Blow to UK as US joins objection to WTO trade quotas split

Despite reaching an initial deal with the EU, the UK’s been dealt another reality check as US joins other WTO members saying they must approve new trade quotas.

The government has been dealt another reality check on trade as the US adds its voice to objection over a UK-EU agreement on dividing WTO tariff-rate quotas. The EU has tariff-rate quotas with a number of countries. These allow those countries to export certain agricultural goods such as meat and grains into the EU at a reduced tariff but only up to an agreed limit, which is the quota. They can still export their goods into the EU beyond the quota but a higher tariff would apply. The EU negotiates these on behalf of member states including the UK. And because of the single market, those countries have one large quota for the whole bloc rather than an individual quota for each country. Post-Brexit, this is one of the areas the UK will be able to ‘take back control’ of.

Part of the Brexit talks in Brussels concerned how the two sides could divide these quotas up. And it’s an area the UK and EU have actually made concrete progress on. As the Financial Times reports, the UK and EU agreed to maintain existing quotas but to divide this up according to consumption patterns over a specific period.

In a joint letter to EU capitals, the two sides said they “intend to maintain existing levels of market access available to other WTO members”. In addition, the letter said: “Both the UK and EU would look to reassure our WTO partners that we will strive to minimise disruption”. The UK and EU planned to take this joint proposal to the WTO for agreement. They argued the proposal was a “technical rectification” and would therefore not require approval from other WTO members.

However, it turns out that dividing these quotas up is not going to be so easy with other WTO countries pushing for a say. Indeed, a group of seven countries including the US, Canada, Argentina, Brazil, Uruguay, New Zealand and Thailand have written to the UK and EU saying they could not “accept such an agreement.” They further rejected the idea that the proposal would leave them “no worse off”.

The letter published by the Financial Times said:

“We are aware of media reports suggesting the possibility of a bilateral agreement between the United Kingdom and the European Union 27 countries about splitting Tariff Rate Quotas (TRQs) based on historical averages. We would like to record that such an outcome would not be consistent with the principle of leaving other World Trade Organisation members no worse off, nor fully honour the existing TRQ access commitments. Thus we cannot accept such an agreement.”

And to add to the challenge of agreeing new arrangements, the seven countries said that any modification to quotas should have their agreement.

Politico reports other WTO members see the proposal as less advantageous for them as they argue splitting the quotas risks reduced market access to the UK and to the EU. Instead, they want bigger quotas to counter any disadvantages of no longer exporting to one big market. The problem for the UK and EU with this, however, is that it risks an increase of cheaper imports to their countries, which could ultimately hurt their own agricultural industries.

As one trade expert tweeted: “‘Breaking up is hard to do’. Especially if your in-laws and relatives must sign the divorce settlement too.”

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