Thursday, August 18, 2022

EU-NZ agree on post-Brexit trade quotas

New Zealand has finally swallowed the dead rat of the European Union’s post-Brexit divvying up of agricultural trade quotas.

A spokesperson for the Ministry of Foreign Affairs and Trade confirmed an agreement had been reached with the EU, but would not disclose the details of the quota increases.

New Zealand has finally swallowed the dead rat of the European Union’s post-Brexit divvying up of agricultural trade quotas.

The two sides have been at loggerheads since 2017 when the EU and the United Kingdom cooked up a plan for splitting market access between themselves for outside trading partners once the UK left the 28-country customs union.

Exporters here said carving up the quota between the UK and remaining continental markets, based on trade flows between 2015 and 2017, reduced previous flexibility to switch up product flows between the EU and UK according to changes in market conditions.

Previously NZ had been able to export up to 228,000 tonnes of sheepmeat each year to the UK and continental Europe without having to pay a cent in tariffs.

As a result of the changes, which became effective on the UK’s formal exit from the EU customs union at the start of 2021, high tariffs kicked in once exports to either the UK or the continent exceeded 114,000 tonnes.

Smaller dairy and beef export quotas were also in the gun.

Exporters complained the three-year reference period used to calculate the new quotas did not fairly represent actual trade flows and were further distorted by the large volume of NZ exports shipped via the Dutch port of Rotterdam before ending up in UK supermarkets.

NZ trade officials led a chorus of criticism of the quota-splitting proposal at the World Trade Organisation (WTO) in November 2020.

The comments were endorsed by Russia, the United States, Canada, India, Australia, Mexico, Paraguay and Uruguay, who all agreed splitting the quotas in the manner proposed by the EU and the UK undermined existing market access.

Since then, the EU and the UK have gradually picked off their critics at the WTO with confidential deals.

In May Russia and NZ were the last remaining holdouts.

In October the UK agreed to a free trade deal in-principal phasing out tariffs on a range of agricultural exports only after NZ agreed to drop its objections at the WTO to its part in splitting the quotas.

And in the week before Christmas a social media post from a middle-ranking trade official at the European Commission announced NZ had agreed to drop its WTO complaint against the EU in exchange for minor quota increases for some agricultural exports.

A spokesperson for the Ministry of Foreign Affairs and Trade confirmed an agreement had been reached with the EU, but would not disclose the details of the quota increases.

It is understood the agreement increases the maximum annual amount of sheepmeat NZ can export to the EU without incurring tariffs from 114,000 tonnes to 138,000 tonnes.

Beef quota for NZ exports to the EU is increased to a mere 1000 tonnes. Increases to dairy quotas were unknown but not expected to be significant.

The new quotas were allocated based on new three-year trade reference periods nominated by NZ negotiators.

A meat industry source said NZ exporters had backed the compromise in the interests of “moving on” and with the expectation of further improvements in access for NZ agricultural exports in separate negotiations for a free trade deal with the EU expected to wrap up sometime in 2022.

While NZ maintained its original position that the EU and UK’s splitting of the quota was illegal under WTO rules, a breakdown in the global trade body’s dispute tribunals due to the ongoing American veto on new judicial appointments had left NZ with little option but to settle the matter out of court through negotiations.

A further condition set by NZ was acceptance by the EU that NZ did not believe a precedent had been set by splitting the quotas, despite NZ’s agreement to let them stand largely as they were first proposed, with only minor tweaks in the case of the remaining EU quotas.

“We have said to the EU if we sign a settlement then it is a settlement but it will be without prejudice to us saying the way you did this was not the way we think you should do it in the future,” the source said.

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