The US Response to Brexit: Implications for International Trade Rights and Obligations Under the WTO System

The US Response to Brexit: Implications for International Trade Rights and Obligations Under the WTO System

This report seeks to legally arm the US government to pursue US interests vis-à-vis the UK and the EU (“Brexit Parties”), and to push trading priorities in negotiations under the auspices of the WTO. The report examines exactly how and when the US may assert its rights at the WTO and appropriately challenge existing trade remedy orders. It also explores the legal approaches by which the US would have valid bases to complain against the UK and the EU in the context of Brexit, which could be used as negotiating leverage. This report address the following topics: (1) tariffs; (2) agricultural tariff-rate quotas (“TRQs”) and agriculture measure of support (“AMS”); (3) government procurement; and (4) anti-dumping and countervailing duty (“AD/CVD”) orders. Authors: Jin Woo (Jay) Kim, Julia Kuelzow, Tom Strong


Executive Summary 

This report explores the United States’ (“US”) third-party rights and obligations under the World Trade Organization (“WTO”) framework upon the United Kingdom’s (“UK”) withdrawal from the European Union (“EU”), or “Brexit.” Brexit charters unknown territory in the world trading framework under WTO multilateral and plurilateral agreements. Amidst and despite this uncertainty, the US has an opportunity to re-orient its trading relationships with two historically close allies and significant trading partners. This report seeks to legally arm the US government to pursue US interests vis-à-vis the UK and the EU (“Brexit Parties”), and to push trading priorities in negotiations under the auspices of the WTO. The report examines exactly how and when the US may assert its rights at the WTO and appropriately challenge existing trade remedy orders. It also explores the legal approaches by which the US would have valid bases to complain against the UK and the EU in the context of Brexit, which could be used as negotiating leverage. This report address the following topics: (1) tariffs; (2) agricultural tariff-rate quotas (“TRQs”) and agriculture measure of support (“AMS”); (3) government procurement; and (4) anti-dumping and countervailing duty (“AD/CVD”) orders.

The Tariff chapter examines how negotiations to set up the UK's new tariff schedules would proceed and provides several elements to consider. This report concludes that the UK must establish its own tariff schedule to fulfill its obligations as a WTO Member, before the UK officially exits the EU. First, the US should refer to the last certified EU schedule, EU-25, to establish the baseline for negotiations with the UK and the EU—also to be used as the basis for any potential WTO claims against either the UK or EU, or both. The certified EU-25 tariff schedule legally binds the UK as well as the EU. Relatedly, Article XXVIII:4 would be applicable to negotiations to bifurcate the EU’s current tariff schedule from the UK's future one. Although disentangling the UK’s tariff schedules from the EU’s (and modifying the EU’s) is entirely unprecedented and procedures remain unclear, previous negotiations may be helpful to understand how negotiations to establish the UK's new tariff schedules would proceed. This report provides two models—EU enlargements and dissolution of Czechoslovakia—to inform Brexit negotiations and to illustrate useful lessons for the US to carry forward in its approach. Moreover, the US is encouraged to press the UK to establish tariff schedules different from the EU’s current ones to obtain better access to the UK market. Lastly, the US government may consider bringing WTO complaints against the UK and the EU as a strategy to pull them into tariff negotiations, although it might not be successful. Against the UK, the US may file a request for consultation, arguing that the UK violates GATT Article XXVIII:4, read in conjunction with paragraph of the Procedures for Modification and Rectification of Schedules, and GATT Article XXIII:1(b). Against the EU, the US may initiate another non-violation claim under GATT Article XXIII:1(b).

The Agriculture chapter discusses the reversal of the agricultural trading relationship between the EU-27 and the UK and its impact on the US. Namely, the Chapter examines the post-Brexit options for the EU-27 and UK with respect to TRQs in place for agricultural products as well as the UK and EU’s post-Brexit division of Aggregate Measure Support (“AMS”) subsidies. First, three options are considered for reallocating the UK and EU’s TRQ commitments. The report concludes each possibility would result in challenges requiring the EU-27 and the UK to enter into negotiations with the US. Second, the division of AMS commitments is considered. The report concludes theoretical challenges against the UK and EU-27 are possible but impractical. Finally, the Chapter concludes with recommendations for a Section 332 Investigation.

The Procurement chapter describes the EU and Government Procurement Agreement (“GPA”) legal framework governing UK procurement. Then, following an analysis of the UK’s status vis-à-vis the GPA, this report concludes that the UK is not itself a party to the GPA and accordingly provides a brief overview of the accession process. Finally, this part explores the UK’s possibilities to structure procurement laws with (or without) the EU. The US would have a strong interest in encouraging the UK to join the GPA—rather than the UK “going it alone.” Notwithstanding the UK’s GPA decision, continuing to adhere to European Communities directives on UK procurement would be most attractive for American businesses, by enhancing predictability and ensuring contractual adherence under already-known EU rules (even if the UK government’s current position is to entirely forego participation in the Single Market).

The Anti-Dumping and Countervailing Duty Orders chapter identifies two anti-dumping orders on American products in which UK producers were included in the injury determination and/or calculation of duties. Those measures are on (1) bioethanol and (2) grain-oriented flat-rolled products of electrical steel (“GOES”). Both cover products of significant US export interest, subject those American exports to high duties, and will be imposed until at least 2018 and 2020. The section then describes the two routes available to the US (and American exporters) to challenge existing orders—one within the framework of the EC and the other at the WTO. The procedural aspects and legal basis to challenge these orders in both fora would also apply to any future orders imposed between now and the UK’s slated 2019 exit.

 

 

Table of Abbreviations

 

ADA

Agreement on Anti-dumping

AD/CVD

Anti-dumping and countervailing duties

AoA

Agreement on Agriculture

AMS

Aggregate Measure of Support

Brexit

UK exit from the EU

Brexit Parties

UK and EU-27

CAP

Common Agricultural Policy

CCP

Common Commercial Policy

EC

European Community

EEC

European Economic Community

EU

European Union

EU-12

Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and United Kingdom

EU-15

EU-12 plus Austria, Finland and Sweden

EU-25

EU-15 plus Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia

EU-27

EU without the UK

EU-28

EU with the UK

GATT

General Agreement on Tariffs and Trade

GDP

Gross Domestic Product

GPA

WTO Government Procurement Agreement

MFN

Most Favoured Nation

NTB

Non-Tariff barrier

TNTB

Tariff and Non-Tariff barrier

OECD

Organization for Economic Cooperation and Development

SPS

Sanitary and Phytosanitary

TEU

Treaty on European Union

TFEU

Treaty on the Functioning of the European Union

TRQ

Tariff Rate Quota

UK

United Kingdom

US

United States

USD

United States Dollar

URAA

Uruguay Round Agreement on Agriculture

 

 Introduction

 On June 23, 2016, British voters went to the polls to answer a simply worded referendum question: “Should the United Kingdom remain a member of the European Union (“EU”) or leave the European Union?”[1] Slightly over half (51.9%) replied “leave,” and, following the voters’ direction, on March 29, 2017 the UK triggered Article 50 of the Treaty on European Union (“TEU”),[2] officially kicking off the process for the UK to formally exit the EU.[3] The UK and the EU have two years to reach an agreement on the terms of withdrawal, unless both parties agree to an extension.[4] Consequently, to solidify the already narrow margin of Brexit support, the UK is slated to hold an early election on June 8, 2017, which, Prime Minister May hopes, will unify the government and, importantly, strengthen political backing for the UK’s Brexit negotiations.[5]

Each step of the UK’s EU breakup—from the “leave” vote to the beginning of withdrawal—has raised increasingly complex questions of international law. And that is especially true of international trade. The future EU-UK trading arrangement along with the UK’s and EU’s individual relationships with other World Trade Organization (“WTO”) Members remain to be determined.

What is known, as of May 2017, is the UK’s intention to entirely forego participation in the single market[6]—referred to in the press as a “hard” or “clean” Brexit, as “leavers” prefer.[7] Instead, the UK will seek a “comprehensive” free trade agreement (“FTA”) with the EU.[8] Parliament will enact a “Great Repeal Bill” to keep in place European legislation for the time being, after which the government may modify or entirely remove parts of the transposed EU acquis.[9] By contrast, the EU declared the UK cannot “cherry pick” certain single market trading benefits, like the free movement of persons—one of the “four freedoms”—without subscribing to all. The EU has made clear that, post-Brexit, the UK cannot enjoy the same level of access to this customs union. Should an FTA not be concluded within the two-year window (or following a possible time extension), the UK will default to trading with the EU under multilateral WTO trading rules.[10]

And, in that WTO context, the situation facing the UK and the EU is unprecedented. The EU is a WTO Member in its own right, as are each of its 28 EU member states. More specifically, the UK, while an EU party, qualifies as a WTO Member under Article XI:1 of the WTO Agreement.[11] The UK itself was both a founding member of the General Agreement on Tariffs and Trade (“GATT”) in 1948 and a founding member of the WTO in 1995.[12] However, as the EU is a single customs union with a single trade policy and common schedules of concessions, the UK's WTO membership terms are bundled with the EU’s.[13]

All schedules and notifications—on tariffs, services, sanitary and phytosanitary measures (“SPS”), and anti-dumping and countervailing duty (“AD/CVD”) orders—have been submitted by the EU on behalf of its member states. As a result, the UK does not have its own schedules under GATT Article II or Article XX of General Agreement on Trade in Services (“GATS”).[14] Before the UK officially exits from the EU, the UK must establish its own schedules with respect to tariffs and services to fulfil its WTO Member obligations.[15] Relatedly, the EU, too, must act by modifying its own schedules to remove the UK and thereby reflect the UK’s de-accession. There are no provisions under the WTO framework that specifically address a WTO Member leaving a customs union, and the procedures, as a result, remain unclear.[16]

While uncertainty engendered by the British decision to exit the EU may seem to destabilize the global economy, it presents the United States an opportunity to improve access to the European market and deepen economic ties to two of its major trading partners and closest allies. The US government should act expeditiously. If favorable deals are not made under the auspices of the WTO or bilaterally with the EU and/or the UK, US exporters could be left behind, with worse access to the EU and UK markets. The EU is currently negotiating free trade agreements with Japan, Mercosur, and other trading partners. The UK is also looking for possibilities to seek free trade deals with New Zealand, Australia, India, and Ghana.[17] However, the UK is currently unable, until formal EU withdrawal, to negotiate bilateral trading arrangements; but, it may engage in “scoping,” a term without official definition that encapsulates discussions falling a step short of negotiations.[18]

This report seeks to legally arm the US government to pursue US interests vis-à-vis the UK and the EU and to push trading priorities in multilateral negotiations under the auspices of the WTO. Brexit will require a rebalancing of the UK’s and the EU’s WTO rights and obligations. This report examines exactly how and when the US may assert its rights in negotiations at the WTO and appropriately challenge existing trade remedy orders. It also explores the legal approaches by which the US would have valid bases to complain against the UK and the EU in the context of Brexit, which could be used as leverage in negotiations. To that end, the following chapters address the topics of (1) tariffs, (2) agricultural tariff-rate quotas and agriculture measure of support, (3) government procurement, and (4) AD/CVD orders.

 

 

 Tariffs                                                                          UK & EU

 

The section examines how negotiations to set up the UK's post-Brexit tariff schedules would proceed and provides elements to consider. The UK must establish its own tariff schedule to fulfill its obligations as a WTO Member, before the UK officially exits the EU. First, the US should use the “certified” EU-25 tariff schedules to establish the baseline for negotiations and in bringing potential complaints against the UK and the EU before the WTO dispute settlement body. The certified EU-25 tariff schedule legally binds the UK and the EU. Relatedly, Article XXVIII to be applicable to negotiations to bifurcate the EU’s current tariff schedule from the UK's future one. Previous negotiations could be helpful to understand how negotiations to establish the UK's new tariff schedules would proceed. This report provides two models – EU enlargements and dissolution of Czechoslovakia – to inform Brexit negotiations and to illustrate useful lessons for the US to carry forward in its approach. The US is encouraged to press the UK to establish tariff schedules different from the EU’s current ones to obtain better access to the UK market. Lastly, the US government may consider bringing WTO complaints against the UK and the EU as a strategy to pull them into tariff negotiations under GATT Article XXVII, although it might not be successful. This section explores separate grounds for potential challenges against the UK and the EU under GATT Article XXVIII:4 read in conjunction with paragraph 2 of the Procedures for Modification and Rectification of Schedules, and Article XXIII:1(b).

 

Introduction

The UK is and will continue to be a member of the WTO in its own right, even after its withdrawal from the EU. What remains to be settled are the terms of the UK’s WTO membership, in particular its schedules that indicate its tariff commitments.[19] The UK must establish its own tariff schedules so as to fulfil WTO membership obligations; but, how it should go about that is not apparent. The British government intends to “copy and paste”—or, rectify—current EU tariff levels and tariff classifications to establish its own schedules. UK Secretary of State for International Trade Liam Fox clarified, in his December 2016 statement to the WTO, that the UK will prepare draft schedules which “replicate as far as possible” current UK obligations.[20]

Brexit will also directly impact the EU in respect to its own schedule of commitments under the GATT. Even where the EU’s tariff schedules formally remain unchanged, the economic value of EU concessions obtained by other WTO Members will substantially decrease because those EU concessions will no longer include the UK market. This decrease in value may empower other WTO Members to request renegotiations with the EU over its tariff schedules.[21] And, if necessary, those Members would have a valid basis to  file a non-violation complaint against the EU under GATT Article XXIII:1(b). So far, the potential modification of the EU tariff schedule has received little attention.[22] Based on the analysis of this chapter, the EU, cannot merely rectify, but must modify its tariff schedule to reflect the UK’s de-accession, especially with regard to tariff rate quotas (“TRQ”), given that part of those quotas must be made available by the UK to other WTO Members.[23]

Disentangling the UK's tariff schedules from the EU's and modifying the EU's are entirely unprecedented, and governing procedures remain unclear. This part aims to provide legal clarity by laying out how the US may pursue its trading interests in negotiations to obtain better market access from both the UK and the EU. Section 1 defines a preliminary challenge insofar as no certified EU-28 tariff schedule exists. The US should refer to the last certified EU schedule, EU-25, to establish the baseline for negotiations with the UK and the EU—and also to be used as the basis for any potential WTO claims against either or both the UK and EU. Section 2 then addresses the next difficulty: there is no specific provision under the WTO framework that expressly covers disentanglement of tariff schedules, the UK's from the EU's. However, GATT Article XXVIII:4 should apply. The section examines the procedures and timing under that provision. Section 3 describes and reflects on two potential models to inform Brexit negotiations, EU enlargements and the dissolution of Czechoslovakia. Then, Section 4 suggests the US press the UK to establish a tariff schedule different from the EU’s current one, although the UK has indicated preference to “copy and paste” current EU tariff levels and classifications over to its new schedule. Finally, Section 5 further explores grounds for potential challenges against the UK and the EU, which can serve as leverage in negotiations favorable to the US.

 

1.   The Absence of a Certified EU-28 Tariff Schedule

            The US faces an initial challenge: there is no certified EU-28 tariff schedule and, accordingly, no proper baseline to guide negotiations with either the UK or the EU and, potentially, to inform a complaint before the WTO dispute settlement body. EU-25 is the last certified schedule, reflecting the EU enlargement of May 2004, when ten new members joined.[24] That schedule was certified in December 2016.[25] After its enlargement to 25 countries, the EU took twelve years to revise its commitments on tariffs, tariff quotas and agricultural subsidies and to certify the EU-25 tariff schedule.[26] The EU notified its intention to modify its tariff concessions to reflect its enlargement to 28 countries, and negotiations are underway pursuant to GATT Article XXVIII.[27]  However, like EU-25, it will take time for an EU-28 schedule to be concluded and certified. A lack of certification adds significant uncertainty to negotiations and potential claims in light of Brexit. The US has two options, either refer to (1) the certified EU-25 tariff schedule or (2) the uncertified EU-28 tariff schedule. The US should begin negotiations and bring claims based on the first option, the certified EU-25 schedule for the two following reasons. The certified EU-25 tariff schedule officially binds the UK and the EU, and it represents the UK's official WTO commitments as of now.

1.1. Certified EU-25 Tariff Schedule

            The WTO employs a certification procedure to obtain approval of any changes to tariff schedules. Paragraph 1 of the Procedures for Modification and Rectification of Schedules provides “[c]hanges in the authentic texts of Schedules annexed to the General Agreement which reflect modifications resulting from action under . . . Article XXVIII shall be certified by means of Certification.”[28] Furthermore, paragraph 8 of the Procedures for Negotiations under Article XXVIII confirms that “[f]ormal effect will be given to the changes in the schedules by means of Certifications in accordance with the Decision of the CONTRACTING PARTIES of 19 November 1968 (BISD 16S/16).”[29] Certification is important, because it ensures annexed schedules to the GATT are up-to-date and maintains schedules as sources of predictable and enforceable legal obligations of WTO Members.[30] Therefore, the certified EU-25 tariff schedule officially binds the UK and the EU. Reliance on the EU-25 schedule will provide a solid starting point for the US to navigate Brexit issues and exercise its WTO rights.

