Thread by @DmitryOpines

1/ Hi. Your Friendly Neighborhood Trade Nerd here,

Many on both sides of the trade debate invoke the specter of WTO breaches, but few go on to explain the practicalities and consequences.

Hopefully this threat helps you put threats of the WTO's wrath in some real-world context.

*** Warning: This thread is super long. I try to make it interesting by telling it like a story, but we're discussing WTO Procedures and not the Battle of Stalingrad so you know, feel free to take a snack break. ***

2/ For this walk-through, I'm going to be using two hypotheticals:

One - As part of Brexit, the UK decides not to collect customs on the NI border;
Two - This decision is a breach of the WTO's Most Favoured Nation Principle (my definition here: explaintrade.com/glossary/#Most…)

3/ So with those hypotheticals, the UK is in now breach of the WTO Rules. So what happens?

Automatically? Nothing.

A breach on its own has NO consequences of ANY kind unless another WTO Member raises it.

4/ The WTO itself, as in the Secretariat who work there, have only one formal method of commenting on the issue at all.

This is through the 'Trade Policy Review (TRP)' of the United Kingdom, for which the WTO Secretariat prepares a report in which they could include this.

5/ The TPR process sees every WTO Member come before the rest of the organization every few years for a discussion of their trade regime.

The Secretariat's TPR Reports thorough, written by very smart people and have all the legal force of Harry Potter/Dr. Who fan-fiction.

6/ But let's say a WTO Member does raise it. This would be a political decision the Member knows would annoy the UK and EU, but one a Member could make.

The Member's first step would probably be to raise the issue in the relevant WTO Committee. In this case likely, the 'CTG'.

7/ The CTG, or Committee on Trade in Goods meets regularly to discuss issues raised by Members (screenshot below is snippet from the March 2018 CTG agenda to show you the kind of things it looks at).

It's always chaired by an Ambassador and is by WTO standards, pretty important.

8/ So, a Member puts the UK's no-border NI-border on the CTG agenda and the day rolls around.

What happens in practice?

When the meeting gets to this agenda item, the Chair gives the Member who raised the issue the floor, and they get to complain about the UK on the record.

9/ Next, the Chair gives the floor to the UK's representative.

Given the importance of the issue, the UK Mission may even have sent in their Permanent Representative (Ambassador) to the WTO to bat for them, but it could just as easily be someone else from the Mission.

10/Now, the UK representative is not obliged to say anything. They can also say, "Thanks, well noted, we'll pass that along." Many Members do.

However, more likely, the UK rep would make a full-throated defense of UK policy.

11/ Next, the Chair opens the floor to other Members to pile on, and they can add their statements on the record, before giving the UK and the original complainant one more chance to speak.

Then that's it. The meeting moves on to the next agenda item.

12/ It's vital to understand that even if every single other WTO Member, the England Cricket Team and the Balinese Goddess of Plenty chime in to slam what the UK is doing, nothing changes in practice.

It's a pretty shitty day for the person behind the UK flag and that's it.

13/ As cathartic as yelling at the UK was in the Committee, let's assume some Members are still upset about this and decide to escalate.

Their next stage is to seek consultations with the UK, toward an eventual WTO dispute.

14/ This is a 60 day period during which the UK and the complaining Member are supposed to meet and try to resolve the issue without recourse to lawyers.

This is the first stage in the Dispute Settlement Process which is LONG (see below),

15/ If the UK can't talk this Member down or buy them off, a WTO Panel is convened and the case begins.

Keep in mind, this would be a WTO Member making a political decision to spend millions of dollars in legal fees to annoy the UK. It's a big call to make.

16/ In the first real consequences for the UK, they must now defend themselves in this dispute. This means paying civil servants or outside counsel to fight a complex dispute.

WTO cases are expensive to defend (but compared to other Brexit adjustment costs, probably negligible).

17/ So the UK fights the case and hypothetically, the panel finds their open NI border to be in breach.

If by this point, the border hasn't already been resolved in some way, the UK would get another chance to discuss compensation with the complainant (buying them off).

18/ If the UK can't or won't buy the complainant off, and doesn't want to change it's NI policy the WTO Panel can authorize 'retaliation'.

This means working out how much the UK's NI-Border has disadvantaged the complainant, and let them levy higher tariffs on the UK to balance.

19/ So let's recap.

At the end of this process, it's maybe 2021/22.

The UK has had a mean comment inserted about it in a 400 page report, endured some formal complaining, paid some lawyers a bit of money, and may now face some tariffs it wasn't facing before.

20/ The UK has repeatedly said it wants to be a model WTO Member and to support the system. All this could hang a cloud over that, as would an uncertified schedule.

BUT, anyone making claims about WTO consequences needs to understand the practicalities of the above process. /End