Explanatory Memorandum to COM(2018)312 - Apportionment of tariff rate quotas included in the WTO schedule of the Union following the withdrawal of the United Kingdom from the Union - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2018)312 - Apportionment of tariff rate quotas included in the WTO schedule of the Union following the withdrawal of the United Kingdom ... |
|---|---|
| source | COM(2018)312  |
| date | 22-05-2018 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
On 29 March 2017, the Government of the United Kingdom (UK) notified the European Council of the UK’s intention to withdraw from the European Union (EU) of which it is currently a Member State. It is anticipated that the UK will cease to be a Member State of the EU as from 30 March 2019.
The UK's withdrawal from the EU has implications beyond the bilateral relationship between the EU and the UK, in particular with regard to their commitments under the Agreement Establishing the World Trade Organization (WTO). Both the EU and the UK are original Members of the WTO. When the European Community accepted the WTO Agreement and the Multilateral Trade Agreements in 1994, the schedule of concessions and commitments that was annexed to the General Agreement on Tariffs and Trade 1994 (GATT 1994) for the European Communities (the EU's WTO schedule) was thereby simultaneously annexed for the UK. The EU’s schedule therefore contain commitments applicable also to the UK in its capacity as a WTO Member. As far as the EU is concerned, its concessions for goods will remain applicable to its territory, but the EU's existing quantitative commitments notably the Tariff Rate Quotas (TRQs) will require certain adjustments to reflect the UK's withdrawal from the EU.
The present quantities of the EU's WTO bound TRQs for agricultural, fish and industrial goods have been established on the basis of the UK being a Member State and forming part of that EU market. These TRQs apply to the EU market as a whole including the UK. It is therefore necessary to reflect the fact that the EU's WTO schedule will no longer apply to the UK after its withdrawal from the EU or, at the latest, after 31 December 2020 should the transitional arrangements agreed between the negotiators of the EU and of the UK as part of a Withdrawal Agreement enter into force.
The adjustment of the EU's WTO bound TRQs entails an apportionment of the existing quantities between the UK and the EU to become effective on the date the UK is no longer covered by the EU's WTO schedule.
In the interest of maintaining clarity and predictability in the multilateral trading system, the EU and the UK sent a joint letter to the whole WTO membership on 11 October 2017 setting out the main rationale and principles envisaged for this apportionment. Subsequently the EU and the UK have been actively engaging with their main trading partners in the WTO on this matter in an open and transparent manner.
In line with Article XXVIII of the GATT 1994, the EU will need to conduct negotiations with certain WTO Members affected in order to modify the EU WTO schedule where it contains TRQ volumes, by apportioning these TRQs. To this end the Commission is submitting in parallel to the Council a recommendation, accompanied by draft negotiating directives, to authorise the Commission to initiate negotiations with affected WTO Members. Negotiations will proceed with the relevant WTO Members who have been identified as having relevant market access interests as set out in Article XXVIII of the GATT 1994 (having so-called principal or substantial supplying interest or holding an initial negotiating right) under the individual TRQs. The UK is expected to undertake the necessary procedures with a view to setting out its own schedule of concessions and commitments annexed to the GATT 1994 including the apportioned quantitative commitments.
Given the time frame in which these negotiations will need to be conducted, it cannot be excluded that some of these negotiations with individual WTO Members under Article XXVIII of the GATT 1994 regarding one or more TRQs will not be concluded by agreement within the necessary time limits before the UK is no longer covered under the EU's WTO schedule. It is therefore necessary to ensure that, in the absence of such agreement, the EU can nevertheless proceed with the apportionment of the TRQs by modifying the WTO tariff concessions and that the Commission is given the necessary powers to consequently amend the relevant EU provisions on the opening and implementation of the relevant TRQs.