            Moreover, the certified EU-25 tariff schedule is the UK's current, official notice of its WTO commitments. As noted prior, as of now, the UK does not and cannot have its own tariff schedule because the EU enjoys exclusive competence over international trade, particularly with regard to changes in tariff rates and the conclusion of tariff and trade agreements.[31] The UK’s new tariff schedule—whether the UK replicates the EU schedule or modifies accordingly—will be based on the certified EU-25 tariff schedule. Unlike the presumptive extant EU-28 tariff schedule, the US and other WTO Members have access to the certified EU-25 schedule. This will make it easier for the US to make strategic planning for negotiations and potential complaints.

            Economically, however, it makes less sense to employ the certified EU-25 tariff schedule, because it does not mirror the expanded economic structure and population size of the EU-28. Yet, the economic size of Romania, Bulgaria and Croatia, which joined the EU in 2007 and 2013, respectively, is relatively small and its economic importance relatively insignificant. For instance, gross domestic product (“GDP”) of these three EU states in 2016 accounted for 1.7% of the EU total—a negligible portion.[32] Thus, the UK, the EU, and the US may attempt to adjust to this economic reality during negotiations. In sum, the US should apply the certified EU-25 tariff schedule as a baseline for negotiations and potential complaints.

1.2. Uncertified EU-28 Tariff Schedule and the Effect of EU – Poultry (China)

            The EU has initiated negotiations for the EU-28 schedule, and an uncertified EU-28 tariff schedule presumptively exists. The EU trades and enters into free trade agreements with non-EU countries, despite the absence of a certified EU-28 schedule. The EU manages these relationships with an uncertified schedule.[33] An uncertified EU-28 tariff schedule cannot be the appropriate baseline upon which the US and other WTO Members rely for negotiations and potential complaints, because the UK and the EU are not legally bound by it.

            However, a recent panel report in EU – Poultry (China) suggests the opposite and supports the EU’s practice of trading without certified schedules.[34] In EU – Poultry (China), China claimed that the EU's application of higher out-of-quota tariff rates arising from two modification packages was in violation of the EU's binding tariff commitments under GATT Article II:1. China argued that because the changes have not yet been incorporated into the EU schedule through certification, those changes have no legal effect as to replace the existing bound duties.[35] The panel, however, rejected China’s claim and found that “[c]ertification is not a legal prerequisite that must be completed before a Member modifying its concessions can proceed to implement the changes agreed upon in Article XXVIII negotiations at the national level.”[36] In other words, the panel implies that certification of schedules is procedural rather than substantive.

            This means that the US may rely on uncertified EU-28 tariff schedules for negotiations and potential complaints. But the US government should consider the following two factors. First, panel reports are not definitive interpretations of the WTO covered agreements. As China decided not to appeal the panel decision in EU – Poultry (China), the WTO Dispute Settlement Body (“DSB”) adopted this panel report in April 2017. However, this panel ruling can be overturned by Appellate Body if another Member, for instance the US, brings a complaint on similar issues and appeals. Second, the US government does not have a copy of non-certified EU-28 tariff schedules. Access to a number of documents used in negotiations for EU-27 and EU-28 tariff schedules, such as G/SECRET/32 and G/SECRET/35, are so restrictive that even WTO Secretariat staff cannot view them, except a few key people. Since it is less likely that the EU will voluntarily release drafts of EU-27 and EU-28 schedules, the US will have difficulty preparing for negotiations and potential claims.

            In conclusion, the US government should rely on certified EU-25 schedules for negotiations and potential complaints; but, this decision as to which EU tariff schedules to employ is more than a certification issue. To the extent both may be legally viable options to inform negotiations, the US government should also consider what would be better economically and then make a strategic choice.

2.   GATT Article XXVIII Applies to Negotiations to Establish the UK’s New Tariff Schedule (and Modify the EU’s)

The US faces a second difficulty insofar as there is no specific provision within the WTO framework that covers how to disentangle the UK's tariff schedule from the EU's.[37] The EU has repeatedly invoked GATT Article XXIV:6 to renegotiate tariff schedules whenever new countries joined the customs union. Article XXIV:6 stipulates that if, in the process of the formation of a customs union duties are raised beyond the bound level in one or more of the constituent territories, the procedures for tariff renegotiations in GATT Article XXVIII must be followed.[38] While Article XXIV:6 applies to combining new EU member states' schedules of concessions with the EU's, the provision’s reference to Article XXVIII provides insight to a separation of schedules.

            GATT Article XXVIII would be applicable to negotiations that divide the EU’s current tariff schedule from the UK's future one. That is, Article XXVIII would apply to both establishment of the UK’s tariff schedules and modification of the EU’s.[39] Article XXVIII is the key provision on tariff concession renegotiations, since it establishes certain conditions as to when modifications of concessions can be made and indicates which Members are entitled to participate in negotiations regarding the proposed modification—namely Members that had “initially negotiated” the concession and Members with have a “principal supplying interest.”[40] The UK, to establish its own tariff schedules, must submit its schedules and seek approval through negotiations or consultations with other WTO Members—a multilateral process.[41] This will follow a long-established pattern for the “Modification of Schedules” under Article XXVIII.[42] As discussed further in Section 4, there are two scenarios to establish the UK’s new tariff schedules: (1) the UK simply “copies and pastes” the EU-25 tariff schedules via rectification; or (2) the UK adopts new schedules that are different from the EU-25 tariff schedules via modification. GATT Article XXVIII would be applicable only to the latter.

This section next establishes why negotiations to set up the UK’s new tariff schedules would fall within the ambit of Article XXVIII:4 “special circumstances,” the benefits that accrue through reliance on Article XXVIII, and the procedures and timing under that provision.

2.1. Types of Renegotiations: “Special Circumstances” Under GATT Art. XXVIII:4

            GATT Article XXVIII envisages three types of renegotiations: (1) normal three-year (or, “open season”) renegotiations under paragraph 1; (2) renegotiations in “special circumstances,” after authorization by the Ministerial Conference, under paragraph 4; and (3) renegotiations following a reservation made under paragraph 5.[43] Article XXVIII:1 provides that on the first day of each three-year period any Member may modify or withdraw a concession after negotiation and agreement with Members having initial negotiating rights and a principal supplying interest and consultation with those with a substantial interest. The second type of renegotiations are authorized by a decision of the Ministerial Conference under Article XXVIII:4. The third type envisaged in Article XXVIII:5 constitute those that may be held at any time before the end of the three-year period if any Member elects to reserve the right before the beginning of the period. [44]

Negotiations to establish the UK's tariff schedule (and modify the EU's) fall under renegotiations in “special circumstances” under Article XXVIII:4. WTO Members’ discussions demonstrate that a rigorous definition of “special circumstances” was purposely left out.[45] Thereby, the Ministerial Conference determines what constitutes “special circumstances” on a case-by-case basis. In practice, approval of requests for authorization has become a routine matter without detailed examination of “special circumstances” and a time extension is easily granted.[46] As Brexit diminishes the economic size of the EU market and negatively affects WTO Members' economic interests, the UK's withdrawal from the EU would likely constitute “special circumstances.”

2.2. Benefits of Relying Upon GATT Article XXVIII: Balance Between the UK and the US (and Other WTO Members)

            Article XXVIII confers certain rights on the UK—in proposing a modification—as well as on the US (and other WTO Members), sitting opposite at the negotiating table. Whether or not agreement is reached between the UK and other WTO Members, the UK may freely modify its concessions within a period of sixty days after negotiations have been authorized or within a longer period, as the Ministerial Conference prescribes.[47] The right of the UK to modify a concession is not dependent on successful negotiations with affected WTO Members.[48] At the same time, the UK, in seeking modification of tariff schedules, is expected to provide compensatory concessions on other products.[49] If no agreement is reached, the US and other affected WTO Members have the right to withdraw “substantially equivalent concessions,” initially negotiated with the UK. The US would be entitled to impose higher tariffs on goods from the UK if no agreement on compensation is reached or if an agreement is reached but the US is not satisfied with the terms.[50]

            In principle, this balancing mechanism under Article XXVIII provides a strong incentive for the UK and the US (and other WTO Members) to cooperate to reach “a general level of reciprocal and mutually advantageous concessions.” At the same time, each party’s entitlement to take unilateral action may lead negotiations astray—the UK modifies its schedules as it wishes and the US, in return, withdraws “substantially equivalent concessions.” To prepare for this worst case scenario, the US should make a list of "UK-interested products," of which the UK would have a significant interest in US exports, and to use these products as leverage to push for a better deal with the UK, as discussed further in Section 4.2.

2.3. Procedures and Timing for Negotiations Under GATT Article XXVIII

            All renegotiations under Article XXVIII are conducted under Procedures for Negotiations under Article XXVIII, adopted by the GATT Council on November 10, 1980, by recommendation of the Committee on Tariff Concessions.[51] The document delineates the procedures and timing for negotiations under Article XXVIII.[52]

2.3.1.   Procedures

            Pursuant to the Procedures for Negotiations under Article XXVIII, the envisaged processes for negotiations between the UK and the US (and other WTO Members) under Article XXVIII:4 follow:

  • If the UK intends to negotiate a modification, the government must transmit a request for authority to enter into negotiations to the Secretariat. That request would then be circulated in a secret document and included in the agenda of the next meeting of the GATT Council.
  • The notification or request should include a list of items, with corresponding tariff line numbers, subject to modification, indicating, for each item, whether the item was initially negotiated with the UK and US. The UK should indicate its intention to modify a concession from the schedule. The proposed modification should be stated in the notification or circulated as soon as possible to the US and other WTO Members with which the concession was originally negotiated and those which are recognized to have a principal or a substantial supplying interest. The notification or request should be accompanied by statistics of imports of the products involved, by country of origin, for the last three years (for which statistics are available). If specific or mixed duties are affected, both values and quantities should be indicated.
  • Either at the same moment of notification to the Secretariat or following the GATT Council’s authorization for the UK to enter into negotiations, the UK should communicate all compensatory adjustments it is prepared to offer to the US (and other WTO Members).
  • The US (or other WTO Members that consider themselves to have a principal or a substantial supplying interest in a concession) should communicate its claim in writing to the UK and also inform the Secretariat. If the UK recognizes the claim, the recognition will constitute a determination of interest in the sense of Article XXVIII:1 by the Ministerial Conference. If a claim of interest is not recognized, the US may refer the matter to the GATT Council. Claims of interest should be made within 90 days following the circulation of the import statistics.
  • Upon completion of each bilateral negotiation, the UK should send to the Secretariat a joint letter on the lines of the model in Annex A signed by both parties. A report on the lines of the model in Annex B must be attached to this letter. The report should be initialed by both parties. The Secretariat will distribute the letter and the report to all WTO Members in a secret document.
  • Upon completion of its negotiations, the UK should send to the Secretariat, for distribution in a secret document, a final report on the lines of the model in Annex C.
  • The UK, the US, and other WTO Members engaged in negotiations are free to give effect to the changes agreed upon in the negotiations as of the date when the conclusion of negotiations have been notified as set out in paragraph 6 above. A notification shall be submitted to the Secretariat, for circulation to WTO Members, of the date on which these changes will come into force.
  • Formal effect will be given to the changes in the schedules by means of Certifications in accordance with the Decision of the Ministerial Conference of 19 November 1968 (BISD 16S/16).[53]

2.3.2.   Timing

2.3.2.1.       GATT

            Under GATT Article XXVIII, there is no concrete deadline to conclude negotiations, which often extend for many months, and even years. Taking into account the protracted length of previous negotiations—especially those under EU enlargements—negotiations to establish the UK's new tariff schedules will likely take, at minimum, a year. However, following the panel’s ruling in EU – Poultry (China), certification of the UK’s new tariff schedule would not be necessary to implement agreed upon changes in Article XXVIII negotiations at the national level. Thus, once negotiations conclude, the UK and other WTO Members may rely upon an uncertified UK tariff schedule. This will shorten a certain period of time in setting up the UK’s new tariff schedules—granted the laboriousness of the certification process—[54] and provide legal certainty in post-Brexit international trade.

2.3.2.2.       EU Law

            It is unclear when the UK may commence negotiations under GATT Article XXVIII. This is a question of EU law. Although the UK triggered Article 50 of Treaty on European Union on March 29, 2017, the country remains a member state of the EU and is bound by the EU law. Therefore, the UK can independently engage in trade negotiations only after it officially terminates its EU membership with the effectuation of a withdrawal agreement. The negotiations between the EU and the UK will last for two years, until March 2019, with the possibility of an extension.[55] Moreover, the withdrawal agreement will take effect a few months, if not years, following the conclusion of negotiations and upon ratification by all EU members’ national parliaments as well as by the European Parliament. Until all these procedural hurdles have been cleared, only the EU, on behalf of its member states, has the power to engage in trade negotiations and to enter into trade agreements with non-EU countries, including those taking place under the auspices of the WTO.[56] Even if the UK were allowed to engage in informal or preparatory talks, other WTO Members would likely not be interested in talking with the UK until details of the UK's future trade relationship with the EU emerge. [57] Negotiations to establish the EU and the UK’s future trading relationship are likely to be a lengthy and complicated task.

            Despite these uncertainties, to the extent possible, the US should begin actual tariff schedule negotiations under Article XXVIII with the UK soon. Why? Imagine Brexit negotiations between the EU and the UK break down, and the UK unilaterally withdraws from the EU in March 2019 without an agreement. On Day One of this “unilateral” Brexit, the EU would cease to speak for the UK at the WTO, and the EU-25 tariff schedules would not be applicable to the UK. WTO Members will struggle to find out which tariff schedules to apply to post-Brexit UK. To avoid this situation, the US and other WTO Members must prepare for this scenario. It is not too early to commence Article XXVIII negotiations to establish independent post-Brexit UK’s tariff schedules, considering that it often takes years to conclude tariff negotiations. Although the UK, as an EU member at the moment, does not have competence to negotiate tariff schedules, the UK is a WTO Member in its own right. As a WTO Member, the UK has an obligation to provide its new ones before its exit from the EU. Failure to do so would violate the UK’s obligation under the WTO.

In conclusion, the US (and other WTO Members) should start the tariff negotiation process early to establish an independent UK tariff schedule to avoid any confusion a “unilateral Brexit” may bring. Still, this approach may not be feasible due to the following reasons. The EU would probably oppose to early commencement of tariff negotiations to set up the post-UK tariff schedules, asserting that the UK does not have competence to do so. Even if the UK were allowed to embark on negotiations under Article XXVIII, it might be limited to “scoping,” which refers to discussions falling a step below negotiations. There is no consensus as to what the UK may and may not do when the UK engages in “scoping.” [58] Lastly, the US first needs some time to figure out what to negotiate. The US should make a list of "UK-interested products," in which the UK would have a significant interest in US exports, as discussed further in Section 4.2.

 

3.   Two Potential Models to Guide Tariff Negotiations

            Although disentangling the UK's WTO rights and obligations from the EU's is unprecedented, past negotiations may serve as templates to guide future negotiations on how to establish an independent UK tariff schedule and to modify the EU’s. Two potential examples are EU enlargements and the dissolution of Czechoslovakia. This report asserts that both provide useful lessons for US negotiators, even if not directly applicable to negotiations with the UK and the EU in the context of Brexit.

3.1. EU Enlargements

            The EU, which began with six founding member states, has expanded over the past six decades, and it now comprises 28 member states. The latest enlargement occurred when Croatia joined on July 1, 2013.[59]  Each EU enlargement affects both EU market and population sizes. [Figure 1] As such, it has had to repeatedly revise commitments on tariffs, tariff rate quotas, services, and farm subsidies as well as renegotiate with other WTO Members to reflect the EU’s new economic status.[60] As discussed in Section 2, the EU repeatedly invoked GATT Article XXIV:6 to renegotiate tariff schedules whenever new member states joined the customs union. Although Article XXIV:6 has only been applicable in the context of EU enlargements, its references to Article XXVIII provides useful guidelines as to how Article XXVIII would operate in negotiations to establish the UK’s new tariff schedules. This section further examines EU enlargements and focuses on two features of tariff negotiations under EU enlargements: the bilateral nature of renegotiations and retaliatory withdrawals, which could provide an advantage to the US.

