TWN Info Service on WTO and Trade Issues (Oct18/11)
18 October 2018
Third World Network
       
EU taken to task over draft methodology for TRQs after Brexit
Published in SUNS #8774 dated 16 October 2018

Geneva, 15 Oct (D. Ravi Kanth) - The European Union's opaque tariff structure for farm products was exposed during a discussion on Brexit at the World Trade Organization last week, as Brussels failed to provide credible answers over the draft methodology it had submitted for apportioning the tariff rate quotas (TRQs) after Britain's departure in 2019, negotiators told SUNS.

During a meeting of the WTO's Committee on Market Access, 15 countries - the United States, Australia, New Zealand, Brazil, Argentina, Mexico, Uruguay, Thailand, Canada, Colombia, Russia, China, India, Japan and Cuba - took the EU to task over the draft methodology for TRQs.

Under Article XXVIII of the General Agreement on Tariffs and Trade (GATT), the EU informed members of its intention to modify the tariffs in light of Britain's exit from the EU next year.

The participants severely criticized the EU for submitting a proposal based on a flawed methodology for allocating TRQ's for 125 products that include beef, pork, lamb, poultry products, and dairy products.

The US and key members of the Cairns Group - New Zealand, Brazil, Argentina , Australia, Uruguay, Thailand, and Colombia among others - are major suppliers of these 125 products to the EU and UK markets.

The EU's tariff structure for agriculture products includes recipe/complex tariffs, fixed tariffs, compound tariffs, and ad valorem tariffs.

The EU's tariff structure for agricultural products acted as a disguised market access barrier for the past many years, said a negotiator who asked not to be quoted.

Brussels along with other farm-defensive countries such as Norway, Japan, Switzerland, Israel, and Chinese Taipei among others had stalled repeated attempts for converting all recipe/complex, fixed, and compound tariffs into ad valorem equivalents during the Doha agriculture negotiations in 2005, several negotiators said.

In the separate draft methodology proposals submitted by the EU and Britain as part of the Brexit negotiations, members questioned the accuracy of the import data submitted by the EU on grounds that it included imports originating from the regional trade agreements that the EU had concluded over the years.

Under Article XXVIII market access discussions, Russia argued that substantial interest within Article XXVIII negotiations will only include data on the overall imports of the member in question but not data that would cover regional trade agreements.

New Zealand, which is one of the major suppliers of dairy and some meat products, criticized the EU's proposal on grounds that Brussels seeks to modify its commitments covering a significant portion of trade in agricultural products.

New Zealand said the EU's proposal raised systemic and general concerns, suggesting that Brussels did not address in any way the EU's future obligations towards the United Kingdom with whom it has had a significant level of bilateral trade.

Australia said the import data provided by the EU did not include specific TRQ access availed by the UK.

Australia said the EU's data, based on the draft methodology, is neither complete nor credible.

At issue is how to treat the internal farm trade between the EU and UK that will soon become international trade, said a participant, who asked not to be quoted.

In the past whenever the EU expanded its membership, for example, from 15 to 27 members, it was easy to get a common TRQ by adding the EU's existing TRQ to the new member's TRQ minus intra-trade between the EU and that new member. This was the case when Hungary and Poland joined the EU, the negotiator said.

But following the UK's exit from the EU, it became imperative to deconsolidate the UK's share from the EU. The problem arose because of lack of data on trade for sensitive farm products between the EU and the UK, said another negotiator who asked not to be quoted.

"So now they have to devise a methodology for individual amounts and derive it from the EU's data," the negotiator said.

When a member enters into Article XXVIII negotiations, it requires that member to modify its tariffs by paying a compensation, the negotiator added, arguing that the big issue is how do members divide the TRQ access between the EU and the UK in the absence of credible data.

Apparently, the draft schedules submitted by the EU and UK maintained that they will divide the TRQ access based on their trade shares.

For the UK market, exports of beef, lamb, pork, poultry, and dairy products are crucial for Brazil, New Zealand, Uruguay, Australia, and Argentina among others. Therefore, TRQ access for these products are sensitive to the EU market more than the UK which is expected to reduce its farm tariffs to avoid any TRQ access, the negotiator said.

Members also raised concerns about the farm subsidy commitments of the EU after the UK's exit. Apparently, the UK should get a share of the EU's subsidies to the tune of 6 billion euro following the contribution made by the UK to the EU's Common Agriculture Policy entitlements during 1986-88.

The EU said it will analyze the claims made by members and will soon submit a consolidated schedule soon, arguing that the schedule submitted in 2017 was not certified.

In short, the EU's opaque tariff structure for farm products that hinder market access was exposed during the meeting.

At a time when the EU wants to pursue plurilateral negotiations in electronic commerce, domestic regulation in services, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs), and gender, it became clear that Brussels did not [want to] address the unresolved issues of the Doha agriculture package, especially the conversion of its opaque tariffs into ad valorem equivalents (AVEs) which continue to act as a non-tariff barrier, several negotiators said.