Brexit: UK, EU Propose Cooperative Approach to WTO Commitments

12 October 2017

The UK and EU wrote on Wednesday 10 October to other WTO members to set out proposals for a “cooperative and transparent” approach to adjusting their existing commitments at the global trade body, as Britain prepares to leave the 28-member bloc in March 2019.

The letter, which is dated 11 October and signed by the EU and UK ambassadors to the WTO, states that the UK “intends to replicate as far as possible its obligations under the current commitments of the EU,” and also seeks to reassure other WTO members that the UK and EU will seek to minimise any disruption to trade.

The EU’s existing obligations on goods, services, and public procurement will continue to apply to the remaining 27 countries, the letter says, although it notes that adjustments will be needed in some areas. It also states that both the EU and UK would cooperate as London seeks to establish separate commitments on services, and to maintain its rights and obligations under the Government Procurement Agreement.

Commitments made at the WTO on the maximum permitted level of trade-distorting agricultural subsidies would be divided between the UK and EU, the two ambassadors say, proposing that support “be apportioned between the future EU and the UK on the basis of an objective methodology.”

Similarly, the signatories propose consulting with other WTO members to agree a common approach on the data and methodology to be used to establish new commitments on “tariff rate quotas” or TRQs – minimum volumes of sensitive farm goods that the EU has agreed can be exported to the bloc without facing normal duty rates.

Agricultural exporting countries raise concerns

However, seven agricultural exporting countries have recently expressed concern that their access to markets could be diminished by the approach that London and Brussels are believed to favour on the question of tariff rate quotas.

A letter to the UK and EU ambassadors to the WTO, dated 26 September and signed by Argentina, Brazil, Canada, New Zealand, Thailand, the United States, and Uruguay, cautions against “splitting” TRQs on the basis of historical averages.

“We cannot accept such an agreement,” states the letter from the exporting countries, which was initially published by the Financial Times, and which called for a “full and proper dialogue” with other WTO members.

Trade officials told Bridges that exporters were concerned in particular about meat products such as beef, pig meat, sheep meat, and poultry, although quota commitments have also been made in other goods such as citrus fruit.

One trade source who is familiar with the talks over the quotas told Bridges that the exporters’ letter had surprised those involved with the issue, with the source citing several meetings that have already been held with the countries that were expressing concerns.

The source noted that the approach under consideration by the UK and EU is not being considered as final.

“Frictionless” onward trade

The exporting countries nonetheless said that they were not seeking to use the situation to expand market access dramatically beyond existing levels.

“We are not looking to double our access,” senior New Zealand trade official Vangelis Vitalis wrote on Twitter. Vitalis is Deputy Secretary, Trade and Economic Affairs at the New Zealand Department of Foreign Affairs and Trade, and previously served as the chair of the WTO’s farm trade negotiations when posted as New Zealand’s ambassador to the global trade body.

Stephanie Honey, Associate Director of the New Zealand International Business Forum, said exporters from the Pacific nation have two important concerns about the impact of splitting existing quotas on the basis of historical averages.

In a recent article, Honey noted that although the full volume of a given TRQ can currently be imported into any EU member state, “under the proposed approach those volumes would be reduced.”

She also argued that products exported to the UK currently benefit from “frictionless” onward trade into the rest of the 28-member bloc, as a result of the UK’s membership of the single market.

One trade official from an exporting country highlighted the importance of maintaining that flexibility in comments to Bridges.

Currently, the UK government is seeking to leave both the single market and customs union in the wake of the June 2016 referendum on membership of the European Union. (See Bridges Weekly, 30 June 2016)

Another trade source told Bridges that exporting countries also should share the data they have on trade flows and discuss possible approaches to resolving the issue.

Balancing concessions

The agricultural exporters who signed the 26 September letter cautioned that existing commitments on tariff rate quotas represent “a delicate balance of concessions and entitlements that is fundamental to the global trade architecture today.”

They also argue that existing market access arrangements cannot credibly be modified through a technical “rectification” of the schedules.

The UK’s Secretary of State for International Trade, Liam Fox, told his country’s parliament last December that the British government would seek to “replicate as far as possible” the UK’s current obligations, in order to minimise disruption of global trade.

However, one trade official from an agricultural exporting country told Bridges that this would still require discussion with other WTO members.

Another trade source told Bridges that the UK government did not see the process as substantively altering the concessions that have previously been made, and noted that if exporting countries did seek to expand existing quotas significantly, that could also be seen as affecting the balance of concessions that negotiators had previously achieved.

EU notifies revised schedules

In a separate but related development, the EU announced on 6 October that it had formally submitted its revised goods schedule to the WTO to cover the bloc’s expansion in 2013 to include 28 member states.

The bloc’s enlargement from 12 to 25 members was only reflected in revised commitments after the bloc submitted new schedules in December 2016, more than a decade after the original expansion took place.

The new schedules also include a revision to reflect the decision of WTO members to eliminate agricultural export subsidies, following an agreement reached at the organisation’s ministerial conference in Nairobi, Kenya, in 2015.

Australia has also taken steps to modify their schedules of commitments accordingly. (See Bridges Weekly, 15 June 2017)

ICTSD reporting; “UK and EU strike initial deal on WTO quotas,” Financial Times, 3 October 2017; “Trump rejects May’s post-Brexit agriculture deal with EU,” Financial Times, 5 October 2017.

Brexit, WTO
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