 

3.1.1.   Bilateral Nature of Negotiations

One notable feature of GATT Article XXIV:6 negotiations is its bilateral nature. For example, in the context of the EU enlargement, all renegotiations began with bilateral agreements between the EU and an individual WTO Member; thereafter, negotiations became multilateral. Relatedly, the European Economic Community ("ECC"), following renegotiations or consultations, concluded bilateral agreements with 22 GATT Contracting Parties, including Australia, Austria, Canada, Sweden, Switzerland, UK, Uruguay and the US.[61] The agreement with the US stated that the agreement in the renegotiations excluded: (a) the tariff items relating to manufactured tobacco and certain petroleum products, and (b) the products falling within the purview of the European Coal and Steel Community.[62] Moreover, side-agreements signed between the EEC and the US covered quality wheat, corn, sorghum, ordinary wheat, rice and poultry. In these arrangements the EEC agreed not to increase tariffs on quality wheat or make the national import system more restrictive on other products until the EEC Council of Ministers had decided to introduce the common agricultural policy.[63] All subsequent renegotiations under Article XXIV:6 in the context of the EU enlargements followed the same process,[64] one entirely bilateral and governed by the parties’ pursuit of their own best interests.

            Negotiations to establish the UK's new tariff schedules (and to modify the EU’s) will likely also be initially dominated by bilateral procedures and only later become multilateral. After the UK commences renegotiations, the US and other WTO Members will express an interest in joining the negotiations. Then the UK will have bilateral negotiations with each WTO Member and conclude bilateral agreements. The bilateral nature of these consultations will benefit the US by providing opportunity to pursue American trade interests. As demonstrated above, parties to bilateral negotiations under Article XXIV:6 were able to arrive at arrangements with the EEC reflective of parties’ own trade priorities. It would have been more difficult were negotiations conducted multilaterally. The US should tackle tariffs on "US-interested products" in which the US has significant interests in exporting to the UK, as explained further in Section 4.2.

3.1.2.   Retaliatory Withdrawals

Another characteristic of negotiations under GATT Article XXIV:6 is retaliatory withdrawals. Whenever bilateral negotiations in the context of the EU enlargements took place, there have always been parties who were not satisfied with the result of negotiations or compensations offered by the EU. Unhappy parties reserved their rights to invoke Article XXVIII:3 to make retaliatory withdrawals. During GATT negotiations concerning the establishment of the EEC in 1958, Austria, Czechoslovakia, Sweden and Switzerland did not regard the compensation as entirely satisfactory and consequently reserved their rights to invoke Article XXVIII:3 to make retaliatory withdrawals.[65] In the following negotiations under Article XXIV:6 when the EEC expanded from six to nine member states in 1973, the US and Australia recorded their dissatisfaction with the compensation in respect of certain cereals and reserved their rights to resume the negotiations.[66] They also reserved their rights under Article XXVIII:3 to withdraw substantially equivalent concessions with respect to any future modification by the EEC to the draft schedule.[67]

It is entirely possible that the UK and the US fail to come up with a mutually satisfactory result in their negotiations to establish the UK's new tariff schedule. As suggested in Section 2, Article XXVIII will be applicable to negotiations to bifurcate the EU’s current tariff schedule and the UK's future one. Accordingly, in the event of failure to reach an agreement with the UK, the US is entitled to reserve its rights under Article XXVIII:3 to withdraw substantially equivalent concessions and make retaliatory withdrawals. Providing a safety net for the US, this will allow the US to push for its best interests during the negotiations. However, the US should keep in mind that the UK is also permitted to unilaterally modify its schedules if there is no agreement.[68] As examined in Section 2.2, there are balancing mechanisms between the UK proposing a modification and the US (and other WTO Members). The US is advised to use the option of retaliatory withdrawal as a potential “stick” to get the best deal from the UK on the basis of a list of "UK-interested products," in which the UK would have a significant interest in US exports, as discussed further in Section 4.2.

3.2. Dissolution of Czechoslovakia

            Another guiding example is the dissolution of the former Czech and Slovak Federal Republic (“Czechoslovakia”) into the Czech Republic and the Slovak Republic. When Czechoslovakia became two independent republics on January 1, 1993, each became a GATT Contracting Party. The former Czechoslovakia was one of the 23 founding members to the GATT. Before official dissolution occurred, the GATT Contracting Parties, at their Forty-Eighth Session on December 2-3, 1992, agreed that the Czech Republic and the Slovak Republic could accede to the GATT under the same terms applied by the former Czechoslovakia, without carrying out any negotiations.[69] Interestingly, although both the Czech Republic and the Slovak Republic had to make fresh applications to join the GATT, their rights and obligations remained the same as those before their disintegration.[70] On the basis of this example, the UK may assert that the UK has a right to succeed to the EU’s rights and obligations in accordance with customary international law on state succession.[71] That is, the UK can identify its legal rights as inherited from the EU, and it may then establish its own tariff schedules with little or no negotiation.

            However, the demerger of Czechoslovakia is not applicable to the UK's withdrawal from the EU and the succession of state cannot be a legal basis to allow the UK to inherit its rights and obligations from the EU. First, succession of states does not apply to Brexit. The Vienna Convention on the Succession of States in Respect of Treaties provides that “succession of States” entails “[t]he replacement of one State by another in the responsibility for the international relations of territory.” [72] If the EU were a state, it could have been possible that the rules on state succession apply to the UK in the context of Brexit.[73] But, the EU is an international organization, not a sovereign state. This is supported by the German Federal Constitutional Court's decision that the EU did not become a state with the entry into force of the Lisbon Treaty.[74] Therefore, the US should reject any attempt by the UK to rely on the principle of state succession to inherit its WTO rights and obligations from the EU.

            Moreover, the Czech Republic and the Slovak Republic were permitted to join the GATT under the same conditions applied to the former Czechoslovakia without any negotiations only because all GATT Contracting parties agreed. The US and other WTO Members, which will be adversely affected by the reduced market size of the post-Brexit EU, should not agree that the UK simply acquire EU's rights and obligations without negotiation. The point is that post-Brexit EU is less valuable in terms of market size and market access. The US must seek to rebalance its trade interests with the UK (and the EU) in the post-Brexit era via negotiations, which will be further discussed in Section 4.2.

4.   Two Scenarios for the UK’s New Tariff Schedules

            There are two possible scenarios as to establishing the UK's new tariff schedules: (1) the UK can simply seek to adopt tariff schedules that are identical, to the extent possible, to the current certified EU-25 tariff schedules; or (2) the UK can seek to adopt tariff schedules that are different from the EU’s. If the UK opts for the second option, it can establish new schedules that are more liberalizing than the current EU-25 tariff schedules or ones that are more restrictive than the EU’s. In principle, the UK can unilaterally adopt tariff schedules that are more liberalizing without renegotiations. However, it is less likely that the UK would, and can, liberalize tariffs on all goods, considering voices of anti-globalization prevalent during Brexit campaigns. The UK, in reality, would need to adopt tariff schedules that are more restrictive than the EU’s on certain goods, and this would require the UK to open renegotiations under Article XXVIII. This report suggests that the US should press the UK to establish tariff schedule different from the EU’s current one.

4.1. The UK’s Preferred Scenario: Tariff Schedules Identical to the EU’s

            As mentioned in the introduction of Section 1, the UK government has indicated its intention to effectively “copy and paste” the current EU tariff schedules into its own. The UK's Department for International Trade revealed the UK will replicate the EU’s schedules via a technical rectification, rather than a modification.[75] The UK government prefers rectification, because it would then be able to avoid approval from all other WTO Members through consensus. This eases the process for the UK to establish its new tariff schedules.

4.2. The US’s Reply: Tariff Schedules Different from the EU’s

            The US should oppose the UK's preferred approach to adopt an identical tariff schedule to the EU's. If the UK simply replicates the current EU schedule through rectification, no tariff renegotiations under GATT Article XXVIII would take place. Thereby, the US will lose an opportunity to obtain better UK market access and also to the EU Single Market. Due to the bilateral nature of renegotiations and the US’ entitlement to take retaliatory withdrawals, as discussed in Section 3.1, the US would be able to reach an agreement with the UK that better reflects its trade interests through tariff renegotiations.

            In order to bring the UK to the negotiating table, the US should remind the UK that the current EU-25 tariff schedules do not necessarily reflect UK trade interests. For instance, the UK does not grow oranges. Therefore, the UK need not maintain the EU's complex tariffs on oranges, which were designed to protect producers from Spain, Italy, Greece, and Portugal.[76] Lower orange tariffs will benefit not only US producers but also UK retailers and consumers, who can purchase cheaper oranges. Through negotiations, the UK can lower its tariffs on oranges, and the US can suggest to tackle other tariff issues that the UK might be interested in.

            To make strategic planning for tariff renegotiations with the UK and to better understand the UK’s positions, this report suggests the US government to commission in-depth research by the International Trade Commission (“ITC”). This research should be two-fold. First, the ITC is advised to investigate US exporting products to the UK in which the US has significant export interest to the UK and where there are limited UK commercial producers. A list of these products, or so-called “US-interested products,” will be a focal point for the US government to push for tariff reductions during negotiations with the UK, wherein decreasing the tariffs would provide British consumers additional choice of (potentially) less expensive American products. At the same time, it would be necessary for the ITC to identify a list of products that the UK has substantial export interest to the US market and where there are little US domestic producers. Likewise, tariff reduction on the so-called “UK-interested products” would benefit both UK exporters and US consumers. A list of “UK-interested products” will serve as carrot to motivate the UK to come to a negotiation table.

However, if the UK insists the “copy and paste” approach and is reluctant to open up tariff renegotiations, the US may seriously consider filing a request for consultation before the WTO dispute settlement. “Copying and paste” the EU tariff schedules via rectifications would be inconsistent with GATT Article XXVIII:4 read in conjunction with paragraph 2 of the Procedures for Modification and Rectification of Schedules.[77] This will be further discussed in Section 5.1.1, along with other potential WTO claims that the US may bring against the UK and the EU.

In conclusion, the US should oppose the UK’s approach to establish its new tariff schedules identical to the EU’s via rectifications and attempt to open up tariff renegotiations with the UK. However, the US should be cautious to make a consistent voice concerning general tariffs and tariff rate quotas. While the UK’s “copy and paste” approach would go against the US’ interest for setting up tariff schedules for industrialized goods, the same approach for TRQs would be beneficial for the US. For instance, if the UK replicates the EU’s TRQs, US exporters would gain more access to the UK market.[78] Although the US, in principle, can take two different approaches to pursue its trade interests, the UK (and the EU) is likely to point this out and make objections.

5.   Potential Claims Against the UK and the EU

            The US government may consider bringing WTO complaints against the UK and the EU as a strategy to pull them into tariff negotiations under GATT Article XXVIII.[79] However, it is not guaranteed that these challenges would be successful. Yet, the US is still recommended to bring these issues before and during tariff renegotiations with the UK and the EU to indicate the US’s strong interest to engage in negotiations. Grounds for potential claims against the EU parties, although not complete, can serve as leverage that benefits the US in negotiations. This section explores separate grounds for potential challenges against the UK and the EU.

5.1. Against the UK

            The US, in principle, may file a request for consultation, arguing that the UK violates GATT Article XXVIII:4 read in conjunction with paragraph 2 of the Procedures for Modification and Rectification of Schedules, and Article XXIII:1(b).

5.1.1.   GATT Article XXVIII:4 read in conjunction with Paragraph 2 of Procedures for Modification and Rectification of Schedules

            If the UK simply “copies and pastes” the current EU-25 tariff schedules to set up its own via rectification, the US can assert that this is inconsistent with GATT Article XXVIII:4 read in conjunction with paragraph 2 of the Procedures for Modification and Rectification of Schedules. The UK must establish its new tariff schedules via modification, following renegotiations under Article XXVIII.

The terms “modification” and “rectification” are not defined in GATT Article XXVIII and Procedures for Modification and Rectification of Schedules. However, Procedures for Modification and Rectification of Schedules, adopted by all WTO Members in 1980 to provide guidelines about how changes in the authentic texts of schedules are to be made by a means of certification,[80] provides clear legal standards to distinguish “rectification” from “modification.” Paragraph 2 of the Procedures for Modification and Rectification of Schedules states that a proposed “rectification” shall be limited to amendments which are of a purely formal character and which do not alter the scope of the concession.[81] That is, if rearrangements to schedules are purely formal or technical, and does not change the substance of existing commitments, this would be “rectification.” On the other hand, if amendments to schedules bring about new commitments or improvements to existing ones, this would be “modification.”

In accordance with these key features of rectification and modification, the UK’s replication of the EU’s tariff schedules would be modification of the UK’s WTO commitments, because it goes beyond purely formal changes and alters the scope of existing UK commitments.[82] On face, the UK’s “copy and paste” approach looks like rectification. The UK would likely to contend that replicating the EU’s schedules for industrial goods does not change the scope of the concessions and, thus, could be done by a relatively simple process of rectification. However, this argument should fail. Tariff schedules concern not just industrial goods but also agricultural products. Particularly to disentangle tariff rate quotas on agricultural goods and re-allocate shares between the UK and EU, the UK's reproduction of the EU's current schedules involves more than mere technical correction but a change in existing commitments, as in a modification (see also Agriculture Section).[83]

Furthermore, it is noteworthy that whether these adjustments fall under “modification” or “rectification” is not only a legal issue, but also political, with real commercial interests involved.[84] The dividing line between modification and rectification is determined by whether any WTO Member believes the changes made will result in any alteration to the scope of concessions and whether that Member believes it will be worse-off under new schedule.[85] A number of WTO Members have already expressed concern about Brexit's implications for international trade and its negative impact on their trade interests. Therefore, the US should be able to gather support from other WTO Members as they all share the same concerns.

In conclusion, it would be inconsistent with GATT Article XXVIII:4 read in conjunction with paragraph 2 of the Procedures for Modification and Rectification of Schedules if the UK “copies and pastes” the EU tariff schedules via rectifications. The UK must establish its new tariff schedules via renegotiations under Article XXVIII, thus “modification.” At the same time, the US should note that distinction between “modification” and “rectification” is not without controversy. As mentioned above, this is not only about a matter of law but also how other WTO Members perceive Brexit’s impact on their trade interests. It would be necessary to share mutual understanding with other key WTO Members to strengthen the US’ positions.

5.1.2.   GATT Article XXIII:1(b)

            The US may also bring a non-violation complaint under GATT Article XXIII:1(b), asserting that the UK has nullified or impaired benefits accruing to by Brexit that was not reasonably expected at the time when tariff rates were negotiated. The panel in Japan Film articulated three requirements that must be met by a complainant in a non-violation case. [86] Accordingly, the US must demonstrate the following three factors: (1) a “measure” applied – Brexit – is attributable to the UK government; (2) a “benefit” – access to the EU Single Market via the UK – accruing to by Brexit has been denied after the UK’s exit from the EU; and (3) this benefit is nullified or impaired after Brexit and the US was “not able to reasonably anticipate” this impairment when it was negotiating concessions. The US should consider bringing this non-violation claim against the UK after the UK actually leaves the EU. Yet, it would be challenging for the US to fulfill the last element and successfully bring this challenge, which will be further discussed below.

            The first two elements could be easily met. (1) Brexit would constitute a policy or action of the UK government and, thus, found to be a “measure” attributable to the UK.[87] Following British voters’ decision to leave the EU in the referendum in June 2016, the UK Parliament eventually approved the invocation of TEU Article 50 and Prime Minister May officially kicked off the Brexit process in March 2017. (2) The benefit that has been denied is the loss of access to the EU Single Market via the UK. If the UK leaves the EU Single Market without any trade agreements with the EU, which is highly likely to happen given tough voices from the UK, US products entering into the UK market would have to pay extra tariffs in order to cross the English Channel and gain access to the EU Single Market. Before Brexit, no such a duty had to be collected since the UK was part of the EU customs unions.

(3) However, it would be difficult to establish the third factor that the US was “not able to reasonably anticipate” this nullified benefit when it was negotiating concessions with the UK. This is related with the timing of bringing this complaint. While this report argues that the US should push the UK to start negotiations to establish its new tariff schedules, as mentioned in Section 4, such negotiations with the UK did not take place as of May 2017 and it is less likely that it would kick off soon. Even if tariff renegotiations start immediately, the US cannot assert that the impaired benefit – the loss of access to the EU Single Market via the UK – was not anticipated. The US is already aware of this loss and that is exactly why the US wants to have negotiations with the UK: to minimize the negative impacts of this impaired benefit.

In sum, it is less likely that the US would be successful in challenging the UK under Article XXIII:1(b). The US, however, is suggested to bring this issue before and during tariff renegotiations with the UK to show how determinative the US is to engage in negotiations. Moreover, Brexit negotiation has just kicked off between the EU and the UK. This negotiation will last, at least, for two years. As things develop, the US might be able to collect some facts that could be favorable to the US and to successfully bring this claim against the UK.

