NZIBF acknowledges the passage of the implementing legislation for the New Zealand/European Union Free Trade Agreement and looks forward to the FTA’s entry into force on 1 May.
Splitsville: Tariff rate quotas after Brexit
As part of the Brexit “divorce talks” to prepare for the UK to leave the European Union in 2019, the European Commission and the UK have reportedly reached a preliminary agreement to divide up the EU’s current WTO tariff rate quotas (TRQs) on agricultural products. This would have significant implications for New Zealand access for meat and dairy products into the UK and EU. Under WTO rules, such a “deal” cannot simply be imposed on New Zealand and other WTO members.
The EU TRQs are part of the EU’s legal commitments in the WTO, and were part of the finely-tuned balance that was negotiated among WTO members in the Uruguay Round. They include so-called “country-specific tariff quotas” for New Zealand sheepmeat, butter and cheeses. A range of other WTO members, including major traders such as Brazil, Canada, Australia, China, Thailand and the US also have country-specific tariff quotas that were negotiated during the Uruguay Round or subsequently. The EU also has other TRQs for meat, dairy products, sugar and other products that can be accessed by some or all WTO Members, depending on the quota.
The tariff rate quotas provide a market access opportunity for a fixed quantity of farm products to enter the EU at a lower tariff rate. (Tariffs outside of those TRQs are normally prohibitively high and make trade uneconomic.) The current WTO commitments provide TRQ access to the 28 EU Member States on an unrestricted basis – that is, product can be imported into any Member State, in whichever proportion, provided that the total volume is not exceeded overall.
The “deal” struck by the UK and Brussels would reportedly simply divide up the current volumes between the UK and the remaining 27 Member States. The basis for this division (according to media reports) would be determined by a historical average of import shares into, respectively, the UK and other EU Member States – although of course this does not take account of a common trade pattern in which product may be imported into a single port in the UK for logistical reasons but then sent on to other European Member States for consumption, or vice versa. Apparently a letter setting out the proposed approach will be circulated to WTO Members in the coming week.
In effect, this approach would represent a reduction in the quality and quantity of the market access opportunity for exporters into Europe and, as such, would not deliver on the UK’s and EU’s bound WTO commitments. While currently the full volume of a given TRQ can be imported into any Member State, under the proposed approach those volumes would be reduced. Further, any product sent into the UK currently enjoys effectively “frictionless” onward trade into the remaining Member States, thanks to EU Single Market rules – which is highly unlikely to be the case following Brexit, thereby further diminishing the “quality” of access provided.
The EU and UK are obliged to ensure that there is no diminution to the market access commitment that the EU has made – in other words, entirely reasonably, that trading partners are “no worse off”. To that end, any proposal made by the EU and UK would need to be agreed by all WTO Members, including New Zealand – the EU and UK cannot simply impose a deal on others.
It should be possible to reach a negotiated solution that ensures such an outcome that properly preserves the existing market access commitments. We understand that New Zealand officials have been working on developing constructive approaches that might help to deliver on this. But clearly the first step is to engage in detail; what will not work is presenting a fait accompli to the WTO membership. Breaking up is hard to do, as our British and European friends are finding out.
This post was prepared by Stephanie Honey, Associate Director of the NZIBF.
REGISTER WITH TRADE WORKS
Register to stay up to date with latest news, as well as saving and discussing articles you’re interested in.
Latest News
NZ/EU FTA A BONUS FOR SOME SECTORS – BUSINESS FORUM
Media release, 22 March 2024 The NZ International Business Forum (NZIBF) acknowledges the passage of the implementing legislation for the New Zealand/European Union Free Trade Agreement and looks forward to the FTA’s entry into force on 1 May. “This agreement was...
“MEAGRE OUTCOME” FROM WTO IN ABU DHABI – BUSINESS FORUM
Media release, 2 March 2024 Despite its overwhelming importance at the heart of the international trade system, members of the World Trade Organisation (WTO) have concluded their Ministerial in Abu Dhabi (“MC13”) with only a meagre outcome. NZ International Business...
