The government has published new guidance for UK businesses on trading under World Trade Organization (WTO) rules in a no deal Brexit. WTO rules will apply to trade between the UK and countries with no trade agreements in place.
As part of the EU, the UK has access to about 40 free trade deals covering more than 70 countries. Trade under these agreements accounts for around 11% of UK trade.
The government is trying to roll as many of these over in bilateral deals with individual countries ahead of Brexit. So far, the government has struck continuity agreements with 12 countries and regions.
Outside the EU, the UK will also need to strike a trade deal with covering trade with all the EU’s 27 member states. Trade with the EU currently accounts for 43% of UK trade.
Government guidance
The Department for International Trade (DIT) has made clear to businesses that, without a trade agreement between the UK and a country traded with, they will have to trade under WTO rules.
WTO rules state that the same trading terms must be applied to all countries, unless there is a trade agreement between 2 or more countries. This is known as Most Favoured Nation (MFN) treatment.
MFN means the UK cannot offer better trading terms to one country and not another, unless it has a trade agreement with that country allowing it to do so.
The DIT has said businesses may need to pay different rates of tariffs on imports into the UK. The government published a temporary tariff regime in March 2019 that would come into force under WTO rules.
Business may also need to pay different rates of tariffs on exports from the UK. These tariffs will vary by country, decided by that country.
To provide services in other countries, UK businesses will need to follow the terms set out in the laws of that country. This includes commitments that the host country applies to all WTO members.
The government’s full guidance is available here.
