WTO Negotiators Look to Lay Groundwork on Post-Brexit Food Import Quotas

The preparations for Brexit have been a top-line agenda item for trade negotiators in Geneva, with the subject of how to divvy up EU and UK tariff-rate quotas being one of the main items for review at a meeting of the WTO’s Market Access Committee last week. Sources expect the process to require continued negotiations to hammer out the final details. 

The Brexit negotiating process at the WTO involves a series of elements, due partly to the nature of how the EU currently represents its member states at the global trade club. For example, as a member of the European Union, the EU’s goods and services schedules are expressed collectively for the entire bloc. In October 2017, the EU and UK circulated a note to WTO members regarding how they hoped to approach the subject going forward. 

“When the European Communities accepted the WTO Agreement and the Multilateral Trade Agreements in 1994, the schedules of concessions and commitments and of specific commitments that were annexed to the General Agreement on Tariffs and Trade 1994 and the General Agreement on Trade in Services for the European Communities were thereby simultaneously annexed for the UK. The EU’s schedules therefore contain commitments applicable also to the UK in its capacity as a WTO Member,” the letter explained.

“As far as the EU is concerned, its scheduled commitments for goods, services, and public procurement will remain applicable to its territory, but the EU's existing quantitative commitments in the area of goods will require certain adjustments to reflect the UK's withdrawal from the EU,” the letter continued. For the United Kingdom, the letter said, London will be looking “to replicate as far as possible its obligations under the current commitments of the EU” in goods and services. The letter was co-signed by the UK and EU ambassadors to the WTO, respectively. 

Both the EU and UK have been meeting informally with WTO members on a bilateral basis over the past several months on the different implications that Brexit will have for their trading relationships. 

The UK submission kicked off a three-month window, due to end this week, for fellow WTO members to review the submission and respond. Should there be no objection, the proposed UK schedule will move forward as is. The document was submitted under the “1980 procedures for the modification and rectification of schedules,” a process that gives WTO members the chance to “introduce changes in the formal text of the schedule.” Other members are then able to examine the changes put forward and determine whether they agree before the changes are “certified,” according to a WTO backgrounder on the subject.

This is a different procedure from what the EU is going through, and whether other WTO members will agree with the UK’s approach is one of the subjects for discussion, given that some members have expressed interest in negotiating with the UK directly. 

The EU had previously notified fellow members of the global trade club of its intention to use Article XXVIII of the General Agreement on Tariffs and Trade (GATT) to modify its concessions under its schedule, a process that does foresee the potential for negotiations with interested members. 

Specifically, that same article refers to this process being done “by negotiation and agreement with any contracting party with which such concession was initially negotiated and with any other contracting party determined by the contracting parties to have a principal supplying interest.” The term contracting parties uses the language of the original GATT, which was the precursor to the current WTO system. 

Questions raised on data, certification status

The UK, as one of the EU’s earliest members, has its commitments on tariff-rate quotas (TRQs) on agricultural products expressed within the EU’s overall goods commitments, meaning that the EU and UK will have to separate out what belongs to each as part of the Brexit process. There is also the question of whether other WTO members will agree with the terms that the UK and EU are proposing, or whether they will seek to negotiate alternative formulations to ensure they do not inadvertently lose market access gains or trading flexibility when the UK leaves the European bloc. 

Tariff-rate quotas, by definition, involve having imports of a good within a certain quota facing lower tariffs, relative to any imports above that quota threshold. 

For example, the EU allows limited volumes of beef or lamb to enter at a lower tariff rate, in a trade concession that allows competitive producers in exporting countries such as Argentina or New Zealand to take advantage of consumer demand for these products within the bloc. If the UK or EU’s post-Brexit trade arrangements were to involve more market access for exporting countries, this could bring them into direct competition with domestic producers – but also with exporters in other developing countries who currently benefit from preferential access. 

According to a Geneva trade official, various WTO members raised questions over the data being used as a basis for the EU proposal, along with how it was calculated. Among the questions raised was which goods should be included, with multiple members referring to how the EU proposal features import data from countries that are either outside the global trade club or have preferential trade accords in place with the bloc. 

Another question raised included which schedule the EU should use as a basis of negotiation, as Brussels has proposed using an October 2017 schedule and related modifications, rather than a December 2016 version. While the latter has been certified, the former has not – a point that some WTO members raised last week. 

Another issue that some members raised was whether the allocation of TRQs in the schedule should consider not just volume, but value, in order to ensure that other WTO members do not lose out on the value of current market access commitments. 

Some WTO members said last week that they do intend to submit a “claim of interest” on the subject, meaning that the process will move into a negotiating phase, rather than being closed this week. On a related note, the UK’s own proposal on rectifications and modifications to its schedule also drew scrutiny from various trading partners, with some questioning whether the UK had erred in excluding some products, or whether the proposal should tackle the subject of how much these goods are worth, rather than basing it solely on the volume of TRQs for inclusion. 

Given that the UK’s proposed schedule builds off the draft version submitted by Brussels, including in the data used, the question of whether to deal with the EU schedule first and the UK one later was also put forward by some members. 

The discussions come as UK and EU negotiators working on the overall Brexit package – aside from the WTO dynamic – have been trying to set the stage for a high-stakes summit this week that could determine the future of the Brexit process. That same summit may clarify whether a withdrawal deal, final transition period, and the process for determining the future trade relationship can be resolved in time for the UK’s exit from the European Union at the end of March 2019, or whether a “no deal” Brexit may instead be on the horizon. (For more on that subject, see related story, this edition) 

The outcome of those talks would have implications for how long negotiators at the WTO have to resolve the issue of schedules. For example, it could allow for additional negotiating time, should a final Brexit deal include a transition window during which the UK will remain a part of the EU’s customs union. 

Government Procurement Committee considers UK bid

In other WTO-related Brexit action this week, the parties to the organisation’s Government Procurement Agreement (GPA) considered the UK’s request to become a party in its individual capacity, after the country submitted its bid in June 2018. While the UK is currently a party by virtue of its EU membership, given that the EU overall is a party to the accord, what levels of coverage the UK will provide following Brexit is a key question in determining its future relationship to the GPA. 

Various WTO members said in June that they wanted to learn more about what London will have on offer regarding market access coverage, while raising questions on domestic legislation relating to government contract bids. Those issues, among others, were expected to come up at this week’s meeting on Wednesday, and the negotiations are expected to continue past this week. 

The GPA is one of the WTO’s plurilateral accords, with the parties involved endorsing a set of rules and market access commitments involving foreign bids for government contracts. When counting all 28 EU member states, as well as the EU overall, the GPA has 47 total parties. Negotiations to update the accord wrapped up in 2011, taking effect from April 2014 for those parties which have ratified the changes. The only one which has not yet done so is Switzerland, though the Alpine nation is well advanced in the process.