Brexit tariffs spark retaliation fears

The Government and Kiwi exporters have come out firing against an European Union proposal to split up tariff access post-Brexit, warning of a “potential spiral” into tit-for-tat action.

The debate over tariff rate quotas has been raging for months, with Trade and Export Growth Minister David Parker saying he does not know where the debate will end.

The EU last week published the feedback it received on its plans to divide up the quotas, which allow imports at low or no tariffs below certain volumes, once the United Kingdom leaves the union.

In its formal submission, the New Zealand Government said there was “no need or justification” for the EU to change its quotas unilaterally, while there were alternative, less disruptive options available.

“It is difficult to understand why the EU – a long-standing champion of the rules-based multilateral trading system – would want to risk precipitating a potential spiral into unilateral withdrawal of commitments and potential retaliation in this way, as well as the reputational damage this could entail.”

The submission rejected the EU’s argument that it needed to urgently prepare for Brexit by changing its quota commitments, saying that was unnecessary while there was still a lack of clarity.

“None of our businesses – including EU producers and traders – can determine precisely how or when their trade interests will be affected in the current uncertain situation.”

New Zealand was not seeking “windfall gains” from the negotiations, but opposed any outcome that would leave the EU’s trading partners worse off.

Exporters hit out

Kiwi exporters also hit out against the EU’s plans, with the dairy and meat industries submitting against the plans.

Dairy Companies Association of New Zealand executive director Kimberly Crewther said the quota proposal was unilateral in approach and went against EU comments that it would “initiate good faith negotiations with other WTO members”.

The proposed three-year snapshot of trade flows was a “deeply artificial and narrow window” for setting future quotas, Crewther said, while the current quota could be maintained for the EU without any risk of “swamping” the market with imports.

In a joint submission, Beef + Lamb NZ and the Meat Industry Association of NZ said the EU proposal was “pre-emptive, unhelpful and unnecessary”.

“Asking affected parties to assess their interests without a clear understanding of the terms of trade between the EU and the UK is both untenable and unreasonable.”

New Zealand trade officials have publicly mooted a “1+1=1” approach, where the UK and remainder of the UK separately keep their existing quotas with an agreement from third-party countries not to exceed the original volume when export levels are combined.

It’s a suggestion unlikely to find favour with either the EU or the UK, given the need for a clean break.

With a Brexit transition period set to be in place from March 2019 until December 2020, there is also a feeling from Europe and the UK that the long-term quota issue can be dealt with through free trade deal negotiations.

Parker: Government in exporters' corner

Parker said the Government was “fighting the corner” for Kiwi exporters, who would lose significant flexibility if the EU’s proposal was to go ahead.

He said it was unclear how or whether a resolution could be achieved, given the stalemate in talks to date.

“Well we’ve been trying to fix this for a number of months and haven't yet, so we don’t know where it ends.”

The mention of “potential retaliation” was a reference to laying complaints with the WTO, with tariff countermeasures unlikely.

A spokeswoman from the EU Delegation in New Zealand said the body had “engaged with many WTO members in Geneva in an open and transparent manner and will continue to do so”.

While the UK and EU suggested any quota changes could be sorted out in a free trade deal, the Government felt “we shouldn’t go backwards in the meantime”, Parker said.

In a statement, a spokeswoman from the EU Delegation in New Zealand said the body had “engaged with many WTO members in Geneva in an open and transparent manner and will continue to do so”.

The EU’s formal notification of its plans began a 90-day period for WTO members to “demonstrate their rights”, and the spokeswoman said the EU would negotiate with individual countries “in accordance with the relevant WTO rules and procedures”.

“This process is naturally without prejudice to the ongoing discussions on the framework for the EU's future relationship with the UK or to any position the EU might take on other trade-related matters.”

A trade spokesperson for the British High Commission said the UK believed the current quotas should be split between it and the EU, based on historic trade flows.

"This seems to us the fairest way to preserve the rights and obligations of all WTO members, including TRQ holders and their competitors."

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