Deadlock on post-Brexit trade

NZ Farmers Weekly, 30 November 2017 by Nigel Stirling

A visit here by Britain’s top trade official Liam Fox failed to settle a dispute over how New Zealand’s quota for sheep meat exports to the European Union should be handled after Brexit.

Kicking off his three-day trip with media interviews last weekend Britain’s international trade secretary Fox repeated the outlines of a deal reached earlier this year between the EU and the United Kingdom to split the quotas between themselves using a formula based on trade volumes over an unspecified three-year period.

Fox maintained splitting the quota to reflect recent trade would leave neither British farmers nor their NZ counterparts any worse off when the UK left the EU in March 2019.

That was flatly rejected by NZ exporters who said it would strip them of the flexibility to sell up to the quota limit of 228,000 tonnes to either the UK or in the remaining 27 countries of the EU as market conditions dictated, as they could now.

Depending on which three-year trade period was used to calculate the split exporters would see their quota entitlements to the UK and the continent respectively roughly halved and a 50% tariff applied on trade above the new limits compared to a zero tariff now.

In September NZ was one of six agricultural exporting countries with special quota access to the EU market to sign a joint letter to the UK and the EU outlining their concerns with the proposals, which they believed ran counter to World Trade Organisation rules that said no country should be left worse off by new trade agreements.

However, the message didn’t appear to be getting through to Fox who met Trade Minister David Parker for the first time in Wellington last week.

Parker said the two sides reiterated their previous positions and remained deadlocked on the issue.

“We took the same position as the prior government did and we heard the same answers and have asked for a formal response to our written proposition outlining the solution that we favour.”

It was understood the proposal floated by NZ in early October adopted a common ceiling approach to the quota.

That would see the 228,000 tonnes tariff-free quota replicated in full across the UK and the remaining 27 members of the EU after Brexit.

By administering the quota from NZ it would be possible for export licences to be revoked once the quota had been exceeded and it would ensure farmers here and in the EU and the UK were no worse off as the UK and the EU were legally obliged to ensure and as both claimed they wanted.

Asked about Fox’s comments about the possibility of a two-stage solution where quota lost as a result of Brexit talks could be won back in bilateral trade talks with the UK at a later date Parker said that would not be acceptable to NZ.

“We have said that we want NZ exporters to be no worse off as a result of the Brexit arrangements.

“So our clear desire is that this is resolved by the time of the Brexit divorce.”

Parker agreed there was potential for the issue to still not be resolved by March 2019.

While that was the date at which the UK was scheduled to leave the EU it was seen as increasingly likely that a further transition period would be required if the terms of the UK’s exit could not be settled before then.