EU-UK plans to split import quotas could spark fight among partners at WTO

15 June 2018 8:57am

14 June 2018. By Joanna Sopinska.

Splitting UK import quotas out of the EU after Brexit is likely to spark a fight at the World Trade Organization, MLex has learned, as major trading partners grumble that the proposal from Brussels and London would leave them worse off.

The complaints from the bloc’s trading partners demonstrate the legal complexity surrounding the UK’s planned departure in March 2019, beyond the challenge of reaching a bilateral withdrawal agreement.

Brussels and London agreed last year to divide the EU's existing concessions and commitments under the WTO by taking averages of the trading data from 2013, 2014 and 2015. The overall level of market access available to WTO members will remain the same, and there will be no major increase in quota levels.

The plan has proven controversial even within the EU, with France in particular calling for a firmer guarantee that the combined EU-UK quotas won’t exceed their current level.

But many countries that benefit from the quotas want a provision for them to be increased, to compensate them for any loss of market access caused by Brexit — especially if there’s no comprehensive customs agreement between the UK and the EU, which could throw up barriers to trade.

The EU and the UK are already in informal talks with their WTO partners on spliting the quotas, MLex understands. But they are due to submit their proposal in the coming weeks, which will then become the default option should the talks fail.

Quotas can either be country-specific or “erga omnes” — open to all WTO members. Countries with specific quotas include Argentina, Australia, Brazil, Canada, New Zealand, Thailand, Uruguay and the US. All of these countries oppose the EU-UK plan, MLex understands.

“Now we can ship goods wherever we want in the EU, including into the UK,” a senior diplomat from one of these countries told MLex. “But after Brexit we would lose this flexibility.”

Flawed methodology?

Under the EU’s draft plan — which national governments must still approve — most existing quotas would be divided according to historic trade flows. For example, the 4,313-tonne quota for rice from Thailand will be split 3,663 tonnes for the EU, and 650 for the UK.

But the exporting countries question the methodology the EU and the UK have used to split the quotas, suggesting that imprecision in the data could make it unreliable.

“There is a huge amount of guess-work involved when it comes to data on historical trade flows,” a senior diplomat said. “It is very difficult to narrow down the end-user of imported goods in the EU.”

The proposal also sets quota levels for certain products that are too small for a full shipment, according to some WTO members.

EU governments are expected next week to give the European Commission a mandate to open formal WTO talks on the quota split, and approve it a week later. This will pave the way for the start of negotiations in Geneva in July.

The talks are meant to end before the UK leaves the EU in March 2019. But diplomats familiar with the issue doubt this deadline will be met, given the large amount of criticism the EU-UK plan has drawn.

In the words of one diplomat, the EU and UK should expect a “tough” and “lengthy” negotiating process with their WTO partners.