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What is GATT & GATS?

The General Agreement on Tariffs and Trade (GATT) came into force in 1947 and now forms part of the World Trade Organisation (WTO) Agreement. WTO tariffs are the default import/export duty rates which apply to international trade in goods, unless two territories are part of a Customs Union, or have a Free Trade Agreement (FTA) in place which reduces or removes tariffs.

If the UK and the EU do not manage to agree an FTA, the WTO’s GATT will apply to trade in goods. Similarly, if the UK and the EU do not agree an FTA, the WTO’s General Agreement on Trade in Services (GATS) will apply to trade in services.

Under WTO rules, a territory MUST apply the same rules to all territories with whom it does not have an FTA. This is referred to as the Most Favoured Nation (MFN) clause. 

What is GATT 24?

Article 24 of GATT provides the basis for two or more territories to form a customs union or establish an FTA. It also makes provision for an interim agreement necessary for the formation of a customs union or a free trade area.

Some UK politicians have said (when a No Deal Brexit was on the table) that GATT 24 could allow for the UK to continue to trade with the EU with zero tariffs on both sides whilst an FTA is negotiated under an interim agreement.

Many trade law experts were sceptical in 2019 that GATT 24 would allow for such an outcome. Some of the reasons for this scepticism were:

  • All agreements under Article 24, including interim agreements, must be agreed by both parties.
  • Interim agreements must include a plan and schedule for the formation of a free trade area within a reasonable time.
  • All interim agreements must be referred for review to all other WTO parties who have the possibility to recommend changes to the agreement.

While not specifically mentioned in Article 24, its provisions do not appear to prevent the possibility of a temporary agreement being reached between the EU and UK to allow some or all tariffs to be set at zero as a short-term measure. It should be borne in mind that such an agreement would only cover tariffs on goods and would not deal with regulatory issues or mitigate other non-tariff issues such as the need for customs declarations.

It is conceivable that the EU and the UK could consider the application of GATT 24 as being mutually beneficial if an FTA cannot be finalised by the end of 2020.

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