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US leads growing opposition to EU-UK WTO tariff rate quota plan

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Opposition to a reported EU-UK agreement on how agricultural import quotas should be carved up post-Brexit is strengthening with a number of key agricultural trade partners, including the US, Brazil and Canada, claiming the approach is not consistent with the principle of leaving other World Trade Organization (WTO) members “no worse off”. 

In a jointly signed letter, dated September 26, addressed to the UK’s WTO representative Julian Braithwaite and his EU counterpart Marc Vanheukelen, the representatives of Argentina, Brazil, Canada, New Zealand, Thailand, the USA and Uruguay, said they could not accept a solution based on splitting Tariff Rate Quotas based on historical averages.

“We would like to record that such an outcome would not be consistent with the principle of leaving other World Trade Organization members no worse off, nor fully honour the existing TRQ access commitments,” it said. “Thus we cannot accept such an agreement.”

It has been suggested this week that the EU and UK have reached a provisional understanding on a formula to reallocate the bloc’s many TRQs, the majority of which relate to agriculture, would be shared out between the two sides based on historical trade flows over a three-year average.

But the letter makes clear that this would not be acceptable to many other WTO members. “These TRQs were achieved through a delicate balance of concessions and entitlements that is fundamental to the global trade architecture today,” it says.

“As countries which are holders of Country-Allocated Tariff Rate Quotas, as well as holders of initial negotiating rights, and principal and substantial interests in several concessions, we attach a particular importance to the stability and continuity of those rights.”

The EU and, therefore, the UK currently has tariff quotas on cheese, butter, beef, poultry, sheep and goat meat, other meat, live animals, sugar, citrus and other fruit, fruit juice, eggs, cereals and more.

Negotiations needed

One of New Zealand’s top trade officials confirmed this week that the preferred solution for his country would be for both the EU and UK to each end up with TRQs of the same size as currently committed by each party – the so-called ‘1+1=1’ approach.

The letter seemingly also backs this approach by stating: “The obligation to honour those commitments binds the European Union as an entity and the individual member states within the Union.”

It continues: “We expect the United Kingdom and the European Union will act to ensure that countries entitled to those access rights will be left no worse off that they are at present, in terms of both the quantity and quality of access.”

In this regard, the letter said it welcomed previous commitments by the UK to ensure that none of its trading partners are left in a worse position post-Brexit.

It also asserted that while the countries are willing to “engage constructively and creatively” to help the UK establish its own WTO goods schedule, it must be done through dialogue with EU TRQ holding members.

“The modification of these TRQ access arrangements cannot credibly be achieved through a technical rectification,” it states. “None of these arrangements should be modified without our agreement.”

The countries expect a “high degree of transparency” through the sharing of information and data, and if there are any substantial changes proposed that affects the balance of concessions, “the whole membership of the organization may take an interest”.

On the US position, Emily Davis, spokesperson for US trade representative Robert Lighthizer, separately confirmed that neither the UK or EU have up to now presented a plan on how to manage WTO quotas to Washington but the government is “actively engaged” in discussions with its trading partners on the issue.

“Ensuring that US exporters of food and agricultural products have the market access in Europe due to them after Brexit is a high priority for the administration,” she said.

The EU and UK are expected to present their proposal to other WTO members in Geneva at some point during ‘Agriculture Week’, commencing October 16. 

IEG Policy has learnt that the UK and EU are now planning to base their proposed division of the EU’s tariff quotas on the quotas the EU–28 is currently applying, and not as previously reported on the latest WTO certified schedule of commitments on goods, which is only for the EU–25 before Bulgaria, Croatia and Romania joined.

Why no Australia?

The most obvious absentee from the list of signatories is Australia – one of the world’s biggest exporters of beef and lamb.

It is not clear whether Australia feels it has less to lose as a result of a straightforward split of existing EU TRQs given that it has far smaller quota shares than many of the signatory countries.

As an example, New Zealand currently has a duty-free TRQ for 228,254t tonnes of sheep meat while Australia’s stands at just 19,186t. For beef, Australia’s share of the EU’s Hilton Quota stands at just 7,150 tonnes – compared to almost 30,000t for Argentina.

In a submission to a sub-Committee of the Australian Parliament earlier this year, Professor L. Alan Winters from the University of Sussex recognised that splitting the TRQs would have some negative impact on Australia but suggested only small adjustments would be needed to resolve this.

“When the TRQ is divided between the UK and the EU14, Australia will lose the flexibility that it currently has to switch exports between the UK and the EU14 according to market conditions. It will become more difficult to fill the quota and so the quota will become less valuable” he explained.

On the other hand, he said the amounts of trade at stake are small and the cost of any disruption would be just a small percentage of them – in 2015, Australian sheepmeat exports to the UK and EU14 amounted to $US79 million and $US23 million respectively.

“The amounts are so small, in fact, that it seems inappropriate to disrupt Brexit, which will certainly generate many other headaches, over them. A reasonable request of the EU and the UK (and recall that it is a joint problem) might be to increase the TRQ by, say, 10% and propose a division based on the last few years’ data,” Winters concluded.

 

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