TWN Info Service on WTO and Trade Issues (Nov18/11)
15 November 2018
Third World Network
   
EU charged for causing "systemic" problems over TRQs after Brexit
Published in SUNS #8795 dated 14 November 2018

Geneva, 13 Nov (D. Ravi Kanth) - The European Union on Monday stood exposed at the World Trade Organization over its proposed "apportionment" of tariff-rate quotas (TRQs) following the United Kingdom's departure from the 28-member bloc, after several countries charged the EU for causing "systemic" problems by reducing the quality and level of TRQ access to WTO members, according to people familiar with the development.

At a time when the EU is spearheading a sustained campaign for the modernization of the WTO on several fronts, Brussels's proposal for apportioning TRQs after the Brexit or the departure of the UK severely undermined its credibility, and raised questions whether members can trust the EU's reform proposals, said a trade envoy who asked not to be quoted.

During a meeting of the WTO's Council for Trade in Goods (CTG) on 12 November, several members, including the United States and China among others, jointly issued a room document (RD/CTG/5) blasting the EU for its proposal on the apportionment of TRQs that was submitted earlier in the month of July.

In its document (G/Secret/42) circulated on 24 July, the EU had informed members that, "as a consequence of the United Kingdom's (UK) upcoming withdrawal from the European Union (EU) and with reference to the joint EU- UK letter addressed to the WTO Membership on 11 October 2017, in accordance with the provisions of Article XXVIII of the GATT 1994, the European Union hereby provides notification that it intends to modify the concessions on all the tariff-rate quotas included in Schedule CLXXV of the European Union, in its Part I Section I-B (agricultural products) and in its Part II Section II-B (other products)."

The EU listed the relevant concessions of TRQs "between (1) the European Union as composed following the withdrawal of the UK (EU27) and (2) the United Kingdom based on the trade flows for a recent representative period under each TRQ."

The EU also provided import data of the products involved, by country of origin, and including the respective usage share of the EU27 and of the United Kingdom.

In sharp response to the EU's 16-page proposal, the sponsors of the joint statement - the US, China, Argentina, Australia, Brazil, Mexico, New Zealand, Paraguay, Chinese Taipei, Thailand, and Uruguay - maintained that Brexit has the potential to "significantly affect WTO Members' investments in, and trade with, the EU."

The sponsors said that the EU must safeguard the "stability and predictability of Members' commitments, including the enshrined principle that Members should not be left worse off as a result of changes made to individual concessions, and that any changes maintain the general level of mutually advantageous concessions for all Members."

According to the sponsors, the EU's proposed "apportionment of WTO [tariff rate] quotas outlined in G/SECRET/42 amounts to a reduction in the quality and level of access provided by the EU to WTO Members for a large number of agricultural and NAMA products covering 196 individual concessions within 142 tariff rate quotas affecting more than 365 tariff lines."

With the EU remaining as the world's largest importer of agricultural products, especially beef, pork, lamb, chicken and chicken products, there is a grand tussle between the key members of the Cairns Group and the US as to how the EU would apportion the quotas for its 27 members and how the quotas will be allocated for Britain once it leaves the EU-28.

The proposed changes by the EU for the new TRQs, according to the sponsors, "affect the flexibility of Members' supply, the total level of access, and the participation of Members in important European supply chains."

The EU, which is known for creating constructive ambiguities in trade negotiations, has suggested "a number of complexities around identifying trade patterns in the single market," the sponsors maintained.

The EU's proposal which includes several annexes to reinforce the apportionment of TRQs "is wholly inadequate for a negotiation of this scale and scope," the sponsors maintained.

Among several reasons, the EU's import data is not only inadequate but also did not cover various other aspects, said a trade negotiator who asked not to be quoted.

To make matters worse, the EU asked the exporting members "to submit their claims of interest on a TRQ basis," the sponsors maintained.

Besides, a major change arising from Brexit "is the emergence of new obligations between the UK and the EU27, covering around US$800 billion worth of bilateral trade."

"The EU has not made any commitments regarding how it might account for this trade in its proposed modifications," the sponsors said, emphasizing that "uncertainty is a major concern for WTO Members, including on how EU-UK trade may be affected."

Without concluding its Article XXVIII consultations with WTO members, the EU issued a draft regulation that proposes to implement those reductions in the EU's market access commitments.

The sponsors asked whether it is appropriate for the EU to issue the draft regulation.

"In addition, we reject that the EU's sense of urgency in tackling this issue justifies a fait accompli in prejudice of our legitimate trade and systemic interests," the sponsors maintained.

The sponsors urged the EU to provide credible assurance "that it will provide clarity on how it intends to account for UK-EU trade; that it will provide for negotiated outcomes that maintain the quality and level of access currently enjoyed to the EU; and that appropriate compensation will be offered where this access is not maintained."

The EU assured the sponsors that it will engage with them to address their concerns without further delay.

But, the EU's image as a true champion of safeguarding "flexible multilateralism" has been laid bare in the manner in which Brussels apportioned the TRQs for sensitive farm products, said a South American trade envoy who asked not to be quoted.

"If the EU could mislead members on apportioning TRQs where there is already considerable trade flow and data, surely, the EU's proposal for reforming the WTO needs to be taken with a pinch of salt," the envoy said.