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Some important trade-related aspects of the EU–UK TCA:  A brief comparison with the EU’s four freedoms and WTO rules (Part I)

Some important trade-related aspects of the EU–UK TCA: A brief comparison with the EU’s four freedoms and WTO rules (Part I)

The post-Brexit EU-UK Trade and Cooperation Agreement. A comparison of the most important trade-related aspects with the EU’s four freedoms and WTO obligations.

Negotiations on the EU–UK Trade and Cooperation Agreement (TCA) were eventually concluded by the end of the Brexit transition period. This agreement sets out some important arrangements for the post-Brexit trading relationship. But how does this new relationship differ from the old one with respect to the four freedoms under EU law? Moreover, as a free trade agreement (FTA) established in conformity with WTO exceptions, how progressive is the EU–UK TCA in comparison with basic rules of the WTO? This post briefly compares some important trade-related aspects of this agreement with the EU’s four freedoms and WTO obligations. The EU–Canada Comprehensive Economic and Trade Agreement (CETA) is also discussed by way of comparison. It shows that many WTO-plus commitments in the TCA towards liberalising market access for goods and services are in line with current EU practice with other third countries. Although the TCA includes the most progressive commitments that the EU has ever made in FTAs, new trade barriers are nevertheless created which are otherwise prohibited under EU law.

Free movement of goods

Customs duties

One obvious fiscal barrier to trade is duties on imports or exports. Under WTO law, members have generally committed to reducing import tariffs, and a few of them have also committed to restricting the use of export duties. In comparison, the CETA, which abolishes tariffs on most goods, and the EU–UK TCA, which prohibits tariffs on all products, have gone one step further. Similar to the WTO approach, however, these CETA and TCA obligations are subject to various exceptions as, for instance, some major WTO exceptions are directly incorporated into these agreements. In contrast, EU law absolutely prohibits tariffs with no exceptions.

Discriminatory taxation

Another major fiscal restriction on trade is internal taxes that discriminate against foreign products. This practice is generally prohibited under WTO law with some exceptions. This WTO approach is largely followed by the CETA and the EU–UK TCA, both of which affirm the WTO obligations as well as some major exceptions. In contrast, discriminatory taxation is prohibited under EU law with no statutory exceptions.

Quantitative restrictions

Unlike fiscal restrictions, quantitative restrictions, such as import/export quotas or bans, specifically limit the volume of trade. These measures are generally prohibited under WTO law with various exceptions. For instance, while the General Agreement on Tariffs and Trade (GATT) Article XI prohibits quantitative restrictions on imports and exports, it specifically allows members to temporarily impose quantitative restrictions for the purpose of preventing critical shortages of foodstuffs. Some major WTO exceptions together with the general ban on quantitative restrictions are directly incorporated into the CETA and the EU–UK TCA. In a similar manner, EU law also provides exceptions to the general prohibition on quantitative restrictions, though the EU approach arguably provides fewer exceptions, in comparison with those in the EU–UK TCA, the CETA, and WTO law.

Measures having an equivalent effect to quantitative restrictions (MEQRs)

MEQRs indirectly concern the quantity or the number of products that may be imported or exported. EU law generally prohibits MEQRs unless they are imposed to achieve legitimate objectives. There is, however, no equivalent concept of MEQRs under WTO law. When it comes to border measures, MEQRs that set an inexplicit numerical ceiling would be prohibited by GATT Article XI. When it comes to internal measures, MEQRs that distinguish between foreign and domestic products would be caught by GATT Article III. Moreover, certain indistinctly applicable MEQRs based on process and production methods that fall outside the scope of GATT Article III would be prohibited by GATT Article XI. That being said, however, WTO law might not cover all MERQs. Largely following the WTO approach, the EU–UK TCA and the CETA explicitly affirm the WTO commitments to prohibit discrimination and quantitative restrictions together with some major exceptions. As a result, these FTAs might not cover all MEQRs.

Technical Barriers to Trade (TBT)/Sanitary and phytosanitary (SPS) measures

Divergent technical requirements (e.g. product standards or testing requirements) or SPS measures (e.g. specific treatment or processing of products) may create unnecessary barriers to trade. One typical EU approach is to develop common rules in order to create harmonised sectors. In non-harmonised sectors, the general ban on MEQRs and the principal of mutual recognition apply. According to these requirements, divergent rules need to be justified by legitimate public policy aims. Thus, under EU law, the trade-restrictive divergence in technical requirements or SPS measures should be either harmonised or justified. In comparison, WTO law only has limited elements of mutual recognition and harmonisation. For instance, Article 6.1 of the TBT Agreement requires WTO members to accept the results of different conformity assessment procedures under certain circumstances. Article 3 of the SPS Agreement and Article 6.1 of the TBT Agreement encourage members to harmonise SPS measures and technical requirements based on international standards. While the EU–UK TCA and the CETA largely follow the WTO approach by generally affirming the commitments under the SPS Agreement and the TBT Agreement, they also have WTO-plus aspects including, for instance, detailed transparency provisions as well as annexes in respect of regulatory convergence.

EU

CETA

EU-UK TCA

WTO

I. Free movement of goods

Tariffs

absolutely prohibited
(no exceptions)

generally prohibited

generally prohibited

generally reduced

Discriminatory taxation

generally prohibited
(no statutory exceptions)

generally prohibited
(affirming WTO rules)

generally prohibited

Quantitative restrictions (QRs)

generally prohibited
(arguably including fewer exceptions)

Measures having an equivalent effect to quantitative restrictions (MEQRs)

generally prohibited

WTO law might not cover all MERQs

Technical Barriers to Trade (TBT)

harmonised sectors are subject to common rules

non-harmonised sectors are subject to the principle of mutual recognition

limited elements of mutual recognition and harmonisation

some WTO-plus aspects including detailed transparency provisions and annexes in respect of regulatory convergence

limited elements of mutual recognition and harmonisation

Sanitary and Phytosanitary Measures (SPS)

The issues of free movement of services, free movement of workers, and free movement of capital are discussed in Part II of this blog post.

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