If the UK leaves the EU without a withdrawal agreement the WTO’s General Agreement on Tariffs and Trade (GATT) will apply to trade in goods.
Under WTO rules, unless two territories have a Free Trade Agreement (FTA) in place with each other that mitigates or reduces tariffs on goods traded between them, WTO tariffs apply.
WTO tariffs are the tariffs that a territory choses to apply to goods imported from territories with which it does not have a FTA.
Under WTO rules, a territory MUST apply the same tariffs to all territories that it does not have an FTA with. This is referred to as the Most Favoured Nation (MFN) clause. Hence if the UK decided not to impose tariffs on imports from the EU (as some politicians in the UK have indicated they would do), they would have to remove tariffs on imports from all WTO Members. The EU would not need to reciprocate. Concerns have been expressed by some UK sectors that this could make them uncompetitive in their own market.
Article 24 of GATT provides that, subject to certain conditions, two territories can form “an interim agreement necessary for the formation of a customs union or of a freetrade area”.
Some UK politicians have said that after a No Deal exit, GATT 24 would allow for the UK to continue to trade with the EU with zero tariffs on both sides whilst a free trade agreement is negotiated.
Many trade law experts are sceptical that GATT 24 would allow for such an outcome. Some of the reasons for this scepticism are: