Plan to build UK trade ship will break WTO agreement, warn experts

Boris Johnson’s plan to build a new yacht in the UK is set to fall foul of a World Trade Organization agreement struck by his own government last year, experts have warned.

The prime minister last month announced that he hoped a domestic shipbuilder would create the £200m vessel, a successor to the Royal Yacht Britannia, to promote British trade and industry around the world.

But while Number 10 has announced its “intention” to build the as yet unnamed ship in the UK, this would breach an agreement that Britain signed up to only eight months ago.

Ministers failed to exclude the construction of civilian ships from the list of contracts that must be opened to global competition when it signed the WTO “government procurement agreement” (GPA) covering 48 countries last October.

The government has set up a national flagship taskforce, hosted in the defence ministry, to oversee the creation of the trade yacht, which will be manned with Royal Navy personnel. However, its purpose is entirely for business rather than security. 

Liz Truss, trade secretary, boasted in October that the GPA would allow British companies to keep bidding for public sector contracts around the world worth £1.3tr a year. Likewise, she said, overseas groups would be able to continue to bid for UK public sector contracts, “delivering better value for UK taxpayers”.

But that could frustrate the government’s attempts to use a “Buy British” approach to building the new yacht. Item 47 of annex 4 of the UK schedule of the GPA explicitly says the procurement of “ships, boats and floating structures, except warships” must be advertised internationally and awarded without discrimination.

Other countries, including the US, Canada, Japan and Australia, have, by contrast, ensured that their GPA agreements exclude civil shipbuilding.

Out of the largest 50 motor-powered superyachts currently at sea, only one (el Mahrousa) was built in the UK — in 1865.

However, Cammell Laird, which has a shipyard in Merseyside, north-west England, says it is ready and willing to manufacture the new trade yacht.

Aline Doussin, head of the international trade team at law firm Hogan Lovells, said it would be hard for the UK to avoid allowing international competition to build the ship unless it was an actual military vessel.

“It is likely that the GPA will be engaged, which means that open, fair and transparent conditions of competition will have to be met, and GPA country suppliers would have to be treated in the same manner as domestic ones,” she said.

Emily Thornberry, shadow trade secretary, said the government had failed to take “the most basic and simple steps” to guarantee the boat could be built in Britain.

“It is yet more copper-bottomed, ocean-going incompetence from Boris Johnson and Liz Truss, and they need to get themselves on solid legal ground before spending any more public funds on this project,” she said.

A government spokesperson said the ship would definitely be built in UK shipyards. She said the programme would be “compliant with our obligations under the WTO GPA” but did not say how that could be the case given Item 47 of annex 4.

One Whitehall figure said the government was planning to claim that the new trade yacht is indispensable for national security in an attempt to bypass those rules.

But the government announcement of the launch said it would be used “to host high level trade negotiations and trade shows and will sail all over the world promoting British interests”.

As a result the UK faces potential legal challenges from overseas governments or shipbuilders against the government’s protectionist stance.

Dmitry Grozoubinski, a trade expert who is visiting professor at the University of Strathclyde, said the government might try to structure the deal to avoid the letter of the GPA rules.

“Ringfencing this procurement is demonstratively contrary to their spirit. The arguments cited for keeping the procurement local — jobs, upskilling, patriotism — apply equally to any purchase made by the government and are precisely what the GPA was negotiated to set aside,” he said.

“The government can’t simultaneously present itself as a champion of the rules-based trading system and retain the freedom to ignore those rules whenever politically expedient,” he added.