Navigating UK's Future FTAs: Challenges and Opportunities

1. ACITA JEREMY WHITE Thursday 27th April 2017 • 1

2. ACITA AGM & National Meeting Thursday 27th April 2017 “UK FTA’s v EU FTA’s” Jeremy White, Barrister, Pump Court Tax Chambers

3. Questions 1.       Can FTA agreements really be completed, signed and sealed within 2 years? 2.       The UK will not have the same bargaining power as EU28. What impact will this have on the UK FTA agreements? Will the UK FTA’s be as favourable as the EU FTA’s with the same overseas countries? 3.       Can the UK FTA’s include ‘drawback’ and if not, is there a reason why it cannot be included? 4. EU-Turkey Customs Union/Agreement – UK Version? – Preference – Quotas.

4. What do you need to know about FTA’s? • They are not FREE • They are not about TRADE • There are not AGREEMENTS

5. FREE? • Very expensive: • In negotiator time • In compliance – proofs • Complex – EU Korea 1428 pages – EU Canada 1598 pages

6. TRADE? • Protection from competition

7. AGREEMENTS? • FTA means FREE TRADE AREA • REGIONAL TRADE AGREEMENTS RTA’S EU-CANADA RTA. In CETA what does the “C” stand for? • GATT 1994 Article XXIV 5(b) “… with respect to a free-trade area, … the duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of such free-trade area … to the trade of contracting parties not included in such area … shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area …”

8. What is the moral of the story? Through the Looking Glass, by Lewis Carroll: “Humpty Dumpty smiled contemptuously. ... 'When I use aword,' Humpty Dumpty said, in rather a scornful tone, 'itmeansjust what Ichooseit tomean— neither more nor less.' 'The question is,' said Alice, 'whether you can makewords meanso many different things.’”

9. 1.       Can FTA agreements really be completed, signed and sealed within 2 years? • No • New agreements: 5-12 years • Replicated agreements?

10. 2.       Will the UK FTA’s be as favourable as the EU FTA’s with the same overseas countries? • The bespoke deal “customs arrangement” with the EU will be negotiated by the Department for Exiting the European Union (DExEU) – David Davis. • The trading relationships with other countries will be negotiated by the Department for International Trade (DIT) – Liam Fox – GREAT.gov.uk

11. DIT Trade Policy Unit objectives include • Replicate EU FTA’s and development (GSP +) – CETA with Canada. What does the “C” stand for? • Bold – Ambitious - Frictionless • New opportunities – Korea + - cars illustration; USA, Australia, New Zealand, Israel • Prioritisation exercise • Independent Trade Framework – Trade Bill 2017 • Trade remedies • Market access • Development agenda • Balance of Trade

12. 3.       Can the UK FTA’s include ‘drawback’ and if not, is there a reason why it cannot be included? • Yes – no longer will need to follow EU policy • But in practice will depend upon trading partners • Replicated agreements exclude drawback (eg. CETA Canada Article 2.5) WTO Staff Working Paper ERDS-2013-05 of 22 March 2-13: “Duty-drawback has traditionally been seen as providing a bias for exporting instead of selling to the domestic market. …While the elimination of duty-drawback has been presented as restoring equal treatment between production for domestic markets and for export, it may, in the presence of a cumulation system, also affect the sourcing of materials, shifting it from third countries to countries participating in the cumulation system, and thus contribute to trade diversion.”

13. 4.       How will the UK negotiate a similar Union Agreement with Turkey which on confectionery products not only has preference but also has quota? • Replication principle • EU-Turkey Customs Union – Common External Tariff (CET) • Not CommonCommercial Policy – separate trade defence policy: anti-dumping, anti-subsidy and safeguard measures • CET only applies to industrial products and to the industrial component of processed agricultural products • Turkey is in breach of its obligations – see CBI evidence to House of Commons and World Bank Evaluation of EU-Turkey Customs Union

14. Preferential Access from Turkey to the EU – Slide 1 • 70% of Turkey's agricultural exports to the EU occur under preferential conditions. • 85 percent of Turkish agricultural products which are exported to the EU entered the EU duty-free between 2008-10. • The UK and Turkey signed a bilateral MOU in March 2007: animal husbandry, equine and organic farming. • Tariff rate quotas have applied to apricot pulp and hazelnuts, and voluntary export restraint agreements have applied to tomato paste and peeled tomatoes.

15. Preferential Access from Turkey to the EU – Slide 2 The main other remaining restrictions facing Turkey, are: • Minimum import (entry) prices for 11 fruits, 4 vegetables, grape juice and grape must. • Seasonal restrictions for preferential tariffs for 4 fruits and 7 vegetables. Eg. in 2003 tomato paste has a quota set at 30,000 tonnes, water melons 14,000 tonnes and onions 2,000 tonnes. • High specific duties for almost all 'core' CAP products (cereals, sugar, dairy, meat, olive oil, etc.). • Specific duties for preparations of cereals, fruits, and vegetables.

16. Preferential Access from EU to Turkey • In Turkey, tariffs are the main instrument of protection for agriculture. • Import quotas are applied by Turkey to agri-food products exported by the EU. • A reduced tariff as part of fixed quotas is applied to: live cattle, sugar, tomato paste and animal feed. • The management of tariff quotas in Turkey is not aligned with the EU. • The EU issues tariff quotas on a first-come first-served basis but in Turkey traders must be licensed to use quotas. • Turkish imports of confectionary and chocolate, which are limited by tariff quotas, can only be allocated to manufacturers.

17. ACITA JEREMY WHITE Thursday 27th April 2017 • 1