5.2. Against the EU

5.2.1.   GATT Article XXIII:1(b)

            The US may initiate another non-violation claim under GATT Article XXIII:1(b) against the EU, arguing that the EU has nullified or impaired benefits accruing to by Brexit that was not reasonably expected at the time when tariff rates were negotiated. The same three requirements established by the panel in Japan Film apply, as discussed in Section 5.1.2, but facts that support each element would be different. The US needs to meet the following three factors: (1) a “measure” applied – Brexit – is attributable to the EU; (2) a “benefit” – the EU Single Market that includes access to the UK market – accruing to by Brexit has been, or will be, denied after the UK’s withdrawal from the EU; and (3) this benefit is, or will be, nullified or impaired after Brexit and the US was “not able to reasonably anticipate” this impairment when it was negotiating concessions. The timing of bringing this complaint against the EU would be different from the one against the UK. The US, in theory, would be able to initiate this claim before the UK exits the EU, meaning even now.

Yet, it would be difficult for the US to satisfy the first factor. (1) It seems less likely that Brexit would be a “measure” attributable to the EU. The UK’s decision to leave the EU is an action of the UK government, not the EU’s. The US may still contend that actions of an EU member state could be considered as the EU measure. However, it seems to be a weak argument. TEU Article 50 states that “[a]ny Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.” This provision clearly indicates that decision of an EU member state to exit the EU is under the sole competence of the member state and there is no involvement from the EU.

If the US manages to tackle this first hurdle, it would be easier to meet the two remaining elements. (2) The benefit that has been, or will be, denied is the loss of access to the UK market and the reduced market size from EU-28 to EU-27. Now, before Brexit, US products are entitled to have free access to the UK once they are cleared in any entry points within EU external borders. After the UK leaves the EU, US exporters would have to pay extra duties to enter the UK market, depending on how the EU and the UK rearranges their post-Brexit trade relationships. In addition, given that Prime Minister May has avowed to leave the EU Single Market and the customs union, the EU Single Market, after Brexit, is likely to shrink from EU-28 to EU-27. One issue to clarify as regard to the second element is whether Article XXIII:1(b) covers prospective, or future, impairment. If it only covers retrospective nullification of benefits, this would be another obstacle for the US.

(3) Lastly, the US would easily establish that the US was “not able to reasonably anticipate” this nullified benefit when it was negotiating concessions with the EU. Since the UK joined the European Community (“EC”), the predecessor of the EU, in January 1973, the US and other WTO Members had legitimate expectation to acquire access to the UK market via the EU Single Market. The EU might argue that exit of an EU member state from the EU could have been reasonably anticipated, since TEU Article 50 was added in 2009. However, this argument should fail, because even drafters of Lisbon Treaty did not envisage an actual withdrawal to take place. Negotiating history indicates that it was a mere compromise among EU member states while exchanging deals in the last moment.

In conclusion, the US has higher chances of successfully bringing a non-violation claim under GATT Article XXIII:1(b) against the EU. However, it will be difficult to meet the first factor and may be the second element as well. As mentioned in Section 5.1.2, the US is still recommended to show its intention to bring a potential complaint against the EU, especially because the US, in principle, may bring this claim against the EU now and does not have to wait until the UK’s actual exit from the EU.

 

Agriculture                                                                  UK & EU

 

This Chapter’s discussion of Brexit’s legal impact on US agricultural interests incorporates and elaborates on the preceding chapter’s examination of tariffs. In particular, this part examines the options for the UK and the EU with respect to the tariff-rate quotas (TRQs) on agriculture products. Additionally, the UK will have to negotiate with the EU-27 to divide Aggregate Measure Support or “AMS” subsidies, before presenting schedules to WTO Members. Whatever the method selected by the EU and the UK to allocate AMS amounts could give rise to WTO challenges by third-countries. This chapter considers such challenges and makes recommendations. Finally, this part concludes with recommendations for an International Trade Commission investigation, to provide a baseline for potential renegotiations to improve access for US agriculture exports.

 

Introduction

            Following Brexit, farmers and agricultural exporters may have different market access opportunities than before. Given the significant amount of agricultural trade between the UK and the EU-27, the degree to which agriculture trade from third-countries like the US is affected will be influenced by whatever trade arrangement is worked out between the UK and the EU-27. The graphs to the right illustrate interdependence, as EU-27 countries dominate the UK import and export market in agricultural products relative to all other countries, and have so, in the years preceding Brexit.[88] There are 10 sectors where the EU-27 is the import market for over 80% of UK exports—eight of those are in agriculture.[89] Similarly, nine of 12 sectors where EU-27 exports account for more than 80% of all UK imports are in agriculture. If Brexit worsens market access between the UK and EU-27, agriculture trade from third countries could see increased opportunities.[90]

            One reason for this pronounced interconnectedness is the proximity of the Brexit Parties; yet, another reason is the Agreement on Agriculture, which permits certain import restrictions and domestic subsidies. AoA provisions favor intra-EU agricultural trade over imports from third-countries. They partly exist because the WTO has long established the AoA would apply and the GATT would no longer “apply to . . . agricultural products, except to the extent that the [Agreement] contains specific provisions dealing specifically with the same matter.”[91] The AoA permits the EU to restrict third-country imports through TRQs “when quantities inside a quota are charged lower import duty rates, than those outside (which can be high).”[92] And further, it permits AMS support to EU domestic producers within levels the AoA specifies.[93] TRQ and AMS measures have insulated and reinforced cross-Channel trade in agricultural products. However, expanded and improved access for third countries may result from possible reapportionment of EU-27 and UK commitments that bind (a) TRQ in-quota quantities and duties and (b) total AMS levels.[94] Consequently, the subject of this Chapter is the reversal of the agriculture trade relationship between the UK and EU-27, the possible apportionment of TRQ and AMS commitments between them, and the resulting implications for third-countries like the US.

            Section 1 delves into TRQs and their allocation between the UK and the EU-27 and its impact on third parties. The EU’s TRQ commitments, for example, are complex and burdensome, resulting in significant tariff and non-tariff barriers and distortions to US agriculture exports. Like the issue of tariffs, there is no precedent or clear GATT provision that would govern “splitting” one TRQ into two.[95] As the section illustrates, an allocation of the quota between the EU and UK may take one of several forms: one option would be for the UK to “copy and paste” or “replicate” the EU’s TRQ schedule, meaning that both the EU and the UK would set the same, respective in-quota amounts; or, as another option, the UK and EU may instead, decide to re-allocate the TRQ based either on historical trade data or ratios. The latter would potentially diminish US agriculture products access to both the EU-27 and UK markets, while the former would significantly increase access to both markets. To get the best deal for American agricultural producers, this section highlights, first, the potential “copy and paste” TRQ strategy, and, second, examines two possible ways in which the EU and UK may “split” existing agricultural TRQs between them—and the legal bases to potentially challenge the division of both the EU-27 and the UK measures. Section 2 examines the obligations that govern domestic support of agriculture under the AoA. While the US may have a legal basis for a potential claim of WTO-inconsistency for a post-Brexit allocation of AMS as between the EU and UK, a challenge would not likely be fruitful as neither the UK nor EU will feasibly trip the divided subsidy limits. Section 3 sets forth suggestions for a Section 332 Investigation[96] into US agricultural products that have the most to lose or gain from the TRQ considerations set forth in Section 1 and similar ones from the Tariff chapter.

 

1.   Tariff Rate Quotas

            A TRQ allows a customs territory to impose a lower tariff rate up to a quantitative limit, and then a higher tariff for imports after that limit has been reached. TRQs were introduced to enhance market access, replacing quotas on agricultural products, prior to the Uruguay Round negotiations, which resulted in the Agreement on Agriculture. Scheduled TRQs delineate tariff limits binding on the EU. The UK will have to negotiate with the EU-27 to separate out the UK’s TRQs, before presenting its schedules to WTO members.

            TRQs present considerable hurdles to US agriculture producers because they restrict market access through quantitative limits on how much can enter at the lower in-quota tariff rate. Average EU duty rates on non-agricultural products are 3.9%, 4.8% on all other product,[97] and 10.9% on agricultural products.[98] As a result of the Uruguay Round negotiations, the EU implemented 87 agricultural TRQs (today, 86) of the 99 TRQs that apply to all products.[99] (By comparison, the US and Canada implemented 54 and 21 TRQs, respectively.) Further, while only 8% of tariff lines have customs duties “in excess of 50%” these tariff peaks “apply to dairy products, beef, cereals and cereal-based products as well as sugar and sweeteners” apparently for out-of-quota quantities.”[100] One third of the EU’s TRQs are imposed on meat products followed by cereals, dairy products, fruits and vegetables.[101] The chart above shows the significance of the EU’s TRQs on leading US agricultural exports. Presumably, if Brexit presents an opportunity to relieve some of the prejudice to access exports force through TRQs, the result would be targeted gains in products where the US is already a strong agriculture exporter.

1.1. A General Note on the “Administration” of In-quota Quantity

Leading Agricultural Products Traded Between the US and Brexit Parties (2015)[102]

Intra-Brexit Party

US-Brexit Party

To UK

To EU-27

To UK

To EU-28

$23.6bn Imported of $39.6bn (total)

$9.1bn Imported of $386bn (incl. intra-EU Trade)

$1.1bn Imported of $39.6bn (total)

$12bn Imported of $140bn (excl. intra-EU)

Horticulture—$7.7bn

Meat – $1.6bn

Horticulture—$354mn

Horticulture—$3.9bn

Meat – $5bn

Fish and Aquatic Resources – $1.4bn

Rubber and Gums –

$146mn

Oilseeds—$2.8bn

Diary, eggs and honey—$3.5bn

Diary Eggs and Honey – $1.3bn

Oilseeds—$143mn

Rubber and Gums –$1.2bn

Other agricultural products – $811mn

Other products (incl. Skins and wool)—–$811mn

Fish and Aquatic Resources—$76.5mn

Fish and Aquatic Resources—$1.2bn

Oilseeds—$1.5bn

Cereals – $780mn

Live Animals— $74.2mn

Other Agricultural –$847mn

            The EU’s in-quota TRQs may be “administrated” in any number of complex, opaque, or otherwise onerous ways. Together with the prohibitive expense of exporting to the EU out-of-quota, these administrative methods contribute to the notion that a “TRQ” is a de facto quota. Brexit may present an opportunity for the US to renegotiate such methods separately or apart from whatever option the Brexit Parties decide for TRQ reallocation.[103] These administrative methods are numerous, technical, and often product-specific, taking them beyond the scope of this Chapter. Of those methods in the table below, the three most common to the EU, in descending order, are (1) License on Demand, (2) Historical Importer, and (3) First-come, First-served. [104] If the US determines one of these methods produces or aggravates prejudice resulting from Brexit-related reallocation of the EU’s TRQs, it should consider a WTO challenge of that administrative method. Notably, the Panel in EU – Poultry (China) decided a challenge to such a method, namely the Historical Importer type.[105] In relation to Brexit, a WTO challenge could be lodged under the frameworks of GATT Article XXIII:1(b) and XXVIII(4) that Section 5 of the Tariff Chapter prescribes and/or that contained in this Section infra concerning GATT Article XIII:2.

Principal Methods of Administrating TRQs Initial

Applied Tariffs

Historical Importers

License on Demand

Auction
State

First-come, first-served

Trading Producer

Groups

Mixed Allocation

Other

Not Specified

Additional Conditions on in-quota quantities: Domestic Purchase Requirement, Limits on TRQ Shares, Export Certificates, Past Trading Performance, Past Trading Performance, and Limits on TRQ Shares

1.2. Replication (EU-28 = EU-27 = UK)

            As discussed in the Tariff chapter, Dr. Liam Fox announced the UK’s preferred method of replacing the UK’s tariff schedules would be replicating the EU’s.[106]  This statement may also refer to the 99 TRQs, including the 86 agricultural ones. The UK would copy the contents of the EU’s schedules and notify the rate and quantity as its own. 

            For example, the EU-28 currently permits 283,825 tons of lamb and goat meat to enter at a lower in-quota tariff, administrated by “historical importer”. [107] With replication, the UK would notify and apply the same duty as the EU on the 283,825 tons. Assuming the EU-27 keeps the same schedule for the 283,825 tons of lamb and goat meat (and does not otherwise diminish access) this would be a win for the US and other third-country exporters. This is because the favorable rate, subject to certain administrative limitations, once prevalent in the EU-28 market would then apply to 283,825 tons in both the UK and EU-27 markets. As a result, favorable access would instantly expand in the EU-27 market and in the UK. As a result, so long as access in the EU-27 remains undiminished, the US should encourage the UK to replicate its schedules for products that are subject to TRQs.

            However, it is unlikely either the UK or the EU-27 will in the end adopt this approach, because replication of the EU’s schedule by the UK without a reduction in the TRQ levels by the EU-27 would result in such increased access.  

1.3. TRQ Division (by historical data or ratio)

            One other option for the Brexit Parties to reallocate the EU’s TRQ commitments is dividing the in-quota share between the Brexit Parties by ratio or historical trade data. However, such methods would constitute modifications (and not rectifications), as explained in Section 5.1.2 supra. In the case of such divisions, the Brexit Parties would be required to enter into negotiations with the US and other WTO Members.

1.3.1.   Division by Historic Trade Data

            The second potential allocation of the EU’s commitments concerning TRQ in-quota quantity and tariffs would be to divide the quantity along the lines of historical data. This would involve the UK and the EU-27 extrapolating quota share from a representative period of time (typically three years, as in 2016 to 2018).[108] Such division has the potential to create significant challenges at the WTO. If this method were used, the US could compete for quota space with the EU-27 and the UK in the other’s market for agricultural imports. Specifically, the US would compete with the UK in the EU-27’s $161 billion agriculture import market and, likewise, compete with the EU-27 in the UK’s $39.6 billion market.[109]

            One complication that may emerge is whether to include cross-Channel agricultural trade between the UK and the EU-27 in formulating the division. Each Brexit Party’s agricultural exports benefit from respective under-capacity of the other resulting from the absence of import competition under the EU’s current TRQ regime. As expressed in the charts below and to the right (over the legally significant three-year representative period under Article XIII), this sort of division may create a historic displacement of quota share, if cross-Channel trade effects the division. On Brexit “day one,” the EU-27 and UK will become mutual third-country exporters in relation to the other. If the division by historical data reflects only trade between present-day third-country exporters, some of the actual demand for agricultural imports that results in cross-Channel trade would be ignored. However, if the division included cross-Channel trade retrospectively, which includes the TRQ regime in place, it might more accurately gauge import demand. But this could be somewhat offset because the EU’s TRQ regime operates in the absence of export competition that would decrease trade that may decrease cross-Channel trade.

            Two questions are averted when extrapolating quota share by historical division: first, whether to include cross-Channel trade between the EU and the UK as provided; and, second, whether and how to include each Brexit Party in the others TRQ regime following Brexit. Going back to the example of lamb and goat meat, while there are 283,825 tons available under the current regime, that quota is carved-up and administrated on a country-by-country basis.[110] This means 226,700 tons, 23,000 tons, and 200 tons respectively go to New Zealand, Argentina, and “other” exporters (which presumably includes the unlisted US). So, while the grand total of 283,825 tons may be reallocated between the UK and the EU-27 along historical lines, a zero-sum allocation could result if Brexit Party attempted to include the other in the country-specific shares. This could operate to the detriment of US lamb and goat meat exports, if the over-all quota were not expanded.

1.3.2.   Division by Ratio

            Another option—meant to address some of the problems arising from TRQ division by historical trade—would involve the use of ratio to redistribute TRQ quota between the EU-27 and the UK. An example of the method is the UK retaining 10% of the EU’s original quota based on import share leaving the EU-27 with 90%. The up-shot to this ratio division for the US could be a better opportunity to account for “under-filled” quantities, resulting from exporters that fail to satisfy particular quota share. This could be significant as the EU’s fill-rates for TRQs from 2002 to 2009 ranged from 37 to 64 percent.[111] The method has been is also “in-line and established under [GATT] Article XIII practice.”[112] Another consideration that concerns division by ratio (also relevant to that for historical data) is that, each Brexit Party would need the other to agree on a proportionate increase/decrease in quota available to third-country exporters.  The US should advocate for this division over historical data to the extent it would offer an opportunity to address quota-fill slack and therefore expand actual in-quota quantities available to exporters.

1.3.3.   Potential Claims Against the UK

            The US may be able to challenge the UK with respect to the foregoing options under violates GATT Article XXVIII:4 read in conjunction with Paragraph 2, Article XXIII:1(b) and Article XIII:2, as provided below.