To go or woe with the WTO?
We’ve been here before with the World Trade Organisation (WTO). The global trade body’s 13th Ministerial meeting (“MC13”) opens in Abu Dhabi on Monday 26 February, with Trade Minister McClay serving as Vice-Chair. In recent weeks diplomats, trade...
DCANZ – Agricultural Subsidy Distortions Must Be Addressed
23 February 2024 - Media Release by the Dairy Companies Association of New Zealand (DCANZ) As the world’s Trade Ministers head to a WTO meeting in Abu Dhabi, the Dairy Companies Association of New Zealand (DCANZ) is calling for an immediate capping of agricultural...
Asia-Pacific business leaders call for greater economic dynamism with people at the center of the APEC agenda
16 February 2024 - APEC NEWS RELEASE Issued by The APEC Business Advisory Council (ABAC) The APEC Business Advisory Council (ABAC), meeting this week in Kuala Lumpur, Malaysia, expressed deep concerns about the growing pressures of economic fragmentation and the risks...
SUBMISSION TO THE PARLIAMENTARY FOREIGN AFFAIRS, DEFENCE AND TRADE COMMITTEE – FEBRUARY 2024
NEW ZEALAND EUROPEAN UNION FREE TRADE AGREEMENT LEGISLATION AMENDMENT BILL Introduction and Summary This submission is made on behalf of the New Zealand International Business Forum (NZIBF) and Export NZ. NZIBF is a forum of senior business leaders working...
ABAC Statement on WTO MC13 – February 2024
Now, more than ever, the world needs a credible, relevant, and effective multilateral trading system, with the World Trade Organization (WTO) at its core. In this era of global challenges, the APEC Business Advisory Council (ABAC) recognizes that the WTO is...
Global Industry Statement on the WTO Moratorium on Customs Duties on Electronic Transmissions
NZIBF has joined 170 international business associations in calling for an extension to the current moratorium on tariffs applying to digital services (like Netflix) at the forthcoming WTO Ministerial meeting. The undersigned associations urge WTO members to support...
Resilient supply chains: Yesterday, today and tomorrow
Published by the Hinrich Foundation, Singapore, 23 August 2024 By Stephen Jacobi History has much to teach us about the way trade contributes to prosperity through the movement of goods, services, people, and ideas. Today, data can be added to this web of...
SUBMISSION TO THE MINISTRY OF FOREIGN AFFAIRS AND TRADE
GENERAL REVIEW OF THE COMPREHENSIVE AND PROGRESSIVE AGREEMENT FOR TRANS- PACIFIC PARTNERSHIP (CPTPP) DECEMBER 2023 Summary This submission is made on behalf of the New Zealand International Business Forum (NZIBF). As individual NZIBF Members may make their own...
Todd McClay – your trade mission, should you choose to accept it …
As published by Newsroom 19 December 2023 By Stephen Jacobi “Twas the week before Christmas, When all through the house Not a creature was stirring, Except busy trade officials … ‘Tis the season to be “BiM-ing”* and the NZ International Business Forum has sent its...
2023 – Steps forward and back
Trade liberalisation moved forward and backward in 2023. Some notable gains have been achieved for New Zealand, but war, geo-political rivalry and global inflation continue to depress global markets. While the pandemic continued to lurk in the shadows, 2023 was the...
NZIBF releases Brief to the Incoming Minister of Trade
DECEMBER 2023...
NZIBF 2023 Chair Report
I am pleased to present my third report on the activities and achievements of the NZ International Business Forum (NZIBF) for 2023-24, our sixteenth year of operations. I am grateful to all Members and to our executive team for your continuing support. As I...
Of APEC, CPTPP and IPEF
While New Zealand was sorting out its new Government, the alphabet soup which is trade got a good stirring in San Francisco. This was APEC Leaders’ week, the annual gathering of Leaders, Ministers, business people and other stakeholders from the 21 economies of...