Russia blocks UK's post-Brexit tariff proposal at WTO

The UK’s proposal to split its import quotas from those of the EU after Brexit has drawn an official objection from Russia at the World Trade Organization, MLex has learned.

An objection from a single trading partner means that the WTO can’t certify the proposal until the problem is resolved. It might also force the UK to undergo the full procedure for changing its rates, rather than the simplified “rectification” procedure it has so far pursued.

In a notice to the global trade body, Russia stated that the draft UK schedule of tariffs and quotas was inconsistent with its obligations “under several basic WTO provisions,” MLex understands.

During a committee meeting at the WTO earlier this month, a Russian representative said that the EU’s current tariff list that hasn’t been ratified by all WTO members since Croatia’s accession to the bloc in 2013, therefore it can’t form the basis of a UK proposal for its post-Brexit schedule.

“The Russian Federation reiterated that the resolution of the issue of certification of the EU schedule seems to be pivotal to proceed with the new UK schedule,” said a WTO official who was present at the meeting where Russia delivered its notice.

Tariff tiff

The UK’s plan has drawn opposition ever since it was circulated in July, alongside a proposal for a revised EU schedule that carved out the UK share.

To become an independent WTO member after Brexit, the UK has to negotiate lists, or “schedules,” of its own tariffs and tariff-rate quotas. TRQs allow a certain amount of goods to be imported each year with no tariffs, or reduced tariffs.

The EU and the UK have agreed between each other to maintain tariffs at current levels and split their quotas according to historical trade flows. But their trading partners complain that this doesn’t account for subsequent movement of goods within the bloc.

The single objection from Russia is enough for the WTO not to certify the schedules until all doubts are resolved. It’s also possible that more countries have sent similar notices to the UK mission —19 countries have raised concerns informally about the schedules. The exact number of formal notices is unknown, because the procedure isn't open to the public.

Shortcut cut short

The UK had hoped to avoid full negotiations with third countries by using a “rectification" procedure, under which the proposal would be accepted if no WTO member objected to it within three months of publication — a deadline that passes today.

That approach drew criticism because the rectification procedure is normally used to introduce cosmetic changes, not to modify whole schedules. Facing the objections, the UK might be forced to use a longer procedure that allows all WTO members to comment and seek changes.

And if the UK fails to reach an agreement before it leaves the EU, it will have to operate on “uncertified schedules”, opening it up to more trade disputes.

UK- EU plan

According to the joint UK-EU plan, most existing quotas will be divided between them. For example, the EU quota for rice from Thailand is currently listed as 4,313 metric tons. After Brexit, EU members will be entitled to 3,663 metric tons, or 84.9 percent, and the UK the remainder.

The proportions were calculated on the basis of trade flows to the UK and other EU countries, averaged across 2013, 2014 and 2015. The joint plan doesn’t include any changes to the overall levels of quotas.

Australia, New Zealand, Brazil and many other countries have been critical about the methodology, timing and the basis of the proposal and are seeking to increase the quotas, to compensate them for any loss of market access caused by Brexit.