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Trump opposes EU-UK WTO deal in blow to May’s Brexit plans

The Financial Times logoThe Financial Times 05/10/2017 Shawn Donnan in Washington
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The Trump administration has joined a group of countries objecting to a deal between the UK and EU to divide valuable agricultural import quotas, in a sign of how the US and others plan to use Brexit to force the UK to further open its sensitive market for farm products. 

President Donald Trump has been one of the most prominent international backers of Brexit and has vowed to quickly negotiate a “beautiful trade deal” with the UK after it leaves the EU. But his administration’s objection to a preliminary plan, agreed to by Brussels and London over how to split the EU’s existing “tariff rate quotas” under World Trade Organisation rules after the UK, assumes its own WTO obligations following Brexit illustrates how Washington is likely to drive a hard bargain. 

It also undermines efforts by the May government in London this week to portray the WTO deal with the EU as a significant win, something made doubly painful by Mr Trump’s past backing of Brexit. 

Watch: How Brexit is impacting the UK and EU economies (Bloomberg)

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The US joined other major agricultural exporters including Argentina, Brazil and New Zealand in signing a letter sent last week to the EU and UK’s WTO ambassadors objecting to the plan to split the quotas that cover everything from New Zealand butter and lamb to US poultry and wheat. 

Under WTO rules, those country-specific quotas allow low-tariff imports up to a certain volume with tariffs increasing after that. As such, they are seen as hugely valuable to countries such as Argentina and New Zealand that depend heavily on agricultural exports and the powerful farm lobby in the US. 

A Case New Holland Italia SpA CR9.90 combine harvester operates in a wheat field during harvest at a farm near Cambridge, U.K., on Monday, Aug. 14, 2017. Premiums for bread milling wheat jumped 74 percent last week to the year’s high, AHDB figures compiled by Bloomberg show. Photographer: Jason Alden/Bloomberg © Bloomberg A Case New Holland Italia SpA CR9.90 combine harvester operates in a wheat field during harvest at a farm near Cambridge, U.K., on Monday, Aug. 14, 2017. Premiums for bread milling wheat jumped 74 percent last week to the year’s high, AHDB figures compiled by Bloomberg show. Photographer: Jason Alden/Bloomberg

While the UK was a founding member of the WTO and one of the first signatories of its predecessor, the General Agreement on Tariffs and Trade, its membership obligations until now have been managed by the EU. 

The EU-UK plan calls for the existing EU quotas to be split between the EU and UK after Brexit based on historical imports and consumption. 

Related: German firms told to prepare for 'very hard' Brexit

The US and others, however, argue that method is unfair as it would effectively allow the EU to reduce its obligations to fellow WTO members and set a low bar for the UK as well. 

“Such an outcome would not be consistent with the principle of leaving other [WTO] members no worse off, nor fully honour the existing TRQ access commitments. Thus, we cannot accept such an agreement,” the countries wrote. 

Emily Davis, spokeswoman for US trade representative Robert Lighthizer, said neither the EU nor the UK had presented any written plan for how to handle the WTO quotas to Washington. But the Trump administration was “actively engaged with its trading partners on the future of UK and EU tariff rate quotas following Brexit”. 

“Ensuring that US exporters of food and agricultural products have the market access in Europe due to them even after Brexit is a high priority for the administration,” she said. 

The UK and EU are due to present their plan to other WTO members during the week of October 16 when trade negotiators descend on Geneva for what is known as agriculture week. 

Among the UK’s plans is to ask that its new agricultural quotas schedule be established using a method called “technical rectification”, which would avoid having to secure approval from other WTO members. But in their letter to the EU and UK ambassadors the US and other signatories objected to that method as well. 

“The modification of these TRQ access arrangements cannot credibly be achieved through a technical rectification,” they wrote. “None of these arrangements should be modified without our agreement … In the case of substantial changes affecting the balance of concessions, the whole membership of the organisation may take an interest.” 

NOW SEE: Europe could face another Brexit-like rupture - beyond Spain

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