Pascal Lamy on the Way Forward After Brexit

The former European commissioner for trade and director-general of the WTO speaks with Quentin Peel about the complexity of the Brexit negotiations and his regret on seeing the UK leave the EU.

Do you believe that this Brexit negotiation can possibly be completed in the legal timescale of two years?

Frankly speaking, no. When I look at the to-do list, which is this telephone book of issues that will need to be settled and negotiated, I don’t think it can be done within two years. But what is probably doable is to have an interim agreement that settles most of the things that have to be settled short-term and that puts down the principles according to which we will negotiate the rest. Then there will be, like in any agreement, notably on trade issues – all the agreements have always had implementation schedules or sequences or transitions. That’s, in many ways, at least trade-wise, a no-brainer.

But the short-term issues that will have to be settled will involve some very difficult questions, including money, the budget, how much is paid; including also, presumably, a sense of the jurisprudence – who will, if you like, regulate the disputes of things. Doesn’t that have to be settled quickly?

You’re absolutely correct. The budget thing… it’s a question of numbers at the end of the day. Once the principle that the UK has financial obligations it will respect – which should be a normal thing to do – is agreed, numbers can always be adjusted. When a negotiation is about numbers, usually there is a solution.

Now on the other issues which you mentioned, there will [have to] be a new frame of relations between the UK and the Continent. What will be the dispute resolution system? This has to be invented. I mean, we have one in the EU, which is the European Court of Justice. We have one in the WTO, which is the WTO Dispute Settlement System. Many bilateral agreement now refer possible disputes to the WTO. We will have to invent some sort of bilateral dispute settlement resolution, as we had to do when we negotiated TTIP with the Americans or as we had to do on investment when we concluded the agreement with Canada.

Pascal Lamy. Photo: Chatham House.

As I understand it, you are really quite fearful that in spite of the logical need to reach a mutually agreeable settlement, we may end up with a very hard Brexit, even no agreement at all.

Well, it’s a negotiation, and I’ve seen plenty of negotiations where negotiators on both sides had the best intentions and they just couldn’t agree, notably because of technical difficulties. I’ve known of negotiations being drowned in complexity, just leading nowhere. Now I hope it won’t be the case for the UK, and if it’s bad for the UK, it’s bad for the remaining Continental members.

So this is always a possibility, and if the UK exits without an agreement, it will have to detail, for instance, what its new trade policy is – which, as far as I know, is a debate that has not really started on this side of the Channel. We know what the EU trade policy is, and the UK knows it because, for the moment, it is part of the EU. But we don’t know what a UK single trade policy would be. These issues will be framing the chances of the negotiation working or not. I still believe there is so much at stake in economic terms, in job terms, on both sides that reason will prevail at the end of the day. But it is nothing like a certainty.

What about the role of the World Trade Organization? You were director-general for eight years, you know it very well. Do you think that if the British were forced to fall back on just WTO rules, is that easily done?

I think it can be easily done, provided there is a bit of goodwill on all sides. WTO lawyers can be reasonably pragmatic and if we agree that the main thing is that trade should be hampered as little as possible, I think that’s not the most complex problem we’ll have to solve. You just have to know that there is a level of trade openness today, which is the [EU] internal market. There is another level of trade openness, which is a free trade agreement between the UK and the European Union – which would be worse than the present situation, but better than the WTO regime, which is why people have free trade agreements which are WTO ‘plus’ in terms of trade opening. And then you have a third layer, which is the WTO.

So, falling into the WTO rules is not an apocalypse, not least because the EU trade regime in the WTO is an open one – much more open than Brazil or India or Indonesia; it’s a bit like the US or Japan: open, developed countries. But it will not be as good as a free trade agreement, which in itself would not be as good as the internal market, because each time you move to something different you add frictions, controls, tests, sampling, standards – and that’s what trade obstacles are mostly about today. The tariff issue is a tiny little problem as compared to standards, technical barriers to trade, sanitary and phytosanitary measures, the use of trade defences like anti-dumping safeguards, countervailing duties – all these things are extremely complex.

Do you regret what is happening?

Of course I do. I do as a European who always thought that what we’re after is preserving and promoting civilization – not just a market, [but] values, things we care about, things which are our European identity. And for me, it has always been the case that the UK is part of that. I mean, the UK is part of European civilization and European integration is something that has to do with the civilization. So, long-term, for me… the UK is part of the European dream.

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