1.3.3.1.       Claim under GATT Article XXVIII:4

             The TRQ division by ratio option could lessen the access of US agricultural exports with respect to the UK depending on the ratio the Brexit Parties decide to employ. That prejudice would result the WTO-inconsistent modification of the EU-27’s and UK’s commitments pursuant to Article XXVIII:4 read in conjunction with Paragraph 2 as provided here and in Section 5 of the Tariff Chapter. If export access would be lessened under a proposed ratio, the US may challenge that ratio for reasons that include, but are not limited to, the following:

  1. Failure to account for the under-filling of in-quota quantities on an individual or aggregated basis. Generally, low fill-rates collapse the actual quota available to all third-party exporters to the detriment of some with additional capacity that are nonetheless subject to TRQ limits. Accounting for under-fill is a primary shortcoming of the division by historic data that the ratio method is meant to address, a method that should be applied precisely to its purpose.
  2. Failure to account for the optimal value of agricultural products relative to each Brexit Parties relative to those the US exports to them. An example illustrates. Norway desires the Brexit Parties to select ratio more amenable to agriculture exports to the EU-27 because Norway and the UK are similarly situated resulting in lower demand/returns on their exports there. By contrast, the US desires a ratio relatively favouring exports to the UK over the EU for similar reasons (i.e., the US and the EU-27 tend to produce similar goods but the latter has an advantage of lower transport costs than for US exports). If the Brexit Parties select a ratio relatively more relatively more favourable to exports to the EU-27, Norwegian exports may be benefit. However, that same ratio may operate to undervalue the risk-adjusted returns on US exports to the UK and “overvalue” the same for those additional ones to the EU.
  3. Failure to account for the impact of the selected ratio together with the administrative methods that determines quota share. For example, suppose a 50-ton quota were available to all exporters before Brexit. Further assume that quota was administrated by historical importer in the amounts of 25, 15, 5 and 5 tons to Canada, Brazil, Mexico, and US, respectively. The US fills the quota completely in the UK. If the ratio selected generally allocates 50 tons along the ratio of 5% (UK) and 95% (EU), total US exports would be cut in half following Brexit. That is, US exports would completely fill the 2.5 tons (5% of 50) now available in the UK and under-fill 47.5 tons left to the EU-27.[113] A loss of 2.5 tons to US exports would thus result.
  4. Failure to accuratley quantify or account for the transhipment of third-country exports as between the UK or EU-27, known as the “Rotterdam effect,” prior to Brexit (e.g., record of agriculutral goods unkept for the ultimate destination of certain agrciultural goods after the arrive in port of Rotterdam over the course of the representative period of time from which the ratio is derived). This would contribute understate the calue of the in-quota quantity of goods transhipped to the UK while overstating the same with respect to the EU-27.
  5. Failure to choose a proper representative time period for exports, which understates the relative value of US exports to the EU-27 or the UK.
  6. Failure to properly exclude or include cross-Channel trade with respect to the relative significance of US exports to the EU-27 or the UK.
  7. Failure to include or exclude information that to an aggregated ratio that may not be warranted or appropriate for an individual product subject to a TRQ quantity, which results in an undervaluing relative to the EU-27 or the UK.
  8. Failure to account for the emergence of post-Brexit trade patterns, suppliers, and supply chain issues that result from it.
  9. Failure of the selected ratio to consider product-specific issues that are relevant to US exports. g., an expanded quota for fruits and vegetables in the UK would only be reasonable giving an under-capacity for producing them.

            Finally, division by historical trade would trigger ultimately the same conclusion. This sort of division of TRQ quota space shares some of the alterations of concessions already expressed above. In addition, a historical division may create alterations that prejudice the access to the EU-27 and UK markets even more specific to the facts that were prerequisite in EU – Poultry Meat (China).[114] This option may include the following failures:

  1. To account for “special factors,” like Brexit itself;
  2. To address under-fill quotas of other Members; and
  3. To consult or commit to concessions with “substantial” or “principal “supplying interests” altogether; or, to address supplying interests that differed in 1994 when the EU’s commitments were first entered.

As a consequence, quota divisions by historical trade may constitute a modification inconsistent with WTO law and practice.

1.3.4.   Claim under GATT Article XXIII:1(b)

            Any of the methods for splitting TRQ quotas may give rise to a further claim against the UK that it has nullified or impaired benefits accruing to the US that were not reasonably expected at the time they were negotiated. As more fully set forth in Section 5.1.2, under Japan Film, the revised TRQ schedules resulting from either division option (historical data or a ratio) would constitute (1) a “measure,” namely a TRQ levied by the UK upon a US agricultural export within a certain quantity, administrative, and rate provisions; (2) a “benefit” of post-Brexit access of US exports to the entire EU Single Market (i.e., EU-27 plus UK) via the UK without an increased in post-Brexit burdens, including, but not limited, those that arise from (a) transaction or administrative costs,[115] (b) costs resulting from productive, financial, or administrative efficiencies from scaled purchases, and (c) duplicate expenses; and, (3) this benefit being nullified or impaired because the US was clearly “not able to reasonably anticipate” nor even negotiate with the UK prior to Brexit, as set forth in Section 5.1.2 of the Tariff Chapter.

1.3.5.   Claim under GATT Article XIII:2

            If the US is a substantial or principle supplying interest in a product that the UK modifies as a result of TRQ allocations, such must comport with GATT Article XIII:2. In particular, this means it must comply with certain “conditions, including negotiating compensation (additional market access) for countries that have a ‘principal supplying interest’ in the product, as well as consulting with those that have a ‘substantial interest’ (at least a 10% import share).”[116] Accordingly (and if not), the US will have the right to retaliate if the TRQ-encumbered product is one that it has a “substantial or principal supplying interest” and considers compensation provided under this division inadequate.[117]

            Further, under GATT Article XIII:2 TRQ allocates to US exports should be based on shares provided during a “previous representative period, ‘due account being taken of any special factors which may have affected or may be affecting the trade in the product.’”[118] One such "special factor" the US should claim against the UK and the EU-27 is Brexit itself—especially to the extent the UK and EU intend to include one another under their respective TRQ regimes. Claiming that Brexit is a “special factor” could allow the US to challenge any inclusion of the significant cross-channel trade flow between the Brexit Parties, which could help minimize the potential for US displacement quota share.

1.4. Potential Claims Against the EU

            In the event of division (by ratio or historic trade) the basis for claims against the EU and the UK are the same under GATT Article XXVIII:4 read in conjunction with Paragraph 2. The gravamen of US complaint under Article XXIII:1(b) against the EU would primarily be that the applicable TRQ in-quota quantities duties and other administrative considerations applicable in the EU-27 were bargained for in relation to a market that was not substantially contracted (i.e., EU-28 without the UK). Of the three prongs set forth in Japan – Film (1) a “measure” attributable, (2) a “benefit” nullified or impaired, and (3) one the US was “not able to reasonably anticipate”, the most difficult to satisfy with respect to the EU-27 would be the first – but, only in the event the UK unilaterally replicated its tariff schedules.

            For any of the agriculture products where the US has a “substantial” or “principal supplying interest” the EU will be required to consult, if not negotiate, with the US. As provided above, the US may claim that Brexit is “special factor” amplifying its right to compensation relative to the EU-27 following Brexit. On the other hand, while this may work for to exclude the UK in the "previous representative period" as member of the EU customs union the EU-27 may attempt the same claim. In particular, it might claim that the UK’s triggering of Brexit in relation to itself was a "special factor" affecting TRQs such that it should be included as a principal or substantial supplier of a TRQ-encumbered product in the UK market. This scenario argument might find a sympathetic audience in Geneva where testy issues often find diplomatic solutions.

 

2.   Agricultural Subsidies: AMS

            In addition to TRQs, the UK and the EU-27 would have to agree on the division of agricultural subsidies, known as the Aggregate Measure of Support. Following Brexit the UK will lose EU support, amounting to upwards of €4 billion a year, equivalent to 14% of British agricultural output. [119]  One source estimates EU farm subsidies currently account for 50-60% of UK farm income. [120] Post-Brexit, the UK, in its WTO schedule of commitments, must determine the level of domestic support it can provide to its farmers. To this end, the UK has already indicated it would guarantee the current level of direct subsides until 2020 “as part of the transition to new domestic arrangements.” [121]   

EU Declarations of Amber, Blue and Green Box Support, 2012-13 (Source: WTO 2015[122])

Totals, €m

Amber Box

5,899.1

 

de minimis payments

1,780.6

of which:
- product specific: €986.1
- non-product specific: €794.5m

Blue Box

2,754.2

 

Green Box

71,140.0

of which:
- decoupled income payments: €34,493.5m

            AMS levels in the WTO are constrained and regulated under the AoA, Countries provide non-exempt domestic support by entering-in a total AMS commitment in Part IV of their WTO schedules of commitments, referred to as Bound Total AMS (“BTAMS” or “Amber Box”), which sets the maximum limit on allowed non-exempt domestic support. Per AoA Article 7, a WTO member is not allowed to provide support to agricultural producers in excess of the de minimis levels. When the UK leaves the EU, the UK will also want a share of the EU’s Bound Total AMS or will need to negotiate to create one for itself. But at the moment the EU-28 does not make full use of its BTAMS. Based on previous years, the current total AMS (“CTAMS”), or support currently allocated, is far less than BTAMS. In 2012-13, the declared “support provided by the EU [was] much lower than its limit in the WTO . . . [,]  only €5.9bn or 8% of its €72.4bn [BTAMS] ceiling, according to the EU’s latest notification to the WTO.”[123]

            If, the UK and EU were to notify the WTO of a new BTAMS ceiling, there would be a basis for alleging WTO-inconsistency against both as provided in Section 2.1. The report, however, concludes in Section 2.2 a technical challenge would not, in reality, prove worthwhile, since the EU-27 and the UK would both be highly unlikely to trip the BTAMS limit, provided the EU-28’s support for agriculture does not increase drastically.

2.1.  Technical Challenges

            In theory, a complaint could lie against the UK and the EU-27 in connection with any division of the BTAMS ceiling post-Brexit. However, the EU and UK would need to obtain approval of other WTO Members to certify the resulting schedules. Approval would be governed by GATT Article XXVIII, concerning the modification of schedules. This would provide WTO Members with the ability to object. However, disapproval would be unlikely because the CTAMS falls well below the BTAMS limit. In addition, the UK will probably reduce its spending on BTAMS after Brexit. Thus, while theoretically possible, in practice, it is less likely a complaint challenging a BTAMS division would be worthwhile.

2.1.1.   UK

            The UK, operating under political pressure from heavily subsidized farmers, has two primary options.[124] The UK could decide to abstain from a BTAMS commitment, in which case the EU-27 would likely welcome the decision.[125] The EU would then retain the entire BTAMS entitlement, leaving a zero share for the UK. However, some WTO Members may not prefer this, as it would create more room in the Amber Box for the EU to provide more support to French or other farmers. The UK would then presumably rely on the de minimis provisions of the AoA to support its farmers.

            In the case of reapportionment, and assuming the UK wants to take BTAMS in local currency (pounds sterling), it would need an agreement on the exchange rate, which would depend on how the apportionment occurs. The UK would then choose between an average exchange rate over a certain period of time or at a point in time. No matter the apportionment method, the UK would still be required to modify schedule. The US would have the right object to the UK’s notification.

2.1.1.1.       EU

            The EU-27 has choices concerning limits on subsidies provided to its agriculture producers. In choosing a split in favour of the UK, however, it would reduce the overall non-exempt support available to its own producers. WTO Members would be unlikely to object. However, the EU-27 would be required to modify its the BTAMS levels—to which the US may object.

2.2. Practical Result

            While challenges to these commitments are colorable on technical grounds, as Sections 2.1 provides, any claim would be unlikely to bear fruit. At the heart of it, the EU’s commitment for BTAMS provides too much leeway relative to the actual levels it has declared. It is recommended that the US refrain from asserting a claim and reserve its right to object to the division in this or similar circumstances in the future.

3.   Section 332 Investigation

            The US should request the U.S. International Trade Commission conduct a Section 332 Investigation to gain information related to two aspects of Brexit: (1) a list of tariff lines that the US can claim were initially negotiated between the US and the EU and a list of HTS lines that the US can claim primary or substantial supplier status to both the UK and the EU-27; and, (2) an analysis of agricultural product exports to the EU that have been constrained by the quota levels in the EU’s TRQs along with an analysis of US agricultural exports to the UK and to the EU-27. With respect to agriculture, the investigation would evaluate the potential removal or liberalization of these restrictions so as to maximize productive opportunities for US agriculture exports in connection with the Brexit rebalancing of WTO commitments.

           At first blush, with the EU-28’s $387 billion in agriculture imports (including trade among member nations), the $12 billion share of US exporters in the EU-27 market appears disproportionately small relative to capacity. Likewise, with more than 65 million people and $39.6 billion in agriculture imports, the $1.1 billion Share of US exporters in the UK market appears even less sizeable. US agriculture exporters may soon have an opportunity to gain market share. 

            Generally, based on a review and analysis of data and information from available sources, including a survey of US firms, the US should request that the Commission:

  • Identify and examine specific import restrictions on US agriculture exports in the EU-27 and the UK that, if removed, would have the most productive benefit to US agriculture exports post-Brexit;
  • Identify the productive value of removing or liberalizing import restrictions on US exports in the UK verses the EU-27; and,
  • Identify potential strategic partners, in terms of WTO Members, in collectively bargaining with the EU-27 and the UK with respect to each product subject to TRQs and with respect to MFN tariff levels on all non-agricultural sectors.

 

Procurement                                                                          UK

This section explores possible designs for the UK’s post-Brexit government procurement regime. When the UK revokes the European Communities Act 1972 with the “Great Repeal Bill,” the UK no longer be bound by EU procurement directives or subject to the WTO Government Procurement Agreement (“GPA”), entered into by the EU on the UK’s behalf[126]—the basis of British procurement laws.

Granted the importance of procurement to the UK economy and British businesses’ cross-border integration, the UK most likely will modify its current EU-based procurement laws to merely remove EU references. However, the US should encourage the UK to accede, in its own right, to the GPA; and, should the UK join, the UK will be unable to roll-over the existing EU procurement coverage.

Introduction

Brexiteers criticized the EU’s rules governing procurement—or, the purchase of goods, services, and works by governments and state-owned enterprises[127]—arguing the European directives “add billions to the cost of government each year.”[128] Rather, not having to abide by EU procurement rules would save UK taxpayers £1.6 billion per year and rectify the 1.9 million days estimated lost by bureaucratic delays in finalizing contracts.[129]

Whether or not these predictions prove true, procurement does comprise a significant share of the British economy. Between 2013 and 2014, the UK public sector spent £242 billion on procurement, representing 33% of its total public sector spending[130] or 14.15% of gross domestic product (“GDP”).[131] This accords with the EU average: over 250,000 public authorities spend 14% of GDP procuring goods and services.[132] The UK, however, has captured a disproportionate share of large notices in the procurement of services, accounting for 84% of total value procured in awards over €100 million.[133]

            Currently—and until the UK completes its exit—EU directives and the WTO Government Procurement Agreement (“GPA”) govern British procurement. Rather than continue to subscribe to EU rules, UK legislators may choose to forge a new path, developing a procurement regime entirely outside of the EU and/or the WTO, or to structure procurement based on its post-Brexit relationship with the EU.

To situate these options, Section 1 describes the EU and GPA legal framework governing UK’s procurement laws. Then, following an analysis of the UK’s status vis-à-vis the GPA, Section 2 concludes that the UK is not itself a party to the GPA, and this section accordingly provides a brief overview of the accession process. Finally, Section 3 explores the UK’s possibilities to structure procurement laws with (or without) the EU. The US would have a strong interest in encouraging the UK to join the GPA—rather than the UK “going it alone.” Notwithstanding the UK’s GPA decision, continuing to adhere to European Communities directives on UK procurement would be most attractive to American (as well as British) businesses, by enhancing predictability and ensuring contractual adherence under already-known EU rules—even if the UK government’s current position is to entirely forego participation in the single market.

1.    The UK’s Current Procurement Obligations

Based on its EU membership, the UK’s procurement obligations derive from two sources: EU directives and the WTO GPA. This section outlines these commitments before assessing the UK’s post-Brexit options.

1.1. EU Directives and UK Regulations

            Under the EU system, directives are legislative acts that set out a binding a goal to be fulfilled by each party’s own laws.[134] The United Kingdom’s primary procurement regulations—the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016, and Concession Contracts Regulations 2016—all derive from EU procurement directives.[135] As part of the Europe 2020 strategy to promote “smart, sustainable and inclusive growth,” the EU adopted new directives to improve business conditions and increase efficient use of public funds.[136] The Public Contracts Directive (Directive 2014/24),[137] the Utilities Directive (Directive 2014/25),[138] and the Concessions Contracts Directive (Directive 2014/23)[139] entered into force in 2014. All three provide judicial recourse before the European Court of Justice (“ECJ”) as well as remedies for enumerated wrongs.[140] The ECJ’s rulings interpret various aspects of this procurement framework.

