WTO rules: government issues recap in face of uncertainty over trade deal with EU

Fri 27 Nov 2020
Posted by: Noelle McElhatton
Trade News

With the question of whether the UK will conclude a trade deal with the EU still up in the air, the government has reissued guidance to businesses on WTO rules.

An update on 25 November began: “From 1 January 2021, if no trade agreement exists between the UK and another country, trade with that country will take place under World Trade Organization (WTO) rules.”

The UK currently trades under EU rules despite having left the bloc earlier this year. The current transition period ends on 31 December 2020.

What does ‘trading under WTO rules’ mean for UK firms?

From 1 January 2021, if a replacement agreement has not been negotiated with the EU, trade will take place under WTO rules.

The IOE&IT has produced its own guide to WTO rules – you can read a summary here and click to buy the full report.

WTO rules core principle: ‘Most Favoured Nation’

WTO rules state that the UK cannot offer better trading terms to any one country, unless there is a trade agreement between countries.

The 'Most Favoured Nation' principle means that WTO members cannot discriminate between their trading partners and must, with a few exceptions, offer access to their market on the same terms for all other WTO members.

The UK currently trades with many countries on WTO terms, for example China, India, Brazil and the US. Your trade with these countries will remain on an MFN basis.

What MFN means for…

  • Customs procedures and declarations

From 1 January 2021, you will be required to complete customs procedures and declarations for imports to the UK.

  • Goods in transit

From 1 January 2021, the UK Global Tariff will apply to imports into the UK unless a preferential agreement like an FTA applies. The MFN tariff of the country of destination will apply to exports from the UK unless the UK has preferential trading arrangements in place.

  • Origin of goods for tariff purposes

How you establish the origin of goods for tariff purposes may change from January. The UK and the EU will be separate territories for Rules of Origin purposes.

Trade under WTO rules does not require you to prove preferential origin.

  • Non-preferential Rules of Origin

When trading with countries with whom the UK does not have a trade agreement, non-preferential Rules of Origin will apply from 1 January 2021.

This means that when you are importing a good you will need to declare the origin of your goods. If you are exporting, you will need to apply the non-preferential Rules of Origin as set by the destination country.

You can apply for a non-preferential certificate of origin from the British Chambers of Commerce.

  • Tariffs on imports into the UK

The UK Global Tariff policy on MFN imports into the UK will come into force from 1 January 2021.

Find out what tariff rates apply to specific imports.

  • Tariffs on exports

Overseas importers may need to pay different tariff rates on exports from the UK. The tariffs will vary by country and product. Many are duty free under WTO terms.

Find out what tariff rates apply in every country.

  • Continue to comply with regulations

The UK will accept most goods that meet EU requirements on product safety for a time limited period from 1 January 2021.

If you are selling goods to another country, you will need to continue to meet their regulatory requirements.

  • Protect your intellectual property

Some trade agreements give extra protection for intellectual property above a ‘baseline’ level required of WTO members. Without a trade agreement, protection for intellectual property may go down to that baseline level. This is most relevant to UK Geographical Indications, which may no longer be protected under WTO rules.

  • Services

Where there is no trade agreement between the UK and another country, you will trade under terms set out in the host country’s WTO General Agreement on Trade in Services (GATS).

Where there is no longer a trade agreement, the host country may impose new restrictions on trade. You may no longer have the right to provide some services, or to provide some services in particular ways.

  • Business visas

If you are a UK national, you will need to check what type of visa, work, or residence permit is required in the country in which you are intending to provide services.

  • Professional qualifications

From 1 January 2021, you’ll need to have your UK professional qualification officially recognised if you want to work in a profession that is regulated in the country in which you are selling services.

WTO member

The UK has been a WTO member since 1 January 1995 and already trades with some countries on WTO terms, such as China, India, Brazil and Saudi Arabia.

It is worth noting that trade deals have been concluded with a number of countries and are ongoing with others – the list is here.