Brexit jargon: What is a Tariff Rate Quota and how does it work?

Tariff Rate Quota (TRQ) is a technical term that is used by countries involved in trade negotiations.

A TRQ means that when one country engages in a trade agreement with another, provision is made for the host country to manage access.

It subsequently creates access to the market but the access is not free.

Trading goods

Speaking to AgriLand, economist and research officer with Teagasc, Dr. Kevin Hanrahan, said a TRQ was a statement to trading partners that allowed one partner to provide the other partner with ‘X’ amount of tonnes of produce, but that goods provided below the quota “would be subject to a tariff”.

Hanrahan says there are two types of TRQ. One is open to all interested parties; the other is known as a bilateral (historical) TRQ.

He then went on to describe how, before the EEC was formed in the 1970s, a trade agreement was established by the UK with New Zealand so Britain could gain access to large quantities of frozen lamb without too much difficulty.

Access to markets

Meanwhile, the EEC was established, and the EU – as it is now known – went on then to determine the benefits of also having access to the New Zealand lamb market.

As a result, says Hanrahan, a TRQ was introduced by the EU “so it could come in with a historical trading partner and access the necessary market”.

He added: “With regard to the other TRQ – the one that is open to everyone – if, after Brexit, the UK was to in fact introduce this it would mean that Ireland would be faced with a scenario where it would be competing under the TRQ against other beef producers, and exporters already shipping produce into the EU.”

Also Read: Brexit: Tariffs could force Irish beef farmers out of the British market

Standards

The Teagasc economist went on to say that the beef producers, in this case, are predominantly South American.

There has been controversy about Brazilian beef and whether or not it is meeting EU standards, but only certified meat plants in Brazil are allowed to export meat into the EU.

He continued: “We know that Irish exporters meet the standards but, also, meat plants already exporting to the EU are meeting the standards in the UK too.

“Then there is the ‘higher end’ quality and this would also include Argentinian beef and there is a willingness to get this beef to UK customers.”

Hanrahan also told AgriLand that TRQs cannot be determined until the UK announces its agricultural policy proposals – a scenario that is expected to happen later today (February 21).  He also says that the onus of responsibility, in terms of setting the tariff, lies with the UK alone.

It  is entirely up to the UK what tariffs it does apply; it could be very little or it could be similar to that of the EU. We don’t know yet.

He concluded: “None of this makes the prospect of a no-deal any easier for the farmer with a shed full of cattle in Longford or Cork; in fact, what exactly it does mean still has to be determined.”