All three EU laws cover public-sector procurement, the processes, procedures, and standards aimed at leveling the playing field for businesses to bid on public sector contracts in EU member states. [Figure 2] While their coverage is broad, applying to almost any public body,[141] the European rules will govern only those contracts that meet or exceed a certain value threshold.[142] For tenders below the threshold, national law applies. Both the EU directives and member states’ laws embody the principles of transparency, non-discrimination, equal treatment, mutual recognition, and proportionality of the TFEU.[143]

So, too, do these principles underpin British procurement.[144] The EU directives have been formally incorporated into UK law through the Public Contracts Regulations 2015.[145] While the UK law essentially mirrors the EU directives, it goes further by supplementing, or “gold plating,” the EU rules to address UK-specific concerns, such as increasing access to contracts below EU thresholds.[146]

As the UK’s public procurement laws were passed through parliamentary legislation, procurement rules would only change if Parliament voted to do so—a point that will be further discussed in Section 2.

1.2. WTO Government Procurement Agreement

The UK expressed its commitment to remain a member of the WTO GPA. This plurilateral agreement has 19 parties, comprising 47 total countries (including the US), and 29 WTO Members have observer status in the Committee on Government Procurement.[147] The GPA, unlike the EU Directives or UK law, sets a baseline for procurement. As such, its rules are not comprehensive. It encompasses provisions related to: (1) national treatment and non-discrimination of Parties’ suppliers as to the procurement of covered goods and services; (2) transparent and competitive procurement processes; (3) transparent procurement information; modifications and rectifications of coverage commitments; (4) the application of WTO dispute settlement; (5) accession for additional WTO Members; and, (5) an agenda to improve the Agreement.[148]

Moreover, the GPA’s provisions only apply to certain procurement activities carried out by specified federal and sub-federal entities in that Member’s market access schedule of commitments.[149] Governments need not open all procurement, and they may exclude certain sensitive sectors, like defense.[150] The coverage of the GPA may be more limited than EU directives (and UK law), which cover defense procurement and private procurement. Nonetheless, market access opportunities from GPA accession are estimated to total approximately $1.7 trillion USD.[151]

 

2.   The UK’s Membership to the WTO Agreement on Government Procurement

The UK was an original party to the first international procurement agreement, the Tokyo Round Code on Government Procurement (“Code”), which entered into force in 1981.[152] However, the EU signed, on behalf of its Member States—including the UK—the WTO Agreement on Government Procurement (“GPA 1994”), which replaced the Code.[153] And, again, the EU, not the UK, acceded to the revised GPA (“GPA 2012”), which entered into force in 2014.[154]

            The EU, not the UK, is considered a “party” to both the GPA 1994 and the GPA 2012. Specifically, GPA 1994 provided that the Agreement “shall enter into force for those governments1 whose agreed coverage is contained in the Annexes of Appendix I . . . ,” where the term “government” is defined in a footnote to include “the competent authorities of the European Union.”[155] Appendix I lists the European Union “with regard to its 28 member states,” including the UK.[156] The argument that the UK is indeed a party to the GPA based on the international law principle of state succession is unavailing for the same reasons here, as discussed prior in Tariffs Section 3.2.

Following Brexit, the EU must act to remove the UK from the EU’s coverage schedules. Article XIX of GPA 2014 requires a member to notify other Parties of any modification commitments.[157] Previously, for each EU enlargement, the EU employed the process to add member states, most recently Croatia.[158] Provided Brexit is roughly the conceptual inverse of EU enlargement, the EU would be obliged to formally remove the UK from its coverage and “modify” its schedules. If a Party objects to a proposed modification of a coverage schedule, a modification cannot be made until the objection is removed or an arbitral panel determines removal inappropriate.[159] Otherwise, the proposed modification becomes effective after 45 days.[160]

Removal of the UK from the EU schedules will create a gap in the EU’s coverage, and the EU will be required to modify its market access commitments on the basis of reciprocity.[161] Alternatively, the EU would be obliged to compensate other GPA parties for this lost coverage.[162] The UK accounted for nearly a quarter of the value of all EU procurement contract awards between 2006 and 2010.[163] Adding to the lost coverage, the EU does not reciprocate access to non-EU bidders. The 2016 National Trade Estimate Report noted that while US suppliers participate in Member States’ procurement tenders, the lack of EU data renders a precise determination of the level of US and non-US participation difficult.[164] Yet a 2011 EU-commissioned report found US firms not established in the EU received only 0.016% of total EU procurement contracts.[165]As former U.S. Trade Representative Michael Froman noted, “European firms are actually granted access to twice the procurement opportunities in the U.S. as American firms are in the EU . . . .”[166] From the vantage of US bidders, the removal of the UK represents a 25% opportunity loss to win EU contracts. Therefore, putting pressure on this discrepancy may be worthwhile to promote American access to EU contracts as the EU modifies its schedules to remove the UK.

2.1. Procedure for the UK to Join the GPA

            All WTO Members are eligible to accede to the plurilateral GPA.[167] Procedurally, the process commences with a submission of interest to the Director-General of the WTO, who conveys that Member’s (“applicant’s”) intention to the Committee on Government Procurement (“Committee”).[168] The applicant must submit an offer that includes the entities and services to be covered by the GPA and other information on the scope of procurement pursuant to GPA Article I. [169] [Figure 4] Thereafter the applicant will hold consultations with the Parties; and, if requested by the applicant or any GPA Party, the Committee on Government Procurement will establish a working party to facilitate accession. The working party’s examination includes

(i) the coverage offer made by the applicant government[] and (ii) relevant information pertaining to export opportunities in the markets of the Parties, taking into account the existing and potential export capabilities of the applicant government and export opportunities for the Parties in the market of the applicant government.[170]

Following the Committee’s agreement to the terms of accession, the applicant may accede by depositing an instrument of accession with the Director-General of the WTO.[171] The GPA will enter into force for that new Party on the 30th day following the date of accession.[172]

2.2. The Shape of the UK’s Accession to the GPA

            Renegotiation will likely to lead to the UK’s own schedule. The UK cannot simply rollover current commitments, because certain elements are tied into EU-wide directives (e.g., subcentral coverage includes contracting authorities which are bodies governed by public law defined by the procurement directive). The UK would need to modify its schedule to remove references to EU directives; and, if it intends to limit coverage, the UK would be obliged to negotiate with other Members and seek approval. Above all, it is significant to note that the accession process to the GPA and resolving the UK’s membership terms at the WTO (e.g., its tariff schedules) are likely to be lengthy, meaning there may be a time delay wherein the UK is not a party to the GPA.

            Notwithstanding these difficulties, before the UK joins the GPA (and before its status at the WTO is determined), the British government will need to determine its relationship with the EU—whether it will enter the EEA, like Norway, pattern its GPA commitments after the EU, or eschew the Single Market entirely. As of now, the last option seems most likely.

3.   What Comes After Brexit? The UK’s Relationship with the EU

Post-Brexit UK government procurement legislation will be influenced not only by the UK’s accession to the WTO GPA but also through future trade arrangements with the EU. Prime Minister May clarified that the government will opt for a “comprehensive free-trade agreement” with the EU rather than remain a member of the Single Market.[173] If it is truly the UK’s intent to forego participation in the single market, be it through the European Economic Area (“EEA”) or the European Free Trade Association (“EFTA”), EU procurement law would no longer ground the UK’s procurement regime. Nonetheless, May pledged that while the “Great Repeal Bill” would revoke the European Communities Act of 1972 (which gives EU law and regulations direct effect), it would also convert existing EU law, along with European Court of Justice interpretations, into domestic legislation to provide some (at least initial) continuity.[174] That bill would necessarily swap out references to the EU regulations and its bodies for equivalent UK laws and institutional counterparts, to reflect that the UK is no longer an EU member. Yet before Parliament acts to reform procurement, the UK’s judiciary—not the ECJ—would determine the extent of the EU regulations’ “domestication” and thus applicability will bear on procurement for the first days of a newly independent UK.[175]

            What happens after is more uncertain. If the UK envisions a comprehensive free trade arrangement, but opts out of the single market, the government may still be required to domestically implement provisions that would, in some ways, be consistent with EU directives. The extent of harmonization may be politically contentious, provided the government seeks to “take back control” of Britain.[176] Alternatively, a future EU-27 and UK relationship may not cover procurement at all, meaning Parliament could consider which parts of the EU directives-based UK procurement laws to keep, amend, or entirely scrap.

Starting over entirely would be impractical and disadvantage UK businesses. Since indirect cross-border procurement accounts for 13.4% of contracts awarded by value, compared to direct cross-border contracts that represent 3.5% of contracts, a divergent UK procurement regime could bar UK subsidiaries from accessing the EU market.[177] Foreign contractors may not invest in the UK, provided its rules and especially if the UK were to impose “buy local” policies that are prohibited by the EU directives.[178]

Rather, streamlining and adding flexibilities to the current regime could be advantageous. For example, Professor Sue Arrowsmith suggested that the three EU directives be combined into one to mitigate confusion over which applies to procurement of mixed goods and services.[179] The UK could adopt the same approach.

            For American bidders, this ambiguity makes planning difficult. To the extent possible, the United States should encourage the UK to:

  • While unlikely, re-consider joining the single market, or, more likely retain, as closely as possible, its current EU-based procurement laws; or
  • To adopt a procurement regime supportive of domestic industry opportunities in the EU and of foreign direct investment by EU members and third-countries, like the US. 

 Anti-dumping and Countervailing Duty Orders       UK & EU

Of the three EU anti-dumping orders currently in place on American products, two account for UK producers in the injury determination and/or calculation of duties. Following Brexit, the UK cannot continue to impose duties without itself conducting an investigation and making a dumping determination, lest risk violating its WTO obligations. As to the EU, the US government, as well as its producers, would have a valid basis to challenge the post-Brexit maintenance of the two orders.

Introduction

As WTO Members, the UK and EU are bound both by GATT Article VI,[180] which lays down the basic anti-dumping rules, and the more expansive Agreement on Anti-dumping (“ADA”).[181] The ADA permits Members to unilaterally remedy dumping by imposing anti-dumping measures, where an imported product is determined “dumped” and the dumped imports cause or threaten “material injury” to domestic industry that produces a like product.[182] Typical anti-dumping measures include customs duties on the dumped imports from a particular source in excess of bound rates.[183] The EU Regulation 1225/2009 implements the ADA into binding EU law.[184] [Figure 5] The European Commission (“Commission” or “EC”) is charged with investigating allegations of dumping, making determinations, and imposing measures on behalf of all EU member states.

Following Brexit, the UK will neither be bound by EU anti-dumping law nor benefit from this unified system—although, as a WTO Member, WTO rules would continue to apply. The UK may develop its own trade remedy system and decide to impose equivalent measures to existing EU orders on third-country products, following its exit, only if the UK itself conducts a dumping investigation and makes an injury determination, as noted in Section 1. The UK cannot continue to collect EU-set anti-dumping duties.

            A more immediate and economically substantial concern to the US is the EU’s post-Brexit maintenance of anti-dumping measures on US products, the subject of Section 2. The ADA Article 16.4 obliges Members to biannually notify the Committee on Anti-dumping Practices (“ADP Committee”) of all anti-dumping actions taken and measures currently in force.[185] According to the last report, there are three definitive anti-dumping measures in force on US products. [Annex I]

But just two include United Kingdom producers in the injury determination and/or calculation of duties. Those measures are on (1) bioethanol and (2) grain-oriented flat-rolled products of electrical steel (“GOES”). Both cover products of significant US export interest, subject those exports to high duties, and will be imposed until at least 2018 and 2020. [Table 3.]

Because the European Union’s anti-dumping legislation builds on the ADA, there are two routes for the US, its producers or the government, to challenge existing orders—one within the framework of the EC (Section 2.1) and the other at the WTO (Section 2.2). The procedural aspects and legal bases to challenge these orders in both fora would also apply to any future orders imposed between now and the UK’s slated 2019 exit. However, the following discussion would pertain to the AD/CVD measure on bioethanol, only if the Commission—at the behest of producers or by self-initiation—conducts an “expiry review,” determines removal of the measure would likely lead to further dumping, and therefore extends the order on bioethanol beyond 2018.[186]

1.   UK – Post-Brexit Maintenance of EU Anti-Dumping Orders

In the immediate aftermath of Brexit, the UK would not be able to itself maintain any EU anti-dumping measures without violating WTO obligations. Article I to the ADA instructs Members that “[a]n anti-dumping measure shall only be applied only under the circumstances provided for in Article VI of GATT 1994 and pursuant to investigations instated and conducted in accordance with the provisions of this Agreement.”[187] As the EU, not the UK, conducted anti-dumping investigations to make a dumping determination and  impose anti-dumping remedies,[188] the UK could not continue to maintain EU anti-dumping measures without itself conducting an investigation and fulfilling the other procedural and substantive requirements of the ADA. Moreover, the UK would be unable to rely on the findings of the EU investigation, as the EU’s investigation concerned the EU as a whole, not the UK individually; accordingly, the UK would lack a basis for either a finding of dumping or a causal link of harm to the domestic British industry.

If the UK seeks to levy duties on “dumped” products, post-Brexit, it must develop its own anti-dumping regime, one that fully comports with WTO rules. For now, the UK lacks any trade defence legislation of its own.

2.   EU – Maintenance of Anti-Dumping Orders

2.1. Basis for Review by the European Commission

The UK’s exit would constitute substantially changed circumstances to merit review by the European Commission, either through its own self-initiation or by valid request. Specifically, under EU law, existing measures may be subject to review if either (1) the circumstances of the exporters have changed or (2) new exporting producers request an accelerated review.[189] An interim review may be either “full,” covering dumping, injury, and EC interest, or “partial,” covering part of the determination.[190]

If the Commission failed to review existing measures, US exporters, but not the US government, would have standing before the Commission to challenge these measures. The legal theory would largely track the US government’s, were the US government to bring a complaint before the WTO, detailed next.

2.2. Challenges to Existing EU AD/CVD Orders on Products Before the WTO

Following Brexit, the market size of the EU will diminish, meaning that (1) the initial dumping margin determination may be inflated and (2) the injury determination rendered invalid.

2.2.1.   Dumping Finding

As defined by GATT Article VI:1 and ADA Article 2.1, dumping occurs when a product is “introduced into the commerce of another country at less than its normal value.”[191] In other words, the normal value, or home-market price, of a product must exceed the export price, or US price, of the like product. Ordinarily normal value is “[t]he comparable price, in the ordinary course of trade, for the like product, when destined for consumption in the exporting country.”[192] The European Union anti-dumping regulation, reflecting this rule, further provides that the normal value is “based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country.”[193]

In the case of the GOES order, the Commission  “constructed” the normal value—meaning the price was determined based on the cost of production in the EU as well as a reasonable amount for administration, selling, general costs and profits of actual data pertaining to production and sales of the like product—and, for the remaining product types, established normal value based on EU-wide domestic prices.[194] Moreover, for the bioethanol order, UK producers contributed data that enabled the Commission’s calculation of a normal value prices. This led, in both cases, to a determination that American bioethanol and GOES were imported for less than normal value.[195] How much less, or the calculated dumping margin, necessarily changes when the EU-28 becomes EU-27.

Accordingly, the EU anti-dumping duties, added to normal customs duties, may reflect an inflated dumping margin, or the difference between the normal value and the price charged on the EU market. For example, in the case of GOES, an additional duty rate of 22% ad valorem tacks onto the EU rate. As the determination of normal value was based on the EU-28 market, the margin would necessarily change to the extent British traders contributed data. If the EU failed to correct anti-dumping orders on bioethanol and GOES, then the US would have a valid basis to challenge the continued maintenance of the EU’s duties.

2.2.2.   Injury Determination

Only dumping that causes or threatens injury to domestic industry may be subject to anti-dumping measures under GATT Article VI. Domestic industry comprises “domestic producers as a whole of like products” or “those of them whose collective output of the products constitutes a major proportion of the total domestic production.”[196] Moreover, ADA Article 3.1 requires any injury determination to be based on “positive evidence and involve objective examination of both (a) the volume of dumped imports and the effect of the dumped imports on prices in the domestic market for like products, and (b) the consequent impact of these imports on domestic producers of such products.”[197] In the case of both the bioethanol and GOES orders, the Commission determined the affected domestic industry to include UK producers of the “like” products. And, relatedly, the UK producers were included in the representative sample for Union injury. In the case of Bioethanol,

a definitive EU sample of six individual producers was ultimately selected based on representativity in terms of the production and sales volume of bioethanol during the [investigation period] and the geographical location of the producer. These producers located in Belgium, the Netherlands, France, UK, Sweden and Germany represent 36 % of the total estimated Union production and 44 % of the total production reported by the companies that submitted data for the selection of a sample. This sample was deemed to be representative for the examination of possible injury to the Union industry.[198]

Upon the UK’s exit, the determination of injury including those UK producers will no longer be a valid proxy for Union injury as a whole. As such, the order must be modified; otherwise, the US would have a basis to lodge a complaint for the measure’s inconsistency with ADA

 

 

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  1. Letters and Speeches

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Prime Minister Theresa May, Speech on the government’s negotiating objectives for exiting the EU (Jan. 17, 2017), available at https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech.

