TRQ deal knocked on head

Hopes that the UK and the EU had reached an agreement in principle on the tricky topic of tariff rate quotas (TRQs) have been knocked on the head by an intervention by the United States. The Trump administration is leading a group of countries challenging British plans to retain EU import restrictions on agricultural goods after Brexit. The other six countries who sent a letter to the UK's WTO representative and his EU counterpart were leading agricultural exporters: Argentina, Brazil, Canada, New Zealand, Thailand and Uruguay.

New Zealand's former high commissioner in London has given it large on the issue saying that the row would make Brexit look 'like a kids' Christmas party' if access was scaled back.

The risk for the UK is that part of the post-Brexit transition in the WTO it may have to accept opening up access to agricultural goods from third countries far more than it wants, even before it agrees the much vaunted new trade deals with such countries.

The UK has tried to smooth ruffled feathers by saying that the plans would be discussed extensively with partners in the WTO before proceeding. This is the opening stage of a process in which countries have staked out their starting position in what is likely to be a long negotiation.

TRQ deal agreed

Tariff rate quotas have always been one of the more difficult aspects of the negotiations between the UK and the EU over agricultural issues arising from Brexit. However, it looks as if an understanding about a deal has been reached. It may, however, not please third countries which could cause trouble down the line. The proposed deal would not expand overall quotas, and hence market access.

TRQs set the amount of goods that can be exported at low or zero tariffs, and are hence valued by agricultural exporters. The UK and the EU need to share out the quotas by the time Brexit takes place in 2019. Countries such as Australia and New Zealand have been pushing for an increase in combined UK-EU quotas after Brexit.

The deal would divide up quotas according to where goods were previously consumed. For example, the UK would take a larger quota for products such as New Zealand lamb. Consumption patterns would be measured over a three year period. This outcome would reduce additional competitive pressure on sheep farmers in particular.

Australia and New Zealand will challenge any outcome they think reduces their current levels of market access. Other major agricultural exporters such as Brazil and the US want more market access. However, if they decide they want to take matters to the dispute settlement mechanism of the WTO, they may be in for a disappointment. The US has been blocking the appointment of new judges and the quasi-judicial tribunal may soon have insufficient judges to function.