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Reports following the latest round of Brexit negotiations, suggest that the EU and UK are close to finalising a deal on splitting the EU’s food import quotas under its trade schedule at the World Trade Organisation (WTO).

The EU has agreed to 124 tariff rate quotas with other WTO member countries, which allow them to export to the EU an agreed volume of product at lower than normal tariff levels. For example, the EU has an agreed TRQ with New Zealand for 74,693 tonnes of butter at €700/tonne and for 11,000 tonnes of cheese at €170.6/tonne. These quotas were introduced into the EU’s trade schedule when the UK became a member state.

Although the EU is holding off on discussing other trade matters until the second phase of the negotiations, it was considered necessary to find an early agreement on TRQs, so that it can be jointly presented and approved at the WTO.

The import quotas will be split based on a calculation of the UK’s share of EU imports, likely an average over a number of years. For example, in 2014, of the 35,700 tonnes of butter imported by the EU from New Zealand, the UK imported 11,631 tonnes, equating to 33%, and of the 10 800 tonnes of cheese imported from New Zealand, the UK imported 7,203 tonnes, 66%.  Therefore based on these figures the EU would reduce its import TRQs with New Zealand by 33% for butter and 66% for cheese.

However, if the EU reduces the volume of third country imports with preferential tariff rates, it in return will need to accept market access reductions to its own export markets. On this matter the negotiations will be particularly tricky, as the UK is a net importer of foods, so while its share of EU import quotas are high, its share of export quotas is low. This will need to be accounted for in the final deal to avoid exporters in the remaining EU-27 losing out due to reduced market access.

In addition, this exercise must also consider the EU and UK’s future trading relationship. At the very least, following Brexit, the UK and the EU will enter into a trade agreement, which must comply with their WTO obligations in terms of tariffs and quotas, and therefore the current levels of EU-27-UK trade will need to be accounted for in both the EU and UK’s trade schedule.

By Alison Graham

European Affairs Executive

Tags: Brexit, Import Quotas