Behind the Headlines

Countries call for Brexit compensation

Written on 11/26/2019


What’s the story?
Fourteen non-EU countries have backed Australia’s call for compensation from the UK (and EU) to make up for the effect of Brexit on their trade. Read more in the Independent


How reliable is the story?


Reliable. Earlier this month, at a World Trade Organisation (WTO) meeting, Australia fleshed out its complain in a formal proposal for compensation.


What’s the background?

  • Under WTO rules, a country or trading bloc can allow a certain number of foreign goods to be imported at reduced tariff rates, which is known as tariff-rate quotas (TRQs). Evidence
  • Together, EU countries agreed on TRQs for third-countries trading with Europe, offering them reduced duties so trade is economically viable. Evidence
  • However, when the UK leaves the EU, it would take a portion of these quotas, which would need to be readjusted and shared between the EU-27 and the UK. Evidence
  • Exporters to the EU point out that splitting the existing quotas into two parts removes the flexibility of exporting more to the UK in some years and more to the EU-27 in other years, as is normal with fluctuating demand. Two lower quotas do not, in practice, add up to the same as one higher quota. Evidence
  • This would likely lead to countries having less-favourable access than they currently do. Evidence
  • Australia is concerned this would lead to significant economic loss, particularly as some TRQs could become too small to be commercially viable. Evidence
  • According to New Zealand, this move undermines the general principle that no change to existing WTO arrangements should leave members worse off. Evidence
  • Earlier this month, Australia presented a formal proposal for compensation to the WTO. Evidence
  • Around 14 other countries backed this move, including the US, India  and New Zealand. Evidence
  • Indeed, the US referred to the proposals as ‘unjustifiable’. Evidence
  • Products under threat from a change in TRQs include beef, buffalo, cheese, sugar, and rice. Evidence
  • On top of this, Brazil has raised the issue that Northern Ireland arrangements could breach WTO rules. Evidence
  • The exact concerns Brazil has are yet to be published, but it is thought to involve WTO rules regarding discrimination. Evidence

 

Photo courtesy of World Trade Organisation via Flickr