I don‘t often disagree with Sam. Here I do. The TRQ negotiations at the WTO won’t be easy. What does that mean? What is happening? (Short thread)
1) Each WTO Member has schedules. These contain, among others, their tariff commitments. The U.K., as an EU member state, traded under the EU schedule. It now needs its own.
2) The EU will need a new schedule of the EU27. The U.K. thinks this exercise is a rectification, that the U.K. schedule can be determined as a technical exercise, separating it out of the EU one. The EU thinks this is a modification of the schedule, requiring negotiations.
3) The most contentious bit in all of this are TRQs. Unlike other tariffs, expressed as a % of the trades good, these contain a quantitative bit. Think ‘the first 100,000 t that enter pay 2%, everything above that 15’
4) While tariffs expressed as a % can just be copied into the new schedules, here the question arises: how do you split these 100,000 t between imports to U.K. and those to the EU?
5) The assumption is to do it based on trade flows (60% went to the EU in the past so they get 60%). But this is difficult as there’s no precise data (goods travelled freely in the past)
6) Worse: even if you have the data in the past you could just flexibly move good between EU and U.K. according to market conditions. In the future...
7) So NZ and others want to negotiate. They want more access. Add one more complication: EU and U.K. assume that there’ll be an FTA between the two, that at least their goods will flow somewhat freely. If that doesn’t happen, that trade too will have to enter the TRQ
8) And now I’m getting there: @SamuelMarcLowe argues that objectors to the schedule can be bought off in FTA negotiations.
9) There’s Logic to it (Sam is, after all, one of the sharpest commentators on these issues): NZ gets an FTA with both the EU and the U.K. Those’ll be the terms of trade. Issue resolved, right?
10) But look at the assumptions: a) all Members that object to the current TRQ modification will negotiate FTA successfully with U.K. (let’s forget the EU also modifies its schedule). B) They’ll do that fast enough for WTO terms to not matter
11) I consider both a and b unlikely. And for the mere risk of breakdown you would want the WTO terms to be right, besides...
12) This is a moment of a) maximum leverage and b) holding UK politicians to their rhetoric. Think about b alone...
13) How often have you heard ‘we finally can trade freely after getting out of the protectionist EU‘. Reality check: we will use the same tariffs and have told Members we are less flexible than the EU, by claiming a rectification.
14) So it‘d be astonishing if there wouldn’t be a fair amount of negotiation in the WTO and not just posturing. A catastrophe?
15) No, not at all. The EU took a loooong time to get its last schedules approved after the last enlargement. Trade will continue under the proposed schedule with lots of negotiations.
