Summary
September 2018 saw WTO members again objecting to EU/UK agreed plans for apportioning WTO agreed TRQ market access arrangements without consultations with the affected partners. While ACP exporters are only marginally affected by this WTO level TRQ apportionment issue, ACP exporters have serious concerns over how the EU plans to apportion bilaterally negotiated TRQ established under EU FTAs. This could for example carry serious implications for ACP banana exporters, who from 30th March 2019 could face a de facto 20% increase in competition from $ banana exporters on EU27 markets. The governments of ACP banana exporting countries need to urgently seek consultations with the EC on what will happen to EU bilaterally negotiated banana TRQs from the 30th March 2019 under a ‘no-deal’ Brexit scenario. Or alternatively, if a Withdrawal Agreement is concluded and a transition period in EU/UK trade relations is set in place, what will happen to these bilaterally negotiated TRQ arrangements from 1st January 2021.
At the September 2018 meeting of the WTO’s committee on market access a wide range of WTO members objected to the EU and the UK’s approach to apportioning existing WTO agreed TRQ access arrangements for EU28 member states between the UK and EU27 markets. These raising objections included amongst others the ‘United States, China, Brazil and India as well as Australia, Argentina, Canada, Colombia, Cuba, Japan, Mexico, New Zealand, Russia, Thailand and Uruguay’. The US representative argued ‘the EU’s apportionment proposal, as it stands now, does not reflect commercial realities and will result in a loss of market access for the United States’ (1).
Under WTO rules members are only allowed to ‘modify or withdraw concessions from their schedules through negotiation and agreement with other members’ (2). Against this background the US is also objecting to UK plans to ‘present its own post-Brexit WTO schedules and quota commitments by rectification, without entering into negotiations with third countries’ (1).
According to a review of the WTO TRQ apportionment discussions opinion is split between EU farmers unions who are broadly support of the EU/UK apportionment approach and ‘exporters (countries and companies) and EU importers’ who oppose the EU/UK proposed approach (3).
The EU meanwhile appears to be looking to cut some side deals to defuse the issue with major trading partners like the US. According to reports on euractive.com the EU plans to reallocate in part the hormone free beef quota in favour of US exporters. On the 3rd September the EC proposed ‘a redistribution of the existing quota for hormone-free beef’ in ways which would ensure US exporters secure a greater share of the quota. In recent years US non-hormone treated beef has faced increased competition from exporters in ‘Argentina, Uruguay, Australia and to a lesser extent Canada and New Zealand’, as a result of the multilateral nature of the quota (4).
The EC is looking to square a rather difficult circle involving ensuring the rights of other existing quota beneficiaries are respected while avoiding any increase in the existing 45,000 tonne WTO quota for hormone free beef (4). The Cattle Council of Australia has objected to the EU/UK discussions arguing ‘if the EU and US agree on a country-specific portion in favour of the US, substantial suppliers such as Australia must be consulted and consent to this allocation’ (5).
In May 2018 the EC also launched discussions with both Australia and New Zealand over a possible FTA agreement, which could provide scope for some other bilateral concessions to resolve the WTO TRQ issue with Australia and New Zealand (6)
| Comment and Analysis
This complex issue of the apportionment of existing WTO agreed EU TRQs will require time to resolve. The conclusion of an EU/UK Withdrawal Agreement would not only provide more time by establishing a 21 month transition period, but it would also create a de facto reality of an apportionment of WTO TRQ access between the EU and UK markets during the transition period, since after 29th March 2019 the UK will no longer formally be a member of the EU. This could serve to ease the resolution of this issue, particularly if it provided time for the UK to operationally clarify the nature of its post-Brexit trade relations with non-EU countries. However, the absence of a Withdrawal Agreement and the resulting ‘no deal’ Brexit could exacerbate global trade tensions, since it would lead the EC to invoke the Council agreed scope for it to unilaterally address this issue. This however would be in violation of WTO rules which require the agreement of the affected WTO members to modifications of any TRQ arrangements. While ACP exporters are not substantively affected by the WTO TRQ issue, how this issue is resolved could potentially carry implications for how the EU deals with the apportionment of bilaterally negotiated TRQs. This is an important issue for ACP banana and sugar exporters. On this issue EU officials have maintained a distinctly silence. This can be taken to imply EU officials see little scope for pursuing this apportionment approach in regard to bilaterally negotiated TRQ arrangements. This carries important implications for ACP banana exporters, who could see a 20% expansion of competition from $ banana exporters on EU27 markets from 30th March 2019. There would appear to be an urgent need for the affected ACP governments to seek clarity from the EC on what will happen to EU bilaterally negotiated banana TRQs from the 30th March 2019 under a ‘no-deal’ Brexit scenario. Or alternatively, if a Withdrawal Agreement is concluded and a transition period in EU/UK trade relations is set in place, what will happen to these bilaterally negotiated TRQ arrangements from 1st January 2021. |
Sources:
(1) Hans von der Burchard , ‘Fifteen countries attack Brexit plans to split WTO food quotas’ 9 October 2018
(2) WTO, ‘Market Access Committee sees considerable increase in activity’
https://www.wto.org/english/news_e/news18_e/mark_11oct18_e.htm
(3) Peter Ungphakorn, ‘Comments on the EU’s (and UK’s) proposed modified tariff quotas’, 12 September 2018
https://tradebetablog.wordpress.com/category/brexit/
(4) euractiv.com, ‘Commission proposes to redistribute beef quota to please the US’, 4 September 2018
https://www.euractiv.com/section/economy-jobs/news/commission-proposes-to-redistribute-beef-quota-to-please-the-us/
(5) Globalmeatnews.com, ‘Australia-concerned-over-beef-quota-alteration’, 18 October 2018
https://www.globalmeatnews.com/Article/2018/10/18/Australia-concerned-over-beef-quota-alteration
(6) Guardian, ‘EU talks with Australia and New Zealand deal blow to UK free trade plans’, 22 May 2018
https://www.theguardian.com/politics/2018/may/22/eu-trade-talks-australia-new-zealand-brexit-commonwealth