Wednesday 30th January 2019
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The European Union's parliament has taken a decisive step towards unilaterally reducing New Zealand's rights to export specified quantities of tariff-free sheepmeat, beef and dairy products to the trading bloc if and when Brexit occurs.
The move has been slammed as "outrageous" by former trade negotiator Charles Finny in a Tweet and "disappointing" by the Dairy Companies Association of New Zealand. The Ministry of Foreign Affairs and Trade said the proposed moves risk compounding "growing international economic uncertainty and rising trade tensions".
Another former diplomat and trade negotiator, the International Business Forum's Stephen Jacobi, stressed the EU parliament's adoption of a European Commission recommendation to reduce tariff rate quota access for a range of agricultural products from several countries was simply the latest step in a process that began in 2017.
At that time, both the EU and the UK indicated they wanted to change preferential market access which, in New Zealand's case, was negotiated as compensation for Britain entering the then European Common Market in 1973. Sheepmeat is the most affected trade, although butter, cheese and beef access rights would also be trimmed.
"They haven't implemented this and they won't until Brexit takes place," said Jacobi. "But the bigger picture is that it's completely unacceptable for them to act like this. These quotas were negotiated and bought and paid for in the Uruguay Round (mid-1990s global trade agreement) and they cannot simply be adjusted at whim through a change in circumstance like this.
"It's a deeply unhelpful move. Not helpful in our relations with post-Brexit Britain and certainly not helpful in our FTA (free trade agreement) negotiations with the EU. It seems extraordinary, after all of these years, that we have to go and back and renegotiate these bloody things.
"We're not paying twice - for Britain going in (to the EU in 1973) and leaving," Jacobi said.
Trade publication Euronews reported yesterday that the EU had formally "adopted quotas for farming produce it will accept from third countries" after Brexit. It said those reductions could occur before the EU had concluded trade talks with the countries affected, including the US, Australia, Canada, New Zealand, Argentina, Brazil, Uruguay and Thailand.
Some 20 countries put the World Trade Organisation on notice in 2017 that splitting the quotas between the UK and EU markets would leave them worse off.
To date, New Zealand has been able to ship as much product covered by the tariff-rate quotas as it wished to either the UK or EU, managing product flows according to market conditions.
The EU proposal would split the existing rights between the UK and EU, based on trade flows between 2013 and 2015.
New Zealand's stance, however, is that access should not change. Britain's decision to leave the EU doesn't alter the fact that the EU has a trade agreement with New Zealand.
Jacobi said the EU might try to wrap the TRQ issue into the FTA negotiations that are now underway but this should be "strongly resisted".
The Europeans might also argue they had to make these changes to prepare for Brexit and that "they can't do anything different now because the parliament has signed off and it'll be too tough to go back and sort it out," said Jacobi. "Well, tough."
Splitting the quotas would be "hotly contested" by New Zealand and other affected nations, who would seek dispute settlement through the World Trade Organisation if the move went ahead unilaterally.
"There are opportunities for NZ post-Brexit, but this is a big can of worms that's not fixed," he said.
DCANZ executive director Kimberly Crewther said it was disappointing that Europe had proceeded to unilaterally change a negotiated tariff schedule despite objections from about 25 countries.
"This move preempts the WTO negotiating process which is underway. I'm not sure it's the kind of example that the EU as a growing net exporter of agricultural products would want to see other countries replicating."
An MFAT spokesperson confirmed that the proposals would eliminate WTO quotas into the EU for five products and reduce access by more than 10 percent for 95 products. In the case of the UK, "these proposals would fully eliminate current WTO quota access into the UK for 55 products".
"This issue is of particular concern for those countries without preferential access into the EU through a free trade agreement," said MFAT. "These countries – like New Zealand, the US, Australia, Brazil, Argentina, China, India – are reliant on the access conditions negotiated and bound in the WTO. The tariff rate quotas are particularly important in that regard because the EU’s tariffs for the majority of these products are too high to be able to trade into that market ordinarily.
"New Zealand has been clear from the outset with both the EU and the UK that these proposals do not fully honour their existing WTO commitments and will leave concerned WTO members, like New Zealand, worse off," MFAT said. New Zealand was urging a "re-think" to the current approach by both the UK and EU.
"At a time of growing international economic uncertainty and rising trade tensions, New Zealand has been urging the EU and UK not to compound these by undermining the bound tariff rate quota access other WTO members negotiated over more than two decades to obtain into their markets."
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