Saturday, March 30, 2024

EU free to cut sheep meat quotas

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Two of the country’s top trade lawyers believe New Zealand has a solid legal argument to challenge plans to split lucrative quota for agricultural exports to the European Union.
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Last month the European Commission outlined the position it plans to take into talks over the future of the quotas following Britain’s planned departure from the 28-country bloc next March.

The proposal would see those quotas carved up between the United Kingdom and remaining EU countries based on their respective share of imports from quota-holding countries from 2013 to 2015.

Based on NZ’s sheep meat exports in those three years the quota of 228,000 tonnes would be split in half between the UK and the EU.

That would mean NZ exporters would go from a position of paying no tariffs on exports up to 228,000 tonnes to either the UK or the continent to one where they would face a 50% tariff on exports of over 114,000 tonnes in either market.

Asked to reassure NZ farmers they will be left no worse off by the proposal during her recent visit here the EU’s top trade official Trade Commissioner Cecilia Malmstrom said she couldn’t.

“This is a lose-lose situation. 

“We all lose out of the British leaving. 

“We will have to divide the quota somehow.”

But Chapman Tripp trade law consultant and former trade negotiator Tracey Epps disagrees.

Changes to quotas are dealt with under Article 28 of the General Agreement on Tariffs and Trade (GATT), which obligates the EU to consult quota-holders and to endeavour to maintain a general level and mutually advantageous concessions not less favourable to trade than that provided for before consultations begin.

Epps said splitting the sheep meat quota in the manner proposed runs counter to the intention of Article 28.

“A simply 50:50 split in the quota between the UK and the EU-27 may well suggest that such endeavours have not been made, as this outcome would not maintain a level of access for NZ exporters as favourable as that which they currently enjoy.”

Head of international trade at law firm Russell McVeagh, Sarah Salmond, said it was clear NZ sheep farmers would be worse off if the EU splits the quotas as it is proposing.

“If they split the sheepmeat quota in two the total quantity remains the same. However, we lose the quality of our access, because we lose the flexibility to send our product wherever the price is highest and the freedom to tranship our product from the UK to the EU and vice versa. So ultimately, under the EU's proposal, we would be worse off.

“The EU is understandably looking for a quick and easy way to split the 124 quotas it is obliged to operate under WTO rules. But just because the EU proposal is quick and easy, does not make it fair or indeed legal. The EU has a legal obligation to ensure that its trading partners are "no worse off" as a result of any quota splits, and I do not think the current proposal discharges that obligation. If this case goes to WTO dispute settlement, I think it is quite likely that the EU would lose.”

But Epps said while there is an obligation on the EU to consult quota-holders there is no requirement to get their approval before changing quota arrangements.

“If agreement cannot be reached then the EU is free to go ahead and make the modification regardless.”

Epps said Article 28 allows NZ impose tariffs against EU imports up to the value of damage done by the quota changes without having to go through the full process of instigating legal action at the World Trade Organisation.

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