Over a year on from the Brexit vote, there is still no clue as to where the UK will end up in terms of its trade position. There are three possible scenarios for the future:
1) the UK stays in the single market;
2) the UK does not keep full access to the single market but signs a Free Trade Agreement (FTA) with the EU;
3) no agreement is signed with the EU.
Whatever the scenario, it is clear that the WTO rules will have a greater role to play in the UK’s future.
The origin of the World Trade Organisation (WTO) can be found in the General Agreement on Tariffs and Trade (GATT) signed in 1947 in Geneva and of which the UK was a founder member. However, agriculture was almost absent from the scene until the Uruguay Round of talks which ended in 1994, with the creation and signature of a series of Agreements by 128 countries.
In agriculture, the aim of the 1994 Agreement was to eliminate most types of non-tariff barriers. As a result, each WTO member has a ‘schedule’ of tariff concessions covering all agricultural products except for fish, fish products and forestry that are not covered by the Agreement on Agriculture.
The schedules set out for each individual agricultural product, or, in some cases agricultural products defined more generally, the maximum tariff that can be applied on imports into the territory of the member concerned. These maximum rates can also vary in accordance with a specified season/time. These are called ‘bound tariffs’.
Exclusively in agriculture, there are also additional Tariff Rate Quotas (TRQs) that allow a specified quantity of product (by concession) to enter the market at a reduced or even zero rate. Once the limit has been reached, the tariff reverts to the standard external tariff rate i.e. the bound tariff. TRQs can be either open to every member or can be limited to parties to an FTA, as, for example, in the EU–Canada deal, CETA.
Brexit means that the UK will have to produce its own schedule of tariff concessions and of TRQs. Although, as a founder member of GATT, the UK has an advantage over newer members who are usually subject to tougher conditions to become part of WTO.
So what does this mean for agricultural trade from the UK? Brexit itself is unpredictable, and the promises made by the government are, at this stage, far too ambitious.
It might create new opportunities or it might dampen trade. It will certainly expose the UK to greater competition and two major concerns are subsidies for farmers and price of food for consumers.
From a purely legal point of view, the loss of a level of appeal and of a wider range of legal arguments will reduce the capability of those wanting to challenge the government’s decisions being successful.
The Government has made it clear that the result of the vote on 23 June 2016 must be recognised. Therefore, some new form of trading arrangement for UK agriculture seems inevitable.
For further information on agricultural law, please contact Frank Smith on 01242 801748 or visit us at http://www.franksmithandco.com/.