A Milestone in the UK’s WTO Transition

Nearly a year ago British ministers agreed a plan for the UK’s transition in the World Trade Organization as it leaves the EU. The goal was to establish the UK’s position in the WTO by 29 March 2019 in a way that minimized any disruption, by replicating as far as possible the UK’s current trade regime in the WTO as part of the EU. In WTO speak, this would involve transposing the UK’s existing WTO commitments from the schedules it shares with the EU, into UK specific ones.

This week’s announcement that the UK and the EU will present proposals to tackle some of the thorniest challenges involved in this WTO transition is an important milestone. Extricating the UK from our common EU structures in the WTO was always going to benefit from close cooperation. From the start, the UK has reassured the rest of the WTO membership that it would seek to work responsibly with the EU to achieve a smooth transition. And just as for our WTO partners, we have also been determined to minimize any disruption for our EU partners as a result of that transition.

The vast majority of the UK’s obligations expressed in the EU schedules can be replicated relatively easily. On the goods trade side, they mostly consist of tariffs. So, for example, a 10% tariff on cars into the EU becomes a 10% tariff on cars into the UK. On the services trade side, many of the UK’s WTO commitments are already expressed as UK specific commitments. The EU rules governing those commitments will be replicated in UK law as part of the EU Withdrawal Bill now going through Parliament. There are many important details that need to be got right in all this, but for the most part they are administrative.

Three areas in particular, however, are more complicated. Agricultural quotas and subsidies cannot just be copied and pasted. And although we are a full member of the WTO in our own right, we currently participate in an important WTO agreement know as the Government Procurement Agreement only by virtue of our EU membership. The GPA governs the $1.7 trillion global market in public procurement. The UK currently makes up about 25% of the EU’s value to the other GPA members, and so it is in everybody’s interest that we remain part of it after we leave the EU.

These are three of the areas that the UK and the EU have agreed to work together to address, in the letter that the EU’s Ambassador to the WTO and I have just sent to the WTO’s membership.

The most tricky issue of all are the agricultural tariff rate quotas, or TRQs as they are known in the WTO. These are the way the majority of agricultural imports for countries without free trade agreements with the EU enter the EU market. A number of countries have valuable country-specific quotas for particular products, such as lamb or beef. These are all set out in the EU’s goods schedule. When the UK joined the then European Economic Community in 1973 we brought a lot of agricultural trade – including lamb from New Zealand, beef from Australia – with us into the Common Market. Likewise as we leave the Single Market, we will take a lot out with us. The question is how much, and what should we do with the EU’s TRQs – which currently include the UK – so as to minimize any disruption to those countries that rely on them to trade with the UK.

Some have suggested that we should effectively double the EU TRQs by providing an additional TRQ of the same size to the existing EU TRQ in the UK specific goods schedule, while the EU should retain its existing TRQ. We have made it clear that we are committed to avoiding any disruption of existing trade. That remains our clear commitment. But it is hardly a surprise that we have never committed to granting our trading partners a windfall gain of doubling their market access! Local producers in the UK would be displaced. Other WTO members who export to the UK through different schemes, for example the preferences we grant the Least Developed Countries and other developing country members, would also see their trade eroded. The UK may decide to liberalize agricultural trade in the future. But the process of establishing our position in the WTO with minimal disruption is not the moment to do so.

In his statement to Parliament on 5 December last year, Secretary of State Liam Fox said that we would undertake our transition in dialogue with the WTO membership. In the first quarter of this year, the UK reached out to every member of the WTO to explain our overall approach. In June and July we held meetings with all those WTO members with most at stake in how we resolve the issue of TRQs. And over the summer, we sat down with the European Commission to work out how we could tackle our common challenges in the WTO, particularly the TRQs.

The UK and the EU will present our ideas later this month to those countries that the UK saw in June and July. We look forward to hearing their reactions, and their own proposals. We are absolutely open to hearing why they consider that our approach to the matter will in fact disrupt their trade, if that is their view. We will then reflect on what we have heard before deciding our next steps. The UK has over a year before it needs to submit its own UK specific schedules. We want to do so with the support of our trading partners in the WTO. So over the next year we plan to have extensive and intensive discussions to find a way forward, particularly with those countries who rely most on the EU TRQs.

The UK is a founding member of the WTO, and of its predecessor the General Agreement on Tariffs and Trade. We were a leading voice in the multilateral trading system before we joined the EU. Once we have completed our transition in the WTO, we will be in position to be so again.