U.S., EU Reach WTO Tariff-Quota Pact Post Brexit, USTR Says

The European Union and the U.S. have reached an agreement after two years of talks on how to adjust so-called tariff-rate quotas that had to be renegotiated after the U.K. left the bloc.

The negotiations took place under World Trade Organization procedures and will determine how to split TRQ quantities between the 27-nation region and the U.K., the office of the U.S. Trade Representative said in an emailed statement Monday. The parties will sign and implement the agreement after the EU completes “formal approval procedures,” the USTR said. It didn’t provide more detail about the pact.

Tariff-rate quotas allow countries to export specified quantities of a product to other nations at lower duty rates, but subject all imports of the product above a pre-determined threshold to a higher duty, according to the USTR’s website.

“Once implemented, this agreement will provide market access certainty for U.S. producers and exporters to the EU,” acting USTR Maria Pagan said.

In 2019, some WTO members criticized the EU’s unilateral plan to divide its joint WTO tariff-rate quota obligations with the U.K., which left the bloc at the end of last year.

At the time, New Zealand said that by cutting back tariff-rate-quota commitments, the EU and the U.K. are acting contrary to the objectives of trade liberalization, non-discrimination, and tariff reduction.

The issue centered on the most important part of the EU and the U.K.’s membership in the WTO -- their schedules of concessions, which outline tariff rates and other trade rules by which other countries may export goods and services to the European marketplace.

Since the U.K. didn’t possess an independent schedule at the WTO, it offered to replicate the EU schedule and split their joint commitments, which set import limits on sensitive agricultural goods.

In 2018, the European Commission approved a mandate that would unilaterally impose a simple formulaic split of Europe and Britain’s joint trade quotas according to historical trade data -- even if the move is rejected by other WTO members.

Now that the tariff-rate quotas have been settled, agricultural exporters to the EU and U.K. will have to be on guard for how those levels could impact their shipments, said Deborah Elms, executive director of the Asian Trade Centre. If the EU’s tariff-rate quotas now lean more toward members that import fewer products than others, foreign firms could lose out.

The agreement could also prove a critical test of future U.S.-EU trade negotiations, Elms said.

“There are no other trade arrangements in place between the U.S. and the EU and the U.S. and the U.K.,” she said. “Getting it ‘wrong’ now means using a baseline for any future trade negotiations that is less favorable to the U.S.”

Source: Bloomberg