Secretary of State for International Trade, Rt. Hon Dr Liam Fox MP, Written Ministerial Statement on UK’s Commitments at the World Trade Organization (Dec, 5, 2016).

 

 

 

 

Annex 1

Current EU AD/CVD Orders on American Products

 

Anti-dumping Measures in Force and Notified to the WTO

Product, investigation ID number

Measure(s)

Date of original imposition

Date(s) of extension

Date of expiry

Inclusion of UK in determination?

Biodiesel AD531 US

 

Duties

10 July 2009

15 September 2015

16 September 2020

No

 

Bioethanol AD580 US

Duties

22 February 2013

 

23 February 2018

Yes

Grain-oriented flat-rolled products of electrical steel (GOES) AD608 US

Duties

30 October 2015

 

31 October 2020

Yes

 

Source: Semi-Annual Report Under Article 16.4 of the Agreement: European Union, Comm. on Anti-Dumping Prac., World Trade Org., G/ADP/N/286/EU (Oct. 7, 2016).

 

 

Definitive Countervailing Measures in Force and Notified to the WTO

Product, investigation ID number

Measure(s)

Date of original imposition

Date(s) of extension

Date of expiry

Inclusion of UK in determination?

Biodiesel AS532 US

Duties

10 July 2009

15 September 2015

16 September 2020

No

 

Source: Semi-Annual Report Under Article 25.11 of the Agreement: European Union, Comm. on Subsidies and Countervailing Measures, World Trade Org., G/SCM/N/298/EU (Apr. 8, 2016).

 

 

 

Annex 2

EU—TRQ for mutton and lamb

 

[1] Uptin Saiidi, The Brexit ballot wording wasn’t always so simple, CNBC, June 22, 2016, http://www.cnbc.com/2016/06/22/brexit-question-ballot-wording-framing.html.

[2] Consolidated Version of the Treaty on European Union, art. 50, 2012 O.J. C 326/13 [hereinafter TEU].

[3] Alex Hunt & Brian Wheeler, Brexit: All you need to know about the UK leaving the EU, BBC News, Apr. 25, 2017, http://www.bbc.com/news/uk-politics-32810887.

[4] TEU, art. 50(2)-(3).

[5] Steven Erlanger, Theresa May Calls for New Election in Britain, Seeking Stronger ‘Brexit’ Mandate, N.Y. Times, Apr. 18, 2017, https://www.nytimes.com/2017/04/18/world/europe/uk-theresa-may-general-election.html?_r=0.

[6] The “single market” refers to the EU as one territory, allowing the free movement of goods, services, money, and people between member states. See The European Single Market, Eur. Comm’n, https://ec.europa.eu/growth/single-market_en (last visited May 10, 2017).

[7] Kylie MacLellen & William James, Britain to leave EU market as May sets ‘hard Brexit’ course, Reuters, Jan. 17, 2017, http://www.reuters.com/article/us-britain-eu-may-priorities-idUSKBN1502H2.

[8] Id.

[9] Hunt & Wheeler, supra note 3.

[10] See letter from Theresa May, Prime Minister, United Kingdom of Great Britain and Northern Ireland, to Donald Tusk, President, European Council (Mar. 29, 2017), available at http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/29_03_17_article50.pdf.

[11] WTO Agreement: Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154 (1994) [hereinafter WTO Agreement].

[12] The UK was a contracting party to the GATT 1947. When it ratified the WTO Agreement on December 30, 1994, it acceded to that agreement and all accompanying agreements, listed in Annex 1. See WTO Agreement, n.1.

[13] Treaty on the Functioning of the European Union, arts. 2(1) and 3(1) [hereinafter TFEU]. The EU has exclusive competence over common commercial policy.

[14] General Agreement on Trade in Services, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 1869 U.N.T.S. 183 (1994) [hereinafter GATS].

[15] WTO chief says post-Brexit trade talks must start from scratch, The Guardian, Jun. 7, 2016, https://www.theguardian.com/business/2016/jun/07/wto-chief-brexit-trade-talks-start-scratch-eu-referendum.

[16] Shawn Donnan, WTO warns on tortuous Brexit trade talks, Fin. Times, May 25, 2016,

https://www.ft.com/content/745d0ea2-222d-11e6-9d4d-c11776a5124d.

[17] Lukas Mikelionis, 11 Countries Gearing Up to Strike Trade Deals With Britain, Heatstreet, Jun. 29, 2016, https://heatst.com/world/11-countries-gearing-up-to-strike-trade-deals-with-britain/.

[18] Hatty Collier, Brexit: Britain ‘scoping’ free trade deals in time to leave EU in January 2019, Evening Standard, July 17, 2016, http://www.standard.co.uk/news/politics/brexit-britain-scoping-free-trade-deals-in-time-to-leave-eu-in-january-2019-a3297621.html.

[19] This report focuses solely on the issues of schedules of commitments under the GATT, granted GATS schedules’ complexity.

[20] UK’s Commitments at the World Trade Organization, Written Ministerial Statement, Dec, 5, 2016, HCWS316, Secretary of State for International Trade, Rt. Hon Dr Liam Fox MP.

[21] The Impact of Brexit on EU Trade Relations, Van Bael & Bellis, at 5 (Jun. 24, 2016), available at, http://www.vbb.com/media/Insights/Memo_VBB_Brexit.PDF.

[22] This report also focuses on renegotiations with the UK.

[23] Michael Lux & Eric Pickett, The Brexit: Implications for the WTO, Free Trade Models and Customs Procedures, 12 Global Trade and Customs J. 95 (2017).

[24] The EU had to revise its commitments each time it added new members, first in 1995 (the year after the Uruguay Round ended, when it expanded to EU-15) and then in 2004 (to EU-25), in 2007 (to EU-27), and in 2013 (to the present EU-28). In 2004, the EU admitted Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia.

[25] Peter Ungphakorn, 12 years on, EU’s certified WTO goods commitments now up to date to 2004, Trade b Blog (Feb. 4, 2017), https://tradebetablog.wordpress.com/2017/02/04/after-12-years-eu-25-goods-commitments/.

[26] The newly certified EU-25 schedule only covers goods, not services. The latest certified EU schedules on services are EU-15. See also S/C/M/111 (Nov. 21, 2012).

[27] Situation of Schedules of Concessions in Goods: Renegotiations under GATT Article XXVIII, World Trade Org., https://www.wto.org/english/tratop_e/schedules_e/goods_schedules_table_e.htm#fnt-i (last visited May 12, 2017). The document, G/SECRET/35, shows that GATT Article XXIV:6 and XXVIII procedures for the enlargement to EU-28 have been initiated. Similarly, a number of documents used in negotiations for the EU’s enlargement to 27 members, the latest being G/SECRET/32, indicates that GATT Article XXIV:6 and XXVIII procedures for the enlargement to EU-27 are underway.

[28] Procedures for Modification and Rectification of Schedules of Tariff Concessions (“Procedures for Modification and Rectification of Schedules”), Decision of Mar. 26, 1980, L/4962, BISD 27S/25 (emphasis added).

[29] Procedures for Negotiations under Article XXVIII, Guidelines of Nov.10, 1980, C/113 and Corr. 1, BISD 27S/26-29 (emphasis added).

[30] WTO Secretariat, A Handbook on Reading WTO Goods and Services Schedules 17 (2009).

[31] TFEU, art. 207(1).

[32] Gross domestic product at market prices, Eurostat, http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=0&language=en&pcode=tec00001. The 2016 GDP of the EU and the three EU States in euros are as follows: EU (€14,820,476 million); Bulgaria (€47,364 million); Croatia (€45,557 million); and Romania (€169,578).

[33] Peter Ungphakorn, Questions on Brexit, agriculture, WTO schedules, standards, free trade agreements, Trade b Blog (Feb. 9, 2017), https://tradebetablog.wordpress.com/2017/02/09/questions-on-brexit-agriculture-wto-schedules-standards-free-trade-agreements/.

[34] Panel Report, European Union — Measures Affecting Tariff Concessions on Certain Poultry Meat Products, WT/DS492/R (Mar. 28, 2017) [hereinafter  EU — Poultry Meat (China)].

[35] Id., at para. 7.496.

[36] Id., at para. 7.551 (emphasis added).

[37] Luis González García, Brexit: Challenges for the UK in negotiating an FTA with the EU (a trade negotiator’s perspective), Matrix Chambers (Aug. 2, 2016), https://www.matrixlaw.co.uk/resource/brexit-challenges-uk-negotiating-fta-eu-trade-negotiators-perspective-luis-gonzalez-garcia/.

[38] GATT, art XXIV:6.

[39] This report, as noted above in Tariffs Section Introduction, focuses on the issue of establishing the UK’s new tariff schedules.

[40] Anwarul Hoda, Tariff Negotiations and Renegotiations under the GATT and the WTO — Procedures and Practices 11 (2001).

[41] Roderick Abbott, The trade consequences of Brexit, Eur. Centre for Int’l Pol. Ec. (Dec. 2016), http://ecipe.org/publications/trade-consequences-brexit/#_ftnref3.

[42] There are four legal texts that inform the procedures laid out in Article XXVIII: (1) Interpretative Note Ad Article XXVIII from Annex I; (2) Understanding on the Interpretation of Article XXVIII; (3) Procedures for Negotiations under Article XXVIII; and (4) Procedures for Modification and Rectification of Schedules of Tariff Concessions. Documents (3) and (4) were adopted in 1980 in the context of the GATT 1947.

[43] GATT, art. XXVIII.

[44] Hoda, supra note 40, at 15.

[45] 2 GATT Analytical Index — Guide to GATT Law and Practice 954 (1995) [hereinafter GATT Analytical Index].

[46] Hoda, supra note 40, at 88. During the year 1958 to 1994, GATT Article XXVIII:1 has been invoked 41 times, Article XXVIII:4 40 times, and Article XXVIII:5 117 times. The relative flexibility in the use of Article XXVIII:5 induced a gradual shift to this provision. 

[47] GATT, art. XXVIII:4(c)-(d).

[48] Hoda, supra note 40, at 16.

[49] GATT, art. XXVIII:4(d).

[50] There are two time limits to be respected: first, the retaliatory withdrawal must take place within six months of the modification of the concession; and second, a 30-day period should be allowed after notification by the retaliating Member.

[51] Procedures for Negotiations under Article XXVIII, supra note 29.

[52] GATT Analytical Index, supra note 45, at 960.

[53] Procedures for Negotiations under Article XXVIII, supra note 29.

[54] The UK’s new tariff schedules can be certified only if there are no objections by other WTO Members and it is likely, given the politically contentious nature of Brexit, a Member would object.

[55] TFEU, art. 50(3).

[56] TFEU, arts. 3(1)(e), 207(1).

[57] James Blitz & Shawn Donnan, Liam Fox Opens Talks with WTO over Terms of Membership, Fin. Times, Dec. 5, 2016, https://www.ft.com/content/97d1c8ce-bb0b-11e6-8b45-b8b81dd5d080.

[58] Collier, supra note 18.

[59] There have been three major EU Enlargements since 2004. In 2004, in the EU’s biggest-ever enlargement, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia became member states. Three years later, in 2007, Bulgaria and Romania joined. Croatia joined the EU on 1 July 2013, bringing the total number up to the now-current 28 members.

[60] Geoff Raby, The EU’s Ambiguous Legal Position in the WTO Reduces the Uncertainty over Britain’s Post-Brexit Trading Relationships, Pol’y Exchange (Nov. 19, 2016), https://policyexchange.org.uk/the-eus-ambiguous-legal-position-in-the-wto-reduces-the-uncertainty-over-britains-post-brexit-trading-relationships/.

[61] Hoda, supra note 40, at 101.

[62] Id.

[63] Id.

[64] Hoda, supra note 40, at 101; The next major renegotiations under Article XXIV:6 took place when the EEC expanded from six to nine member states in 1973. After the EEC opened the process of renegotiations, it concluded bilateral agreements with 12 GATT Contracting Parties including Australia, Brazil, Canada, Poland and US.

[65] On their part, the EEC and the member states affirmed their assessment that they had fully compensated the contracting party concerned and in the event of any withdrawal by the latter they too reserved the right to withdraw concessions to achieve reciprocal balance. Id.

[66] Hoda, supra note 40, at 105.

[67] Id.

[68] GATT, art. XXVIII:4(d).

[69] Czech Republic and Slovak Republic accede to the GATT, GATT/1573, Apr. 16, 1993, available at https://www.wto.org/gatt_docs/English/SULPDF/91690160.pdf.

[70] Aakanksha Mishra, A Post Brexit UK in the WTO: The UK’s New GATT Tariff Schedule, in Legal Aspects of Brexit 12 (Jennifer Hillman & Gary Horlick eds., 2017).

[71] Lorand Bartels, Understanding the UK’s Position in the WTO after Brexit (Part I – The UK’s status and its schedules), Int’L Ctr. for Trade and Sustainable Dev. (Sept. 26, 2016),  http://www.ictsd.org/opinion/understanding-the-uk.

[72] Vienna Convention on the Succession of States in Respect of Treaties of 1978, art. 2(1)(b), 1946 UNTS 3 (1978).

[73] Mishra, supra note 70, at 12.

[74] The Federal Constitutional Court of Germany, BVerfG, Judgment of the Second Senate of Jun. 30, 2009 - 2 BvE 2/08, available at http://www.bverfg.de/e/es20090630_2bve000208en.html.

[75] Secretary of State for International Trade, supra note 20.

[76] Peter Ungphakorn, Oranges: a litmus test of UK post-Brexit tariff negotiations, Trade b Blog (Sept. 10, 2016), https://tradebetablog.wordpress.com/2016/09/10/oranges-litmus-test/#euorange.

[77] Procedures for Modification and Rectification of Schedules, supra note 28.

[78] For the sake of analysis, let’s assume that the EU-28 TRQs are 100 before Brexit. If the UK simply replicates the EU’s, it would be: EU-27:100; and UK: 100. This would be beneficial to US exporters, because this significantly increases market access to the UK, while keeping the existing EU’s

[79] Unlike Section 4 where the focus was on the UK, this part covers potential claims against both the UK and the EU.

[80] EU —Poultry Meat (China), supra note 33, at para.7.538.

[81] Paragraph 2 of the Procedures for Modification and Rectification of Schedules reads:

Changes in the authentic texts of Schedules shall be made when amendments or rearrangements which do not alter the scope of a concession are introduced in national customs tariffs in respect of bound items. Such changes and other rectifications of a purely formal character shall be made by means of Certifications.

[82] The Select Committee on the European Union, House of Lords, Written evidence by Peter Ungphakorn, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-external-affairs-subcommittee/brexit-future-trade-between-the-uk-and-the-eu/written/39818.html.

[83] Id.

[84] Peter Ungphakorn, Six things I’ve learnt since the Brexit referendum: seeing both the wood and the trees, Trade b Blog (Jan, 9, 2017), https://tradebetablog.wordpress.com/2017/01/09/six-things-since-referendum/.

[85] Raoul Ruparel, Priorities for the new Department for International Trade post-Brexit, Open Eur. (Jul. 27, 2016), http://openeurope.org.uk/today/blog/priorities-for-the-new-department-for-international-trade-post-brexit/.

[86] Panel Report, Japan — Measures Affecting Consumer Photographic Film and Paper, para. 10.82, WT/DS44/R (Mar.31, 1998) [hereinafter  JapanFilm].

[87] Lux & Pickett, supra note 23, at 100. 

[88] House of Lords, European Union Committee, Brexit: Trade in Goods, 16th Report of Session 2016–17.

[89] Id.; see also What might Brexit mean for UK trade in agricultural products? (Ag. and Horticulture Dev. Board, 2016), availavle at http://www.ahdb.org.uk/documents/Horizon_Brexit_Analysis_Report-Oct2016.pdf.

[90] Id.

[91]Appellate Body Report, Regime for the Importation, Sale and Distribution of Bananas III, para. 155, WT/DS27/AB/R, 25 September 1997.

[92] Tariff quotas, WTO glossary (2017). This is an exception to GATT Article XI:1 generally prohibiting “a direct restriction on the quantity of some goods that may be imported.”

[93] Such levels are otherwise and more generally prohibited under GATT Article XVI (as amended in 1955).

[94] Limits on TRQs and AMS levels are provided through internal reference of the AoA to Articles 3.1, 4.1, and 6.1 of the WTO Agreement.

