Proposal for a Regulation on the apportionment of tariff rate quotas in the WTO schedule of the Union following the withdrawal of the United Kingdom from the Union amending Council Regulation (EC) No 32/2000

In “International Trade - INTA”

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Background: Brexit and tariff rate quotas in the WTO

The United Kingdom is currently a member of the EU, and is as such a member of the EU’s customs union. The UK accordingly applies to the rest of the world the common external tariff set by the EU in line with its schedule of commitments, which sets the bound rates i.e. the ceiling rates that the EU has committed to in the World Trade Organisation (WTO).

Once the UK leaves the customs union, it will set and apply its own tariffs to its imports. Therefore, the UK needs to create its own schedule of commitments in the WTO. For some goods, the UK can simply replicate the tariffs included in the EU schedule; however, this is not possible for goods subject to tariff rate quotas (TRQs). A TRQ applies to a certain quantity of the good a certain tariff (in-quota tariff), while for quantities of imports exceeding that quota level it applies a higher tariff. The TRQs were set in the framework of the WTO to account for the demand of an EU made up of 28 Member States. The quota levels, currently foreseen in the EU schedules, will therefore be disproportionately large for the UK alone. Conversely, considering that the UK is one of the major consumer markets in the EU, the EU wants to ensure that it does not have to continue importing the same amounts. Thus, the EU wants to adapt its TRQs to account for the reduced demand in the post-Brexit EU-27.

The proposal for a regulation submitted by the Commission implements into EU law an agreement reached with the UK in 2017 on how to apportion the quotas present in the EU schedule of commitments between the EU and the UK following the UK’s withdrawal from the EU.

The EU-UK 2017 agreement and ongoing negotiations with other WTO Members

The EU and the UK considered the apportionment of the TRQs between the EU and the UK as an adaptation of the WTO schedule to the new post-Brexit situation. The EU and the UK then held bilateral discussions to adjust their schedules, without triggering renegotiations under Article XXVIII of the General Agreement on Tariff and Trade (GATT). Their aim was also to use the quicker procedure foreseen within the WTO for rectification.

An EU-UK agreement on splitting the quotas was reached and submitted to the WTO partners in October 2017. Some of the major exporters of agricultural products in the WTO wrote a joint letter to the EU and UK raising concerns about the EU-UK agreement. These countries considered that the changes proposed by the EU and the UK were more than a simple rectification of the schedules, and involved less flexibility and market access for their exporters. They stressed that if market access changed because of the proposed EU-UK quota subdivision, other concessions should compensate for the loss of market access. They also pointed out that modifications of the current WTO binding commitments should be adopted with their agreement.

In order to obtain an agreement on the splitting, the EU and the UK started talks with the various countries in the WTO that are considered to have a stake in the renegotiation of tariff schedules under WTO law. At a meeting of the WTO market access committee in October 2018, several countries expressed concern over the methodology and the accuracy of the import data that had been provided by the EU to justify its proposal to modify its current WTO commitments as a consequence of Brexit.

Proposal of the Commission for unilateral apportionment

While negotiations in the WTO continue, the Commission submitted a proposal to modify Council Regulation (EC) No 32/2000 which implements the EU’s tariff quotas bound in the GATT internally. In doing so, the Commission is preparing for a scenario in which agreement in the WTO will not be reached in time before the UK’s exit from the EU.

The proposal follows the method that was agreed with the UK. The EU share of the apportioned quota was computed by subtracting the UK share of a given quota from the entire scheduled tariff rate quota in question. The UK share of a given quota was worked out by determining the UK’s usage share (expressed in percentage) and applying it to the scheduled tariff rate quota volume. In this context, the UK usage share was obtained by calculating the UK share of imports per quota over a recent representative period of three years (in this case 2013-2015).

The Council agreed on the proposal on 29 October 2018. The proposal contains in annex the detailed list of TRQs and the respective EU apportionment. The proposal also gives the Commission delegated powers to change the annexes to the Regulation in order to account for any agreement reached in the WTO. On the 14 November 2018, the Parliament decided to enter into inter-institutional negotiations based on its report on the proposal. The Parliament report proposes, amongst others, that while modifying the annexes the Commission should take care not to extend the current level of market access. The Parliament’s INTA Committee approved the provisional agreement that came out from inter-institutional negotiations on 10 December 2018. The Parliament approved the regulation upon first reading on 16 January 2019 and subsequently adopted by the Council. The new quotas would only apply from the day after UK’s withdrawal from the EU.

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Further reading

Author: Jana Titievskaia, Members' Research Service, legislative-train@europarl.europa.eu

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As of 20/11/2019.