Thread by @DmitryOpines

1/ Brexit Implications of the WTO Appellate Body Crisis - A Thread

Smart money seems to be on the World Trade Organization's dispute settlement system losing the quorum of panelists it requires to hear appeals in less than a fortnight.

Does this mean "WTO Brexit" is dead?

No.

2/ A Brexit "on WTO Terms" describes the departure of the UK from the Single Market and Customs Union without a significant new trade agreement in place to replace them.

Without one, the only obligations they'd have to one another are the WTO treaties they're both party to.

3/ It's CRITICAL to understand that a paralysis of the Appellate Body doesn't mean the WTO rules no longer apply.

The rules are contained in international treaties 164 economies freely entered into. They are international law, whether the AB is functioning or not.

4/ "But without the Appellate Body to enforce them, won't everyone just go berserk?"

They may, but they almost certainly won't. The WTO's Dispute Settlement System was never really intended as an 'enforcer' against economies blatantly ignoring the rules.

It's an arbiter.

5/ "What's the difference?"

The WTO's Dispute Settlement System is there to help resolve disagreements about how economies are implementing the rules they've agreed to... not to enforce compliance.

It's a beefed up marriage counselor, not Judge Dread.

6/ For decades prior to the establishment of the WTO and the Appellate Body in 1994/5, international trade rules under the General Agreement on Tariffs and Trade (GATT) didn't have binding dispute settlement... most parties still followed most of the rules most of the time.

7/ "So, what will this mean for the UK post-Brexit?"

A few things.

First, on the overwhelming number of trade questions the UK will likely still be able to rely on the EU following the trade rules.

The EU loves the rule of law and takes its obligations seriously.

8/ Second, the UK may find itself in a more difficult position when it comes to resolving disputes with other countries.

Most free trade agreements have their own dispute settlement systems, but the UK won't have many FTAs.

That could be a problem.

9/ Third, when economies do start bending and testing the international rules system a prime consideration for them will be potential retaliation (if I break the rules, how hard can you hurt me by breaking them back).

As part of the EU, the UK had a lot more muscle.

10/ We don't know exactly why President Trump backed off his threat on automotive tariffs against the EU, but it's fair to say the potential size of EU retaliation was probably a factor.

Loss of access to 500 million consumers hurts more than loss of access to 64 million.

11/ Fourth, if the system is beyond recovery and something new begins to emerge, that 'new thing' may be dominated by three major blocs: the US, the EU and China.

Outside the EU, the UK will have less ability to shape the EU's thinking but the freedom to align elsewhere.

12/ Fifth, economically, a period of uncertainty and fragmentation in the international system will likely make investors more conservative and cautious.

The UK needs bold investors willing to take a gamble on its still unwritten trade future, so that's a problem.

13/ Conclusion: The Appellate Body crisis isn't really good for anyone, and has some unique implications for an independent UK... but it doesn't make "WTO Brexit" HUGELY worse than it already would be.

14/ What makes a WTO Brexit bad isn't that the EU may not follow WTO rules.

It is the gap between the rules of EU-UK trade today, and the rules of EU-UK trade under WTO terms.

Appellate Body crisis is bad, but not really the issue. /end