[95] The legal bases for new WTO TRQ schedules are set forth in the following authorities: (1) GATT Article XXVIII; (2) GATT Contracting Parties, Procedures for Modification and Rectification of Schedules of Tariff Concessions, Decision of 26 Mar. 1980 L/4962; (3) Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/RW/ECU, adopted 6 May 1999.

[96] Tariff Act of 1930, 19 U.S.C. §1332(g) [hereinafter, “Section 332 Investigation”].

[97]The path to Brexit, The Economist Intelligence Unit, http://country.eiu.com/article.aspx?articleid=275047811 (last visited Feb 28, 2017).

[98] Id.

[99] See Written evidence by Peter Ungphakorn, supra note 82 (listing TRQ commitments in an annex).

[100] The EU “applied zero or minimal duty to 775 lines out of the total 1 764. Only 8% of the tariff lines have a customs duty in excess of 50%.” WTO Agreement on Agriculture | EU Fact Sheets, Eur. Parliament, available at: http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_5.2.7.html (last visited May 20, 2017)

[101] Harry de Gorter & Ian M. Sheldon, Issues in the Administration of Tariff-Rate Import Quotas in the Agreement on Agriculture in the WTO: An Introduction, 29 Ag. and Res. Ec. Rev. 54, 54-57 (2000).

[102]EU-28 Exports to the UK, Resource Trade Earth, available at https://resourcetrade.earth/data?year=2015&importer=826&category=1&units=value (last visited May 20, 2017).

[103] Note that these methods somewhat reformulate the very non-tariff barriers (“NTBs”) – e.g., quotas, licenses, and “health” measures – existing in “disarray” as exceptions to the GATT system the AoA was meant to reform. In an effort to reform such barriers through tariffs, i.e., “tariffication,” the AoA contemplates that TRQs would function (albeit, temporarily) to relieve political pressure from local agriculture interests. However, the negotiations the AoA intended to subsequently remove the TRQs ultimately broke-down in the 2000s and remain defunct. Agreement on Agriculture in The Princeton Encyclopedia of the World Economy (2010).

[104] Gorter & Sheldon, supra note 101.

[105] See EU – Poultry Meat (China).

[106] UK’s Commitments at the World Trade Organization, supra note 20.

[107] See Annex 2 for the EU’s current TRQ for mutton and lamb.

[108] The “reference period applied for [European Economic Community] purpose of allocating quota shares, i.e., the previous three years – was consistent with its obligations under GATT Article XIII.” Panel Report, EEC – Restrictions on Imports of Dessert Apples – Complaint by Chile, L/5047 (Nov. 10 1980) at para. 4.17.

[109] EU and UK Import Data (2015), Resource Trade Earth, www.resourcetrade.earth (last visited on May 29, 2017).

[110] See Annex 2 for further details on the TRQ currently in place for lamb and goat meat in the EU.

[111] Id.

[112] Chris Downes, The Post-Brexit Management of EU Agricultural Tariff Rate Quotas (2016), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2874371.

[113] Another example could be the mutual inclusion of the EU-27 or UK in the historical importer approach that would displace the access of US exports regardless of the ratio the two select following Brexit.

[114] See Footnote 34 supra.

[115] Transaction costs include those of “acquiring information, bargaining, mediation, and law and contract enforcement.” Transaction Cost, Encyclopedia of World Trade: From Ancient Times to the Present, available at, http://0-search.credoreference.com.gull.georgetown.edu/content/entry/sharpewt/transactions_costs/0?searchId=72026d41-3b7a-11e7-81aa-0aea1e3b2a47&result=6 (last accessed May 17, 2017).

[116] See EU – Poultry Meat China, White and Case, https://www.whitecase.com/publications/alert/eu-poultry-meat-china (last visited May 29, 2017).

[117] Id.

[118] Id.

[119] Clemens Boonekamp, Alternative Thinking: Out of the box for Brexit – and radically, Feb. 12, 2017, Trade β Blog, https://tradebetablog.wordpress.com/2017/02/.

[120] Chancellor Philip Hammond guarantees EU funding beyond date UK leaves the EU, Aug. 13, 2016 Gov.UK, https://www.gov.uk/government/news/chancellor-philip-hammond-guarantees-eu-funding-beyond-date-uk-leaves-the-eu.

[121] Id.

[122] The EU’s AMS Final Bound Limit of €72.4 billion far exceeds the €5.899 billion declared granted to agricultural producers. See Alan Swinbank, World Trade Rules and the Policy Options for British Agriculture Post-Brexit, The UK Pol’y Observatory (Jan. 2017).

[123] Peter Ungphakorn, Brexit, agriculture, the WTO, and uncertainty, Trade β Blog, Oct. 22, 2016, https://tradebetablog.wordpress.com/2016/10/22/brexit-ag-wto-answers/.

[124] UK exports of Agriculture Products to the EU-28, Resource Earth, available at https://resourcetrade.earth/data?year=2015&exporter=826&importer=eu28&category=1&units=value (last visited May 17, 2017).

[125] In that event, the EU would retain the entire entitlement, leaving a zero share for the UK, the UK would rely on de minimis provisions of the AoA.

[126] The EU has also entered into preferential trading agreements, also on behalf of the UK, which include government procurement provisions. However, these bilateral and plurilateral commitments fall outside the scope of this report.

[127] Public Procurement, OECD, http://www.oecd.org/gov/ethics/public-procurement.htm (last visited Feb. 20, 2017); see also WTO and government procurement, World Trade Org.,

https://www.wto.org/english/tratop_e/gproc_e/gproc_e.htm (last visited Feb. 20, 2017).

[128] Heather Stewart, Vote Leave: EU rules add almost 1.7bn to costs of Whitehall contracts, The Guardian, May 25, 2016, https://www.theguardian.com/politics/2016/may/26/vote-leave-eu-rules-add-almost-2bn-costs-whitehall-contracts (quoting justice secretary and “Leave” campaigner Michael Gove).

[129] Quitting EU would save ‘billions’ in procurement costs, BBC News, May 26, 2016, http://www.bbc.com/news/uk-politics-eu-referendum-36382197.

[130] Kamala Dawar, Brexit and Government Procurement 1-2 (Univ. Sussex, Working Paper 2017), available at http://sro.sussex.ac.uk/67065/3/Final%20March%2010%20K%20Dawar%20UKTPO%20Briefing%20Paper%20on%20PP%20and%20Brexit.pdf.

[131] Government at a Glance – 2015 edition: Public Procurement, OECD Stat.,

https://stats.oecd.org/Index.aspx?DataSetCode=GOV_2015# (last visited Feb. 20, 2017).

[132] Public Procurement, Eur. Comm’n (Feb. 20, 2017), https://ec.europa.eu/growth/single-market/public-procurement_en.

[133] Albert Sanchez Graells, Written Evidence for UK Parliament (TAS0083) (Dec. 2016), http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-internal-marketsubcommittee/brexit-future-trade-between-the-uk-and-the-eu-in-services/written/44483.pdf.

[134] Cf. Regulations, Directive and other acts, Eur. Union (Feb. 23, 2017), https://europa.eu/european-union/eu-law/legal-acts_en (“A ‘directive’ is legislative act that sets out a goal that all EU countries must achieve. However, it is up to the individual countries to devise their own laws on how to reach those goals.”).

[135] Cf. Sue Arrowsmith, The implications of Brexit on the law for public and utilities procurement, Achilles, at 12 (2016), available at https://www.achilles.com/images/locale/en-EN/buyer/pdf/UK/sue-arrowsmith-brexit-whitepaper.pdf.

[136] European Commission, Green Paper on the modernization of EU public procurement policy Towards a more efficient European Procurement Market 3-4 (2011), available at

http://ec.europa.eu/internal_market/consultations/docs/2011/public_procurement/20110127_COM_en.pdf

[137] European Parliament and Council Directive 2014/24/EC, 2014 O.J. (L 94) 65-242 [hereinafter Public Contracts Directive].

[138] European Parliament and Council Directive 2014/25/EC, 2014 O.J. (L 94) 114-240 [hereinafter Utilities Directive].

[139] European Parliament and Council Directive 2014/26/EC, 2014 O.J. (L 94) 1-64 [hereinafter Concessions Contracts Directive].

[140] See, e.g., Case law, Eur. Comm’n (June 8, 2016), http://ec.europa.eu/environment/gpp/case_law_en.htm.

[141] The Public Contracts Directive applies to “the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or one of several of such bodies governed by public law.” Public Contracts Directive art. 2(1).

[142] The Concessions Directive operates only for works or services that exceed €5,225,000 in value. See generally Thresholds, Eur. Comm’n (Mar. 29, 2017), https://ec.europa.eu/growth/single-market/public-procurement/rules-implementation/thresholds_en.

[143] A Brief Guide to the 2014 EU Public Procurement Directives, Crown Commercial Serv., at 2 (Oct. 2011), available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/560261/Brief_Guide_to_the_2014_Directives_Oct_16.pdf.

[144] Public procurement policy, UK.gov (Feb. 8, 2017), https://www.gov.uk/guidance/public-sector-procurement-policy.

[145] The Public Contracts Regulations, 2015, S.I. 102, (U.K.).

[146] For example, the UK has specific procurement regulations that guide the purchase of healthcare services by the National Health Service. See Ruth Smith & Tom Benjamin, Plus Ça Change, 5 Reasons Why Brexit is Unlikely to Spell the End of Procurement Regulation in the UK,  Mills & Reeve, Feb. 24, 2016, http://www.procurementportal.com/blog/blog.aspx?entry=480; see also Public procurement policy, supra note 107.

[147] Agreement on Government Procurement, World Trade Org.,

https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm#accession (last visited Feb. 20, 2017).

[148] General overview of WTO work on government procurement, World Trade Org.,

https://www.wto.org/english/tratop_e/gproc_e/overview_e.htm (last visited Feb. 22, 2017).

[149] See generally GPA (2012).

[150] Briefing note: the WTO’s Government Procurement Agreement, World Trade Org., https://www.wto.org/english/thewto_e/minist_e/mc9_e/brief_gproc_e.htm (last visited Mar. 29, 2017).

[151] Agreement on Government Procurement, World Trade Org.,

https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm (last visited Feb. 20, 2017).

[152] Id.; see also, Agreement on Government Procurement, Apr. 15, 1994, 1915 U.N.T.S. 103 [hereinafter GPA 1994].

[153]General overview of WTO work on government procurement, World Trade Org.,

https://www.wto.org/english/tratop_e/gproc_e/overview_e.htm (last visited Feb. 20, 2017).

[154] Agreement on Government Procurement, supra note ?; see also Revised Agreement on Government Procurement, Annex to the Protocol Amending the Agreement on Government Procurement, Mar. 30, 2012 [hereinafter GPA 2012].

[155] GPA (2012) art. XXII:1. The European Communities signed the original GPA 1994 on December 30, 1994, as did four other European countries—Belgium, Finland, France, and Luxemburg—on or soon after that date. GPA 1994, n.2, available at https://treaties.un.org/doc/Publication/UNTS/Volume%201915/volume-1915-I-31874-English.pdf.

[156] GPA’s rules apply to the procurement of governments for each party listed in its Appendices.

[157] Paragraph 1 details the required notification procedure:

A Party shall notify the Committee of any proposed rectification, transfer of an entity from one annex to another, withdrawal of an entity or other modification of its annexes to Appendix I (any of which is hereinafter referred to as “modification”).  The Party proposing the modification (hereinafter referred to as “modifying Party”) shall include in the notification:

    1. for any proposed withdrawal of an entity from its annexes to Appendix I in exercise of its rights on the grounds that government control or influence over the entity’s covered procurement has been effectively eliminated, evidence of such elimination; or
    2. for any other proposed modification, information as to the likely consequences of the change for the mutually agreed coverage provided for in this Agreement.

GPA (2012) art. XIX:1.

[158] Croatia becomes 43rd member of the Government Procurement Agreement as it joins the EU, World Trade Org., June 27, 2013, https://www.wto.org/english/news_e/news13_e/gpro_27jun13_e.htm.

[159] Decision on Arbitration Procedures Pursuant to Article XIX:8 of the Revised GPA, Comm. on Gov’t Procurement, World Trade Org., GPA/139 (June 23, 2016).

[160] GPA (2012) art. XIX:2.

[161] Cf. Dawar, supra note 93, at 3.

[162] Id.

[163] See Public procurement in Europe: Cost and effectiveness, study prepared for the Eur. Comm’n by PwC, London Economics, and Ecorys, March 2011, at 29, available at

http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/cost-effectiveness_en.pdf.

[164] United States Trade Rep., The 2016 National Trade Estimate Report 171 (2016), available at

https://ustr.gov/sites/default/files/2016-NTE-Report-FINAL.pdf.

[165] Id.

[166] Victoria Guida, TTIP services offers in focus, Politico, Apr. 25, 2016,

http://www.politico.com/tipsheets/morning-trade/2016/04/ttip-services-offers-in-focus-obama-makes-ttip-case-in-eu-but-us-isnt-sure-either-us-senators-dont-let-eu-off-the-hook-on-ag-213934.

[167] GPA (1994) art. XXIV; see also Decisions on Procedural Matters Under the Agreement on Government Procurement (1994), Annex 2, Comm. on Gov’t Procurement, GPA/1 (March 5, 1996), at 3.

[168] Decisions on Procedural Matters Under the Agreement on Government Procurement (1994), supra note 130, at 3.

[169] Id.

[170] Id.

[171] Id.

[172] Agreement on Government Procurement (1994) art. XXIV; see also GPA (2012) art. XXII.

[173] Prime Minister Theresa May, Speech on the government’s negotiating objectives for exiting the EU (Jan. 17, 2017), available at https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech.

[174] Brexit – State aid and public procurement law update, Eversheds Sutherland (Jan. 1, 2017), http://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/Public_Procurement/brexit_state_aid_public_procurement_update190117.

[175] While British courts may not be bound by ECJ precedent, the UK and EU’s homologous procurement regimes suggests judges would find the European rulings persuasive and aid interpretation of the British rules.

[176] See, e.g., Taking back control from Brussels, Vote Leave Take Control, http://www.voteleavetakecontrol.org/briefing_control.html (last visited Mar. 29, 2017).

[177] Final Report: Cross-Border Procurement Above EU Thresholds 36 (Eur. Comm’n 2011).

[178] Albert Sanchez-Graells, Additional Thoughts on Brexit and Public Procurement, How to Crack an Nut (Nov. 30, 2016), http://www.howtocrackanut.com/blog/2016/11/30/brexit-and-public-procurement-some-thoughts-after-kcl-seminar.

[179] See Sue Arrowsmith, Modernising the EU’s Public Procurement Regime: a Blueprint for Real Simplicity and Flexibility, 21 Pub. Procurement L. Rev. 71 (2012).

[180] GATT art. VI.

[181] Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, art. 16.4, Apr. 15, 1994, 1868 U.N.T.S. 201 [hereinafter ADA].

[182] Id.

[183] Id.

[184] Regulations are binding law on all Member States. Cf. Regulations, Directive and other acts, supra note 97. Therefore, the EU Anti-Dumping Regulation controls. Council Regulation, Protection Against Dumped Imports From Countries not Members of the European Community, 1225/2009, 2009 O.J. (I. 343/51).

[185] See generally ADA.

[186] Reviews, Eur. Comm’n, http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_151016.pdf (last visited Mar. 27, 2017).

[187] ADA art. 1 (emphasis added).

[188] See European Parliament and Council Regulation 2016/1036/EC, 2016 O.J. (L 345) 176-21 [hereinafter EU Anti-Dumping Regulation].

[189] Reviews, supra note 149.

[190] Id.

[191] ADA art. 2.1; see also GATT art. VI:1.

[192] ADA, art. 2.1.

[193] EU Anti-dumping Regulation, art. 2(1).

[194] Council Implementing Regulation No. 2015/763, art. 3.1.1(40) & art. 3.6.1(107), 2015 O.J. (L. 120) 10 (“Normal value was constructed by adding the following to the average cost of production of the like product of each cooperating exporting producer during the investigation period: (a) the weighted averages selling, general, and administration (‘SG&A’) expenses . . . (b) the weighted average profit realised by each cooperating exporting producer on domestic sales of the like product . . .”); see also ADA, art. 2.2.2; EU Anti-dumping Regulation, art. 2(2).

[195] Compare ADA, art. 2.1 (Normal value is “[t]he comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.”) with Council Implementing Regulation No. 2015/1953, 2015 O.J. (L. 284) 109-39 ([hereinafter Definitive Measure on GOES] and Council Implementing Regulation No. 157/2013, 2013 O.J. (L 49) 10-28 [hereinafter Definitive Measure on Bioethanol].

[196] ADA art. 4.1.

[197] ADA art. 3.1.

[198] Definitive Measure on Bioethanol, ¶ 20.