On 22 February 2018 ACT Alliance convened Seminar on the Implications of Brexit in the agro-food sector for ACP countries and for the forthcoming ACP-EU Post-Cotonou negotiations. A series of twelve 2 page summary notes were produced for the seminar covering both substantive issues arising within the Brexit process and the current state of play in the Brexit process. Note 11 explores the WTO complication arising from the Brexit process with reference to the expectations of other WTO members as to how the EU will treat the UK once it is a 3rd country and how the EU’s current preferential trade partners should treat the UK once the UK is no longer a member of the EU and is just another 3rd country trade partner.
Initial Exchanges on WTO TRQ Obligations
There is a general under-appreciation in the UK government of the complications which could arise for the EU and ACP governments in relations with other WTO members as a result of efforts to promote a smooth Brexit.
Leading WTO members have already objected to a joint EU and UK agreement on the division of WTO agreed tariff rate quotas.
The EU/UK proposal to apportion existing EU28 WTO TRQs ‘based on trade flows under each tariff-rate quota’ was rejected as ‘unacceptable’ by the US, Argentina, Brazil, Canada, New Zealand, Thailand and Uruguay.
It was argued the UK-EU proposal to the WTO ‘would not be consistent with the principle of leaving other World Trade Organization Members no worse off, nor fully honor the existing TRQ access commitments’.
These WTO members committed themselves to ‘challenge any proposal that in practice would limit their access to the UK market’.
The seven signatories maintained ‘the modification of these TRQ access arrangements cannot credibly be achieved through a technical rectification’ and insisted that what was required was ‘fully-fledged negotiations with other WTO members’.
It was argued the existing TRQs ‘were achieved through a delicate balance of concessions and entitlements that is fundamental to the global trade architecture today’, with it being maintained ‘two fixed quotas – a U.K. quota and a EU27 quota – make markets less easy to sell to than one big quota’.
The main aim of these interventions by WTO members appears to be not only to ensure they are not made worse off by the Brexit process, but also to ensure the Brexit process leads to an improvement in their access to the existing EU28 markets.
The Broader Issue of Equal Treatment for All 3rd Countries
Following on from these September 2017 exchanges leading WTO members have made it clear to the EC that post-Brexit the UK must be treated the same as any other third country, otherwise they will insist on the same treatment as that accorded the UK.
The complications this could give rise to was implicitly recognized by Michel Barnier in his 29th January press conference on the EC’s guidelines, when he noted the EU ‘cannot ensure in the Article 50 Agreement that the UK keeps the benefits from these international agreements’ since the EU’s ‘partners around the world may have their own views on this’.
He left it implicit that this extended to EU trade partners which were not signatories to EU trade agreements.
In this context Michel Barnier appears to believe the principle that the UK should be treated the same as any other 3rd country once it has left the EU, is also likely to be applied to post-Brexit ACP-UK trade relations.
Specifically, if existing preferential access for UK exporters to ACP markets under EU EPAs were rolled over outside of the framework of a fully WTO compatible FTAs, third countries may seek the same tariff treatment in their own trade relations with ACP EPA signatories.
The Way Forward in Accommodating the WTO Dimension
Against this background the only ways in which ACP governments would be able to avert calls for equivalent tariff treatment from other WTO members would appear to be via one of three options:
- by concluding WTO compatible free trade area agreements with the UK which enter into force on the 30th March 2019 (something which is technically complex and cannot be achieved without EU authorisation);
- by granting the UK associated membership of the EU EPAs for the duration of the transition period;
- by the UK extending existing terms and conditions of access to the UK market (the obligations under the EU agreements) on a non-reciprocal basis from the 30th March 2019, while negotiations for ‘UK-only’ reciprocal preferential free trade area agreements are concluded.
While it is unclear which of these three options the UK is likely to agree to, the EU is insisting the UK should respect the obligations entered into under trade agreements negotiated while it was a member of the EU, with this implying support for the UK extending the current duty free-quota free access enjoyed by ACP countries under EU EPAs as a unilateral non-reciprocal arrangement.
Currently given its’ primary concern is to maintain preferential access for UK exporters, thereby avoiding any loss of competitiveness vis a vis EU27 exporters, the UK government is looking for EU authorisation to extend both the UK’s rights and obligations under existing EU trade agreements throughout the transition period.
This is being sought despite the UK being committed to withdrawing from the EU, the customs union and the single market on 29th March 2019 and de facto becoming a 3rd country which is no longer part of the EU.
It remains to be seen if the UK will accept the current implicit EU position which would require the UK to extend existing ACP duty free-quota free access enjoyed under EPAs on a non-reciprocal basis throughout the transition period.
Given the tolerance showed by WTO members to the EU’s interim EPAs established under MAR 1528/2007 (which established non-reciprocal preferences for ACP EPA participating countries while FTA negotiations were being finalised) which has never been challenged by a WTO member during its ten years of application, the granting of non-reciprocal preferential access to EPA signatories during the transition period in EU/UK relations is likely to face less opposition in the WTO than arrangements which would ‘grandfather’ existing UK reciprocal tariff preferences.