Dividing up WTO TRQ obligations between the UK and EU27 could provoke discontent amongst WTO members over how this impacts on their existing rights and market opportunities. Such discontent could reduce the prospects of securing the acceptance by WTO members of any unilateral transitional arrangements which may be required to ensure continuity of current ACP access to the UK from day 1 of the UK’s formal departure from the EU.
Analysis from Reuters argues Brexit is likely to create particular challenges in the agricultural sector in regard to the future division between the EU27 and the UK of existing quota restricted WTO market access commitments (1). In December 2014 the EU had 110 GATT/WTO quota obligations and 35 other unilateral TRQs which are tolerated by the WTO (2). Most of these TRQs are ‘allocated to particular suppliers’ (1), covering a range of agricultural products, from meal and cereals through wine and milk to fruit and vegetables. The Reuters analysis notes ‘unless Britain agrees what share of each EU quota it will take, and what tariffs apply for some 2,000 agricultural products, businesses will be flying blind’(1).
As Professor Alan Mathews has pointed out in some instances the UK market is central to the utilisation of EU TRQs (for example for New Zealand butter exports). The EU27 may want no part of these quota obligations, since exports under these WTO market access obligations primarily serve the UK market. The process of UK/EU27 negotiations across all of these WTO TRQs therefore is by no means a simple task (3).
However the discussions between the UK and EU27 on the division of these WTO obligations are just the first stage of the process. Other WTO members would then ‘have to agree to this apportionment’. According to Professor Mathews this ‘should not be taken as a foregone conclusion’. If some WTO members felt the agreed division of commitments between the UK and EU27 ‘discriminated against their market access entitlements or nullified some of their expected benefits under the WTO agreement, they might seek improvements or compensation in lieu’ (3).
The Reuters analysis goes further arguing the process of dividing up WTO quota obligations between the UK and EU27 is likely to be complicated by third parties using the process to increase the overall size of their market access to the EU27/UK markets. It argues ‘no WTO partner will accept less than the current EU offer and in most cases will want more’. This issue of WTO quotas has been described as ‘a pressure point for squeezing out concessions’ (1).
However, ‘if Britain open up to much, it might cause a backlash among British farmers and also give away bargaining chips’ which could be used in future bilateral UK trade negotiations(1).
|Comment and Analysis
While most ACP countries are not affected by these WTO quotas, given the duty free quota free access they enjoy either as LDCs or by virtue of their engagement in an EU EPA, there are two areas where this issue could impact on ACP countries.
Firstly, depending on how the quotas are divided up between the UK and EU27 across a range of products this could impact on the level of market competition ACP suppliers will face on the EU27 and UK markets.
Secondly and perhaps more importantly, if badly handled, this issue could give rise to disputes with WTO members which would make it more difficult to secure the consent of WTO members to any extension, on a transitional basis, of existing ACP terms and conditions of access to the UK market from day 1 of the UK’s formal departure from the EU.
Such a transitional unilateral UK arrangement which extends on a non-reciprocal basis existing terms and conditions of access to the UK market, may prove necessary given the capacity constraints faced in the UK administration on simultaneous engagement in multiple processes of trade negotiations (for details see ‘Capacity constraints and complexities of ‘grandfathering’ highlighted by Parliament Report’, 27 March 2017).
In this context a mishandling of the dividing up of WTO TRQ access between the UK and EU27, could result in any special transitional arrangements for ACP countries being held hostage in the WTO to the resolution of this WTO TRQ issue.
(1) Reuters, Future of Britains’ ag trade deals uncertain after Brexit’, 10 April 2017
(2) EC, ‘Agricultural TRQ Regulations – TRQs managed by DG AGRI with licences – main elements’, 2 December 2014
(3) Alan Mathews, ‘WTO dimensions of a UK Brexit and agricultural trade’, 5 January 2016
|Key words: BREXIT, WTO TRQs
Area for Posting: BREXIT, EPA General