Brexit, the EU, and the WTO

The Economist is one of my favorite news sources. The writing is always clear and interesting, and I often agree with them on substance. Nevertheless, while I hate to give them a public reprimand, a recent piece by their Free Exchange columnist on Brexit contains a misleading point that needs to be addressed.  The author appears to equate the EU and the WTO, and says, in effect, why would UK voters accept being part of the WTO when they could not accept being part of the EU? Here’s the passage in question:  

It is puzzling that Brexiteers, whose campaign was summed up as “Vote Leave, take back control”, seem happy with the WTO option. The WTO is truly global, with only a handful of countries outside it (zealous as they are about sovereignty, Brexiteers do not want to join the ranks of Turkmenistan and Nauru). But forsaking one unelected, unaccountable bureaucracy in Brussels for another housed in a leafy district of Geneva seems perverse. WTO members are at the mercy of its “dispute-settlement” regime, which allows other countries to enforce penalties.

Having worked at the WTO, I know a thing or two about it. First of all, it is small. There are 634 staff in total (that includes administrative support). The budget for 2015 was a little less than 200 million Swiss francs.

More importantly, the WTO does not make any rules of its own. The WTO member governments agree to a set of rules (mostly related to constraining protectionism), and they can enforce the rules through a special dispute procedure.  However, governments ultimately make their own decisions about whether to comply.  If they really don’t want to change after having been found in violation of the rules, they can accept the trade sanctions imposed by others.

By contrast, the EU is a vastly different entity.  The European Commission alone employs 32,966 people and had a budget of over 3 billion euros in 2015.  The total EU budget for 2015 was around 162 billion euros.

The EU is still not considered to be a nation-state, but it is getting pretty close, and I think it’s fair to say that it offers a kind of supra-national governance. It has become famous for its regulations on obscure issues such as “marketing standards for bananas” (including their curvature), as well as broader issues such as “rules governing the manufacture, presentation and sale of tobacco and related products”.  And its enforcement mechanisms cannot be evaded in the way WTO obligations can be.

I don’t want to get bogged down here in the relative merits of being part of either institution.  The point here is simply that equating the EU and the WTO as two “unelected, unaccountable bureaucracies” misses the vast distinctions between the two.  It is not difficult at all to understand how someone might want Britain out of the EU while remaining in the WTO.

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