Liam Fox rubbishes Boris Johnson's no-deal Brexit claims

Leon Neal/Getty ImagesLiam Fox.
  • Liam Fox rubbishes Boris Johnson’s “Gatt 24” no-deal Brexit claim.
  • The International Trade Secretary on Tuesday published an article which debunked the claim that the UK could continue trading with the EU without tariffs if it leaves without a Brexit deal.
  • In his article, Brexiteer Fox said: “It is important that public debate on this topic is conducted on the basis of fact rather than supposition.”
  • The claim has also been rubbished by a number of experts.
  • Johnson on Tuesday made his firmest commitment yet to leaving the EU on October 31, with or without a deal.

LONDON – International Trade Secretary Liam Fox has rubbished the claim made by his fellow Brexiteer Boris Johnson that the United Kingdom’s trade with the European Union would continue without tariffs if there is a no-deal Brexit.

Johnson, the frontrunner to replace Theresa May as Conservative leader and prime minister, last week suggested that the UK could use international law to continue trading with the EU without extra cost in a no-deal scenario.

Johnson said the UK could enjoy a “standstill” period of trade with the EU, even if it leaves without a deal in October, meaning tariffs on goods sold between the UK and EU countries would remain at zero.

The former Foreign Secretary based his claim on an obscure international trading law called Article 24 of the General Agreement on Tariffs and Trade (GATT.)

Conservative Members of Parliament who back Johnson’s campaign to be the next Tory leader and prime minister, including ex-minister Priti Patel, have since repeated the claim, despite it being debunked by numerous experts.

Fox, who is backing Jeremy Hunt in the contest to succeed May, over the weekend challenged the claim himself, telling the BBC’s Andrew Marr that it was “just not true.”

The International Trade Secretary followed up with a meatier intervention on Tuesday night, publishing an article titled “The Facts About Gatt 24” which dismantled the claim put forward by Johnson and his advocates.

Fox’s article, which did not name Johnson directly, said that the UK could not rely on “Gatt 24” to keep trade flowing as normal in a no-deal scenario, as the rule only applies to countries which have negotiated a free trade agreement.

“A ‘no-deal’ scenario, by definition, suggests that there would be no mutual agreement between the UK and the EU on any temporary or permanent arrangement. In those circumstances Article XXIV cannot be used,” he wrote.

He also cited the remarks of Bank of England Governor Mark Carney and Roberto Azevedo, Director-General of the World Trade Organisation, as evidence against the claim made by Johnson and his backers.

Fox concluded: “It is important that public debate on this topic is conducted on the basis of fact rather than supposition, so that we are able to make decisions in the best interests of our country.”

Fox’s intervention caused fury among some of his fellow Brexiteers.

Former Brexit minister and current Boris Johnson supporter, Steve Barker, tweeted on Wednesday that Fox was “ludicrously tilting at windmills.”

“By stating the obvious, by repeating common ground as if there were any disagreement, Liam is ludicrously tilting at windmills.

“He’s done much to promote trade and freedom but I couldn’t be more disappointed in him here.”

Boris JohnsonGettyBoris Johnson

The row came after Johnson on Tuesday made his most firm commitment yet to leaving the EU on October 31 with or without a deal.

The former mayor of London described leaving on that date as “do or die” in an interview with TalkRADIO.

He also told the BBC that MPs would face “mortal retribution” if they blocked a no-deal Brexit in October.

In a letter he challenged his rival Hunt to make a similar commitment.

Liam Fox’s article in full

Given recent commentary, I am not surprised that my constituents are writing to me about trading arrangements in a ‘no deal’ Brexit scenario. This is an excerpt from a letter I sent to a concerned resident today:

“Some commentators have suggested that, in a ‘no deal’ scenario, the UK could maintain its existing trading relationship with the European Union for up to ten years by claiming exemption from the WTO’s rules, under Article XXIV:5 of the General Agreement on Tariffs and Trade (GATT).

This is not the case. GATT Article XXIV permits the establishment of free trade agreements and customs unions as an exception to the ‘most favoured nation’ principle at the WTO – namely, that WTO Members cannot give preferential treatment to products and services originating from one trading partner over others.

However, in order to benefit from the terms of Article XXIV, there must be an agreement between two WTO Members as to the elimination of duties and other restrictive regulations on substantially all trade. Therefore, Article XXIV would not, by itself, allow the UK to maintain tariff-free trade with the EU in the absence of a negotiated agreement.

Article XXIV also allows WTO members to rely on special provisions for interim agreements that lead to a definitive free trade area or customs union. This allows the parties to phase in the elimination of tariff and non-tariff barriers.

It has been claimed that in place of the implementation period we could immediately establish an interim agreement under this provision. However, in this scenario, the UK would still require the consent of the EU to the terms of that agreement, with an agreed plan and schedule for implementation.

A ‘no deal’ scenario, by definition, suggests that there would be no mutual agreement between the UK and the EU on any temporary or permanent arrangement. In those circumstances Article XXIV cannot be used.

The European Union has made it clear on a number of occasions that full tariffs will be applied to the United Kingdom in the event of ‘no-deal’.

The Director-General of the WTO, Roberto Azevedo, has also confirmed there must be a bilateral agreement between the EU and the UK in order to claim an implementation period under GATT Article XXIV. “Once they have an agreement I think Article XXIV could give them some time for implementation of that agreement,” he told Bloomberg. “But the first question is the agreement itself.”

The Governor of the Bank of England has stated that GATT Article XXIV only applies if there is an agreement between the UK and the EU. As he said in an interview with the BBC on 21st”we should be clear that not having an agreement with the EU means that there are tariffs automatically, because the Europeans have to apply the same rules to us as they apply to everyone else”.

We should also be clear that any simple Article XXIV based agreement just covering tariffs and quantitative restrictions would not address those more complex behind the border regulatory issues affecting trade.

My own view on Brexit is a matter of public record. I believe it is imperative that we honour the result of the referendum and leave the European Union. I would prefer the UK to leave the EU with a deal, so that we can continue to trade with EU countries on terms which are good for British businesses, and at the same time, allow the UK to negotiate our own international trade agreements.

However, I have been clear that no deal is preferable to no Brexit. If Parliament chooses to prevent the UK from leaving the EU, it would be a gross betrayal of the millions of voters who gave us an instruction in 2016.

I
t is important that public debate on this topic is conducted on the basis of fact rather than supposition, so that we are able to make decisions in the best interests of our country.”

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.