Would Civil Servants Refuse To Tax Non-EU Imports following a Hard Brexit?

by ukcivilservant

There has been an interesting exchange between Dr Richard North and George Peretz QC concerning the implications of Brexit without a prior withdrawal agreement.  It is clear that it is now far too late for us to be able to apply border controls and charge tariffs on post-Brexit imports from the EU, even if we wanted to.  But would we then also have to allow all other imports to arrive duty-free?

In short:

  • Both Dr North and Mr Peretz agree that WTO treaties require the UK to remove tariffs from all its imports if we continue to import goods from the EU without tariffs and customs checks. This would no doubt be disastrous for many UK industries – and maybe for the Exchequer.
  • But Dr North says that the UK could ignore the WTO until the successful conclusion – many years later – of other countries’ challenges to our decisions.
  • Mr Peretz says that the UK could not and should not act in such flagrant breach of its international commitments.

I would add that UK civil servants may not accept instructions to do things which are very  likely to be illegal or improper, and this includes actions which would contravene our treaty obligations. So I do not think that HMRC and other officials could be asked to impose tariffs on, say, Chinese imports whilst simultaneously allowing EU imports to arrive duty free.

In more detail:

Here is Dr North’s argument:

“[Mr Peretz notes that WTO rules] “make it hard for the EU to give the UK benefits that it doesn’t give other third countries”. … if the UK’s policy response to the problems of ‘no deal’ is to waive tariffs and checks on imports from the EU, it will also have to waive them for imports from (for example) China and the US in order to avoid well-founded claims of discrimination”.  Noting that this is “unlikely to be politically attractive” (as well as potentially hazardous), what he doesn’t take on board is the very nature of the WTO as a body dedicated to facilitating international trade. As such, the WTO relies on negotiation as its main tool and regards the treaty law as a adjunct, to be used when all else fails and then only to achieve an effect. It is not a legal authority which regards the rule of law as a sacred principle or any part of its duty implementing the letter of the law.

Reflecting this, many of the WTO treaty provisions (and their predecessors in GATT) are not actionable merely on evidence of a breach. The WTO Agreement sets the additional test of requiring the aggrieved party (or parties) to have suffered injury – known in technical terms as “nullification or impairment”.  Given this requirement, one can imagine a post-Brexit UK which, in order to keep goods flowing and to prevent the ports being clogged, decides to maintain its existing checks on what were EU third countries but decides to waive checks on EU produce which, until very recently it did not check at all.

In those circumstances, where the UK is maintaining the status quo, one has to ask whether any of the erstwhile third countries are materially disadvantaged. And, if they feel they are, their option is to go through the dispute procedures, potentially taking several years before an actional judgement is made, which in any event only allows the aggrieved parties to impose sanctions which have an effect on the target county similar to the damage originally sustained.

One can easily imagine the situation where the UK will take the political judgement that it should waive WTO rules. And even if it is later found to be in breach, such modest sanctions as may then apply – some time in the distant future – are nothing compared to the damage that might otherwise have been caused.

Similarly, if the UK decides to invoke the national security exemption, its lawyers will doubtless be able to keep any complainants tied up in the minutia of international law and WTO precedents so that, by the time anything is resolve – if, indeed, it is – the crisis will have been long past.

Crucially, this means that many of the headline effects of Brexit will not materialise – or are capable of mitigation to such an extent that they will scarcely register as much more than minor perturbations. The really damaging effects will be longer-term and far less visible, the cumulative effect discernible only from periodic trade statistics.

Here is Mr Peretz’s argument:

[Dr North] is of course right to point out that WTO enforcement requires a complaint showing harm, takes years, and results only in permission to take action if the defendant government fails to respond. … But … he ignores three important political points …

First, the UK Government has always had a firm policy of complying with its international obligations, whether enforceable or not. That is a real constraint on policy.

Second, there will be real political consequences for the UK if it proceeds in a way that is in breach of its WTO obligations. Such conduct is not consistent with the Government’s stated aim of being a leading free-trade voice in the WTO. And nor is ignoring your international obligations a good look when negotiating free-trade agreements with numerous third countries in a hurry (as the UK will have to do in the weeks after a no deal, given that it will have fallen out of all the EU’s existing FTAs).

Third, his suggestion that the UK might seek to take advantage of the “national security” provisions of GATT – when the UK has, rightly, been one of the leading critics of President Trump’s abuse of that provision – is pretty odd in political, as well as legal, terms.

I would add only that a fundamental element of the UK constitution is that government departments are headed by ‘Accounting Officers’ who are directly responsible to Parliament (not to Ministers) for ensuring “regularity, propriety, and value for money” – and the first of their basic “dos and don’ts” is “don’t break the rules”. I would accordingly be very surprised if any Accounting Officer has told Ministers that tariffs could be imposed on non-EU imports in the circumstances described earlier in this blog.

Some further reading may be found on my “No! Minister” web page and, more generally, in the “Speaking Truth to Power” area of the UK Civil Servant website.

Martin Stanley