There are few widely agreed truths in the Brexit debate, but one of them is this: if Britain fails to reach a trade deal with the European Union after Brexit, it will have to fall back on the “WTO option”. This involves trading solely under rules set by the World Trade Organisation (WTO), which govern things like tariffs and quotas. However, in recent months trade economists have reached an uncomfortable conclusion: falling back on the WTO could be a lot harder than it looks. Why?

Britain is already a member of the WTO. However, when negotiating trade deals and the like it operates through the EU. To become a fully independent member, Britain would need to have its own “schedules”, WTO-speak for the list of tariffs and quotas that it would apply to other countries. In theory, it would not be too difficult for Britain to acquire its own schedules. Under a so-called “rectification”, the British government would simply cross out “EU” at the top of the page and write “United Kingdom” instead. But doing more than this would be difficult. Imagine that Britain decided that it wanted to boost support for its farmers by raising tariffs on farm products (perhaps they had lost out from reduced EU funding). Such a move would require a more ambitious “modification” of Britain’s WTO schedules, requiring much lengthier negotiations. While they were going on, Britain’s status in the WTO would be in legal limbo.

The most likely course is that Britain keeps its “schedules” precisely as they were under the EU, including maintaining the EU’s “common external tariff”, which is applied uniformly by member states to imports from third countries. This avoids diplomatic wranglings; but a post-Brexit government will surely be embarrassed that it is using EU-approved commitments. That is not the only problem. Current WTO trade agreements assume that the 28-member EU is a coherent economic bloc. Trade between member states is mostly free. Multinationals move parts back and forth frequently between different member states. If Britain broke free from the EU, but kept the common external tariff in place, then a company moving parts between the EU and Britain could potentially face a tariff charge every time a border was crossed. Countries whose producers were hit by this development might make life difficult elsewhere for British negotiators.  

The WTO will even shape the Brexit negotiations themselves. The government is desperate to ensure that Britain’s big exporters do not suffer from Brexit. It has explicitly assured Nissan, a carmaker, that it will not suffer. But WTO rules can make such sectoral deals hard. If Britain were to agree bilaterally with the EU not to apply tariffs on cars, the WTO’s “most-favoured nation” principle might force it to offer tariff-free access to other countries as well. Channelling government money to boost exports is also something of which the WTO would disapprove. The WTO option may seem like an easy way out for post-Brexit Britain, but that road is in reality covered with bumps.