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WTO members pile into UK-EU proposal for splitting tariff quotas after Brexit

Argentina, Australia, Brazil, Canada, China, India, Japan, New Zealand, Russia and the US all raised objections over proposed new commitment documents

A long list of countries placed on the record in the World Trade Organization (WTO) their concern about the way the UK and the EU propose to split their tariff quotas after Britain leaves the EU, and the data used to calculate the split.

Sources say 20 counties — including, Argentina, Australia, Brazil, Canada, China, India, Japan, New Zealand, Russia and the US — raised objections over the proposed new commitment documents, known as “schedules” of commitments on goods, 15 criticising the EU’s draft and 19 objecting to the UK’s.

The concerns were raised in a session of the Market Access Committee today (October 9), the first time other WTO members’ reservations have been aired in a formal, minuted WTO meeting. The committee deals with market access for goods, and like almost all WTO bodies, comprises all 164 WTO members.

The stream of reservations indicate that Britain will now be forced into negotiations over the tariff quotas — where limited quantities can be imported at low or zero duty instead of regular high tariffs.

The UK had initially wanted to follow a simple process of technical correction to the commitments it currently has in the WTO as an EU member, although it had recognised it might have bargain over tariff quotas.

The deadline for members to put their reservations in writing before October 24 (three months after the draft schedules were circulated on July 24). Britain will then launch a new process (under GATT Article 28), which would lead to negotiations in the new year, and could take the talks right up to March 29, 2019 when the UK leaves the EU.

These talks are likely to be only about tariff quotas and a more technical exercise on establishing the UK’s limit on trade-distorting domestic support for agriculture. The UK is submitting its whole goods schedule, which includes thousands of regular tariff rates copied and pasted uncontroversially from the present EU commitments.

The EU’s draft revised commitments are only on tariff quotas. They were already circulated under GATT Article 28, and so long as reservations are also submitted in writing before October 22, negotiations under the article can begin immediately.

Little progress

Although both the UK and the EU have been meeting WTO members unofficially for at least a year, sources report little progress and no real negotiations. This may be partly because both sides initially waited until the drafts were formally circulated in July and then for this month’s deadlines for comment to be reached.

The two propose to split each of around 100 tariff quotas — mainly on agricultural goods — according to the percentages that were imported into the UK and the remaining 27 EU members (EU–27), on average in 2013–15, calculated from EU data. The total of the UK and EU–27 splits would add up to the original EU–28 quotas.

The criticisms aired in the Market Access Committee largely echo those raised in the informal meetings.

Several members repeated their concern that the value of the tariff quotas is reduced as a result of splitting them into portions for the UK and EU–27. Before Brexit, exporters can choose to sell their total entitlement anywhere in the EU–28 where the prices are most profitable; after the quotas are split that flexibility will be lost.

Some pointed out that the data results in some quotas being zero — seen as a loss of the right to access the market — because there were no imports into either the UK or EU–27 in the period, or too small to be commercially viable.

One of the new complaints is that some of the data used includes imports under EU free trade agreements, and not normal WTO-terms trade, and even products from non-WTO members.

This has implications both for splitting the quotas and for determining which countries have negotiating rights under GATT Article 28 as principle or substantial suppliers.

Several countries also questioned whether the EU and UK should be proposing drafts based on commitments for the EU–28, which were circulated in October 2017 but have not yet been certified because of outstanding objections. The WTO cannot certify the schedule until all objections have been dropped.

Among New Zealand’s reported concerns was the way the UK’s and EU–27’s tariff quotas do not take into account trade between the two. Brazil, suggested Britain should adopt the whole of the EU’s schedule (meaning its tariff quotas would be the present EU–28’s quotas).

EU responds, UK does not

The EU said it would analyse any claims according to its WTO obligations and argued that it can base its modification on the schedule for the EU–28 even though that has not yet been certified.

The EU also said it could not reply on behalf of the UK government about its schedule and urged members to talk directly to the British. The UK did not speak, apparently observing the practice of EU member states only being represented by the Commission in WTO trade matters.

Sources say Russia kicked off the comments on both the EU’s and the UK’s drafts.

Other countries commenting on the EU’s draft were: New Zealand, Japan, Canada, Uruguay, Australia, the United States, Brazil, Thailand, Colombia, Argentina, Mexico, China, India and Cuba.

The others targeting the UK’s draft were: Australia, New Zealand, Japan, Uruguay, the United States, Canada, Brazil, Thailand, China, Mexico, Guatemala, El Salvador, Honduras, Costa Rica, Argentina, Colombia, Nicaragua and Ecuador.

This is considerably more than the seven that originally objected to the joint UK-EU approach a year ago.

In separate processes, the UK also has to establish its commitments in services and negotiate to join the WTO’s Government Procurement Agreement in its own right.

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