Can the UK deal selectively with Ireland post-Brexit without falling afoul of WTO rules?

Question

A major obstacle in the Brexit negotiation process currently is the issue of the Irish border. All available options seem insufficient to some or all of the negotating partners, as detailed in this answer to another question:

The UK government now has four basic options to choose between:

1. Remain part of the EU single market, accepting EU rules and regulations, but without the seats in the EU parliament and other decision-making parts of the EU...
2. Implement a "hard border" between Northern Ireland and the Republic...This is not acceptable to the Irish Republic or the EU. It is also something that the UK government previously promised the EU that it would not do.
3. Implement an equivalent border in the Irish sea between Northern Ireland and the mainland UK, and keep Northern Ireland in the European common market...
4. The "Singapore model": abolish all import controls and duties on any goods from anywhere (anything more selective would run foul of WTO rules)...

This answer concurs, stating that:

There is simply no way that status quo can be upheld between the UK, Northern Ireland and the Republic of Ireland if the UK leaves the Single Market.

However, a recent article in The Irish Times proposes that the claim against the possibility of implementing selective rules (which I have emphasised above) is not entirely true, arguing that

there are exceptions to the scope of the WTO rules, including most importantly the “national security exception,” article 21 of the general agreement on tariffs and trade (Gatt): “Nothing in this agreement shall be construed . . . to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests . . . taken in time of war or other emergency in international relations.”

The authors cite President Trump's use of the same exception when introducing country-specific tariffs. Presumably, therefore, the powers that be are not unaware of this exception. They also outline the potential benefits to both the EU and Ireland of agreeing to such a soft land border, and it seems that doing so would satisfy all of the interests otherwise not served by the exisiting four options.

With all that in mind, why is this not being widely proposed as a desirable fifth option? Is there some obstacle not mentioned in the article, or is this exception not as widely known as it should be?

Answer 1

This is quite speculative as this is the first I'm reading of such a possibility, but I would imagine that there are 2 encompassing reasons:

1. A lot of the parties involved want to use the Ireland border issue as a faux negotiating position.

While very few would vocally come out and say that the EU border can be used as leverage in a negotiation, implicitly it still is. The EU can use this sticking point to put pressure on the UK government to not leave the EU at all and potentially revoke article 50 or continue to trade within the single market and abide by its rules, and UK MPs who are in favour of a hard-brexit can use the border as an excuse that the EU are not negotiating fairly and thus the UK should simply leave without any deal, as they believe that it would be better for Britain than staying in the single market.

Therefore it is not necessarily in their interests to publicise such a loophole.

The remaining people that don't fall into category 1 are mostly those who want to both allow the UK to have their own trade rules, but still have no border with the EU (i.e. what the Chequers deal was attempting). Many realize that this is an impossibility, but some UK MPs still are trying to get across that this is a potential outcome.

So why has no one has mentioned this possibility from this group of people? This leads to reason 2:

there are exceptions to the scope of the WTO rules, including most importantly the “national security exception,” article 21 of the general agreement on tariffs and trade (Gatt): “Nothing in this agreement shall be construed . . . to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests . . . taken in time of war or other emergency in international relations.” [Emphasis mine]

2. In order to try to pursue this option, they would have to declare that this is a time of war or international emergency.

Politically this has a high potential to go disastrously wrong, as the UK would have to either declare war or that there is an emergency in order to trigger this clause. Either of these options could cause more issues than simply dropping out of the EU without a deal.

In addition, this is not exactly a long-term solution, as wars and national emergencies don't necessarily go on indefinitely, and such a loophole would eventually have to be closed. Therefore it is in the best interest to negotiate some type of deal, rather than exploit such a clause and accept it as an ongoing agreement.

Obviously Trump is already doing this to impose tariffs against specific countries within the EU, but I won't go into that other than to say that Trump has shown that he is willing to go against international norms.

To summarize: I would speculate that many people don't want to exploit a loophole as it weakens their negotiating position, and it would not work to allow this loophole to go on forever. For anyone who would want to use such a loophole, in order to make it possible they would have to be willing to declare a national emergency or war, which could be worse than any other option currently on the table.

Answer 2

Firstly, some nuance. The WTO rules require that, in the absence of a comprehensive trade agreement, all goods are treated the same no matter their country of origin. 'Origin' does not mean 'the country they most immediately came from', instead it's quite a complicated thing. For example, something produced in the USA and packaged in Ireland might still count as American, whereas some textiles that have been grown in the USA but woven and dyed in Ireland might count as Irish.

Opening the border between Ireland and Northern Ireland (or Ireland and the whole of the UK) opens it for all goods in Ireland, not just Irish ones. Without a border of some kind you can't do origin checks so to some extent you can't deal selectively with Irish goods. Bear in mind here that most countries will not charge tariffs on your goods (or will refund the tariffs) if you later export them so this really would be zero tariffs, not EU tariffs imposed by Ireland as would be the case if NI stayed in the customs union.

Whether this would breach WTO rules (without trying to use those exceptions) I don't know. It might, in a narrow sense, not breach them because it's not discriminating between goods of different origins. However, it almost certainly is doing so in practice so I doubt it would fly. Either way it's as much about power as it is about rules and things that the US can get away with are not necessarily things that the UK can get away with. But let's suppose the UK can do this, with the exceptions or not.

As the article the questioner links to says, tariffs are often low enough that it's not worth routing your goods through Ireland. The average EU tariff is 1.8%. However, for some goods this isn't true. For lamb, for example, it appears to be 38%-91% and for dairy products about 54%. The UK wants to have an independent trade policy and it wants to control its tariffs. It's the goods with high tariffs that are the ones most targeted by policy, not the ones with small tariffs. Obviously, it can't do this if it's wide open to unchecked imports. An open border therefore helps to undermine the UK government's stated aim of controlling trade policy.

A second issue is VAT, which for most goods is much larger than tariffs. At present the UK and Ireland use the EU VAT system. A consumer buying in Ireland and driving north can't claim the VAT back, he pays Irish VAT (for businesses it's more complicated). After Brexit, goods exported from Ireland to NI will have no VAT applied by the Irish (or it can be claimed back). If there's no border then the UK won't be able to enforce its own VAT on entry. The smuggling / undercutting opportunities are obvious.

Finally, it's worth distinguishing the single market from the customs union. The customs union is about tariffs. The single market is about product standards (and many more things besides). Mostly for what you're asking about it's the customs union that matters, not the single market. However, product standard conformance (eg, are your drugs licensed? is your food safe?) is also an issue. As an aside, ambulances regularly cross the border which creates all kinds of problems relating to the legality of the drugs they carry, the medical qualifications of their personnel and their legal liability and insurance.

These three things - the UK's desire for an independent trade policy, the risk of VAT fraud and the enforcement of standards - mean that having an open border may be unattractive for the UK even if the WTO and its members accept it.