EU and UK intend to split import quotas post-Brexit

Published 25 October 17

This month, the UK and EU announced a proposal on how to divide agricultural import quotas upon Brexit. A number of quotas exist that allow limited third country imports of dairy products at significantly reduced tariff levels, which otherwise make shipments uneconomical. As such, the quota allocations will influence the extent to which the UK dairy industry might be exposed to the global market after Brexit.

The initial proposal suggests existing Tariff Rate Quotas (TRQs) would be split according to the average UK share of total EU imports of the particular product, over a three-year period. The formula for allocation has not yet been specified, but it may not be easy to determine how much imported product is ultimately consumed in the UK, due to the clouded nature of intra-EU trade flows.

The simplest way to apportion TRQs based on relative UK and EU demand would be by the UK’s direct share of third country imports of the relevant products into the EU. Based on this method, and using average volumes of butter and cheese imports from third countries between 2014 and 2016, the UK could potentially receive 7% of butter and 9% of cheese TRQs. For cheddar alone, the proportion may be as high as 42%.

EU Dairy Imports

UK TRQ Share

However, such a blanket approach is not without challenges. Notably, WTO rules specify that the separation of the specific TRQs cannot negatively impact existing levels of market access for third countries. Reflecting this, a number of key suppliers, including New Zealand and the US, have rejected the preliminary deal on the grounds that the reduced flexibility on where to send their product will leave them worse-off. This may make it difficult to get the deal agreed at the WTO, and will undoubtedly mean modifications will be made to the initial proposal. These amendments will impact the level of tariff-free access to the UK dairy market, making this an area to watch.