Three years ago the UK and the EU hatched a plan to carve up quotas for agricultural imports from third countries including NZ.
The proposal would see quotas previously agreed by the EU and third countries split between the UK and the remaining 27 countries of the EU when the UK leaves the bloc on December 31 this year.
NZ is one of 20 countries opposed to the proposal, which is the subject of ongoing discussions at the World Trade Organisation.
The objecting countries argue splitting the quotas robs them of the flexibility to export up to the quota volume limits to either the UK or the remaining EU countries.
At the moment NZ has quota to export up to 228,000 tonnes of sheep meat without tariffs to either the UK or the remaining countries of the EU, depending on where they can get the best price.
Under the proposed splitting of the quota, tariff-free entry for NZ sheep meat would be capped at 114,000 tonnes for both the UK and the remaining EU countries.
Exports above those levels would be hit with high tariffs.
Smaller dairy and beef quotas would be carved up in a similar fashion.
Along with other objecting countries, NZ argues the proposal violates WTO rules which forbid agreements that diminish one country’s access to another’s market.
This opens the possibility of a WTO lawsuit but with the global trade body’s appellate body currently out of action – sidelined by United States President Donald Trump’s block on judicial appointments – the EU and the UK could easily deflect the issue by appealing any decision against them by the WTO’s lower court.
This has led to speculation that NZ’s best chance of resolving the impasse is through trade deals with the EU and the UK.
NZ has been in talks with the EU for a free trade deal for the past two years.
Talks with the UK are due to kick off next month.
But the meat industry’s Brexit representative, Southland farmer Jeff Grant, said it was not the NZ Government’s present position that it would tackle the quota dispute in talks for a free trade deal – and the EU had so far not tried to link the two negotiations.
“That is not to say that they would not try but they have not tried it yet.
“NZ’s stance has always been that it is a separate matter.”
Dairy Companies Association chairman Malcolm Bailey urged NZ’s negotiators to stick to their guns.
He said the quotas should not be split and the existing quota should instead be the starting point for improving NZ’s access to the consumer markets of the EU and the UK in free trade talks.
“What the EU and the UK have done on this matter is completely contrary to our agreement (at the WTO).
“In both the EU FTA and the UK FTA we must try and have an outcome that supersedes all of this and we would expect that we don’t go backwards in any way whatsoever.”
However it would appear there is plenty of work to do to get to that point given the EU’s most recent market access offer, which was leaked ahead of the latest negotiating round earlier this month.
“That offer is miles back from what we already have, which have very onerous tariff levels, which means we are not really using it anyway,” Bailey said.
The first round of talks with the UK begin on July 13.
