1. What assessment has the Counsel General made of the legal implications for Wales of the imposition of World Trade Organisation rules in the absence of a trade agreement between the UK Government and the EU? OAQ(5)0041(CG)

Thank you for the question. Officials in a newly established trade policy team are in the process of assessing the policy and legal consequences of the UK trading under World Trade Organization rules. We intend to update Members on this work over the coming months.

Thank you for that answer. Excluding agriculture, the devaluation of the pound can remove the problem of financial tariffs. Does the Counsel General agree with me that the rules imposed, and making sure that the World Trade Organization rules are being met, is really a far greater problem than a 5 per cent or 10 per cent tariff, which further devaluation can put right? Actually meeting the rules and having to go through all the checks is going to be a greater problem for Welsh industry and Welsh exporters than having the tariffs themselves.

Well, obviously tariffs are of massive significance because they directly affect cost—goods crossing borders having tariffs imposed upon them. The other issue, of course, with regard to tariffs is what the level of those tariffs is, and also, particularly under World Trade Organization rules, whether there are quotas that might apply as well. But the point you make is an absolutely proper one, and that is that it is the behind-the-border barriers that are sometimes the biggest issues. That is, the compatibility of being able to trade—issues such as product certification, import licences, customs checks and so on. And of course there are all the other issues that relate to the fact that the EU has its own trade agreements, its own versions of the transatlantic trade and investment partnership with different countries, and may have new ones. Of course, part of the purpose of those is to remove some of these behind-the-border barriers, so it may actually mean that, in actual fact, agreements are being made that, whether we like it or not, we’re not party to, but we will need to comply with them in order to actually trade. So, you’re absolutely right: it is a very significant factor, and one that has to be addressed.

I’m not sure what country the Counsel General thinks the EU has an agreement like TTIP with, which is far broader in scope than any previous trade agreement. But is it not the case that for WTO members, even if they lack a free trade agreement with each other, there is still customs facilitation? The vast majority of our trade with non-EU countries, including the US and China, for which there is no trade agreement, progresses smoothly. Currently our exporters already meet these conformity requirements and the absence of a major free trade deal, which we would all like to see, would not of itself lead to anything like the scale of customs problems that I think Mike Hedges may have suggested.

First of all, dealing with the point you make abut TTIP, well, of course, there are versions of TTIP that are already in existence, such as with Canada and other countries, all of which deal with those particular issues. Of course, they apply to the UK as long as we are a member of the European Union.

Of course, the TTIP discussions with the United States of America did not progress, and now seem to have faltered, but part of their objective was to try and remove some of these behind-the-border issues. Whatever happens in respect of those agreements, if you have the European Union working to a particular standard, and those standards become part of an agreement, in order to trade with the EU, it is very likely that it will be the EU standard that we have to comply with, and we will be de facto bound by it if we actually want to trade.

In terms of our position with the World Trade Organization, of course it is presented as though somehow it is an easy fallback position, a sort of default position—if things don’t work out with the EU, there’s nevertheless some sort of simple default position. That really isn’t the case, because the arrangements with the World Trade Organization are negotiated by the EU on behalf of all its members, so we would have to, first of all, extricate ourselves from the European Union and then actually set about the establishment of our own schedules of trade with the World Trade Organization. There was a very interesting quote recently in ‘The Times’ from Roberto Azevêdo, the World Trade Organization’s director general, who said: there is no precedent for extricating itself from an economic union while inside the organisation—the process would not be easy and would likely take years before the UK’s WTO position was settled, not least because all the other member states would have to agree.

And, of course, one of the consequences is that while you’re going through this period of uncertainty, markets are being targeted and, as a trading nation, the UK is increasingly sidelined. The other problem is, although certain areas of trade might be relatively simple, perhaps in certain areas of manufactured goods, of course there are major problems in respect of agriculture, something which will be of massive concern to Wales, in particular, because it’s not just about tariffs, but it’s also about quotas, and synergistic quotas don’t relate to tariffs and they vary from country to country. So, I suppose the point being made is that the idea that there is somehow some simple fallback position—. It isn’t there, it doesn’t exist, and I have to say that membership of the customs union becomes more attractive the more one delves into the possibility of being bound by World Trade Organization rules.