The UK and Brussels have struck a preliminary agreement on dividing up World Trade Organisation quotas, in one of the first big breakthroughs in Brexit-related talks between London and the European Commission.
Diplomats and EU officials contacted by the FT said the two sides had reached an understanding on sharing out the tariff-rate quotas that govern the import of farm products into the EU from countries outside the bloc.
“The EU and the UK intend to maintain the existing levels of market access available to other WTO members,” a joint letter sent to EU capitals says. “Both the UK and the EU would look to reassure our WTO partners that we will strive to minimise disruption.”
The deal in principle could help pave the way to the UK joining the WTO as an independent member in its own right rather than as part of the EU.
It contrasts with the more faltering progress made in the UK’s formal divorce talks with the EU, which the European Parliament said on Tuesday had yet to make sufficient progress to open up a second phase of negotiations on future relations.
Because tariff rate quotas set the amounts of goods that can be imported at low or zero tariffs — rather than at the full WTO rates that can exceed 100 per cent — they are highly valuable for agricultural exporters.
The issue has become particularly sensitive, since the UK and the EU will need to share out the quotas — which can total tens of thousands of tonnes of meat and dairy products — when Britain leaves the bloc in 2019.
Some countries such as Australia and New Zealand have been pushing for an increase in the combined UK-EU quotas after Brexit, to avoid any reduction in trade with Britain.
But under the proposed UK-commission deal, the quotas would be divided up according to where the goods were previously consumed. This would mean that the UK would take a larger quota for products such as New Zealand lamb, where it traditionally accounts for much of the EU demand.
The consumption patterns would be measured over a three-year period, according to people familiar with the talks.
But officials are already bracing themselves for resistance from other WTO members. Australia and New Zealand have warned that they will closely watch the outcome of the talks and will challenge any outcome that they feel in practice reduces their current levels of market access.
Other large agricultural exporters including the US and Brazil are also lining up to demand generous market access.
Britain opposes taking on large extra quotas that would subject UK farmers to intense competitive pressure from low-cost imports, while countries such as France want to avoid an outcome in which the full burden of existing quotas falls on the remaining EU27 member states.
The EU-UK understanding faces an additional obstacle because of a lack of the data that could help divide up the quotas.
People involved in the talks said that, while the EU has highly detailed information on the point of arrival of goods into the EU, figuring out where they are consumed is much more difficult, given the free movement of goods within the single market.
Diplomats say that a key EU priority is to settle the issue quickly in further talks with the UK, and to present a united front to other WTO members who may challenge the method for splitting the tariff-rate quotas and seek compensation.
Both sides intend that the draft letter setting out the plans will be circulated within the WTO’s membership ahead of a series of WTO meetings on agriculture in the week of October 16.
Additional reporting by Alex Barker in Brussels.