In order to ensure compatibility of this exercise with the EU's obligations under the WTO Agreement and in particular Article XXVIII of the GATT 1994, this apportionment should be based on the existing trade flows under each TRQ for a recent representative time period. A consistent approach to all TRQs, inter alia with respect to data and methodology, should be followed. Importantly, the existing overall levels of market access to the EU and UK available to other WTO Members should be maintained in line with paragraph 2 of Article XXVIII of the GATT 1994.
The Commission has used a clear and objective methodology, which was agreed jointly with the UK, in proposing an apportionment of the TRQs concerned. In a first step the UK usage share for each individual TRQ was established. The usage share (%) is the UK share of total EU imports under the TRQ over a recent representative three year period (2013-2015). In a second step this usage share was then applied to the entire scheduled TRQ volume to arrive at the UK share of a given TRQ. The EU share consists of the remainder of the TRQ in question. This means that the total volume of a given TRQ is not changed (i.e. EU27 volume = current EU28 volume – UK volume). The underlying data was extracted from the Quota2 database for TRQs administered by DG TAXUD and from the Agricultural Markets Information System (‘AMIS’) database for TRQs administered by DG AGRI.
In those cases where no trade was observed for a specific TRQ over the reference period, two alternative approaches were pursued to establish the UK usage share. In those cases where there is another TRQ with the exact same product definition the usage share of that identical TRQ was applied to the TRQ without observed trade over the reference period. In those cases where there is no TRQ with an identical product description the formula to calculate the usage share was applied to the EU imports in the corresponding tariff lines outside of the TRQ.
An agreement between the EU and New Zealand under Article XXIV.6 GATT subsequent to Croatia's accession to the EU was signed on 13 March 2018 and is currently still awaiting the consent of the European Parliament before its conclusion by the Council. This agreement would increase the TRQ for 'Meat of sheep or goats, fresh, chilled or frozen' allocated to New Zealand (order number 092013) by 135 t so that the quantity would become 228,389 t and the corresponding future EU-27 quantity would be 114,184 t.
• Consistency with existing policy provisions in the policy area
This initiative is in line with the EUs ongoing actions to prepare for the withdrawal of the UK from the EU in an orderly manner, notably the joint EU-UK letter to the WTO Membership of 11 October 2017.
• Consistency with other Union policies
As above.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
Article 207(2) TFEU.
• Subsidiarity (for non-exclusive competence)
The common commercial policy is an exclusive competence of the Union.
• Proportionality
The envisaged measure is the only way of ensuring the desired result.
• Choice of the instrument
A legislative act is required, as existing legislation does not provide for an empowerment to the Commission to adopt the proposed measures in the event that no agreement is reached in the WTO negotiations with individual WTO Members within the time limit of the actual UK withdrawal.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
Not applicable.
• Stakeholder consultations
Not applicable.
• Collection and use of expertise
Not applicable.
• Impact assessment
Not applicable.
• Regulatory fitness and simplification
Not applicable.
• Fundamental rights
The proposal has no impact on fundamental rights.
4. BUDGETARY IMPLICATIONS
Not applicable.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
Not applicable.
• Explanatory documents (for directives)
Not applicable.
• Detailed explanation of the specific provisions of the proposal
Article 1 provides that TRQs figuring in the EU’s WTO schedule of concessions and commitments will be apportioned between the EU and the UK. It refers to the Annex (part A and part B) for a detailed list of the TRQs and the respective EU27 apportioned amount. Article 2 provides that Part B of the Annex shall replace Annex 1 to Regulation (EC) No 32/2000, where these TRQs are currently listed. Article 3 gives the Commission an empowerment to amend the Annex to this proposed Regulation and Annex I to Regulation (EC) No 32/2000, in order to change the apportionment to cover for agreements concluded with trading partners in the meantime, for the case that following negotiations with trading partners it becomes evident that the mathematical application of the method used for the apportionment is not appropriate for a specific TRQ or for the case that other pertinent information relating to a specific TRQ comes to the knowledge of the Commission at a later stage. Article 4 provides for the modalities of use of the empowerment. Finally, Article 5 provides for the application of the Regulation, which should start on the date on which Union law ceases to apply to the UK