WTO Strikes Deal on Ag Import Tariff Rate Quota Underfill Mechanism
World Trade Organization members reached an agreement March 31 that will help address the continuing "underfill" of tariff rate quotas on agricultural imports by some importing members, the WTO said. TRQs allow certain agricultural goods to be imported at lower duties up to a specified amount, with increased duties applied to amounts over the limit. The mechanism was agreed to as a means of allowing exporters some access to other countries’ markets when the normal tariffs on imports are high.
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The underfill mechanism addresses cases when the fill rate of a TRQ in any given year is below 65% for two consecutive years or the fill rate isn't notified by the importing WTO member country. Absent any improvement in the fill rate or a resolution to the problem, the importing member may be required to change the management of its TRQs to show that market conditions rather than simply the administration of the quotas are contributing to the underfill, the WTO said.
Members' average fill rate of all WTO TRQs during 2014-2019 stood at 53%, the WTO said. Based on a September 2020 study, close to 200 TRQs, with fill rate below 65%, could have theoretically been subject to an agreed underfill mechanism in the year 2018.
The new agreement on the underfill mechanism addresses paragraph 4 of the mechanism, and concerns the initiation of the “final stage” to deal with chronic underfill (fill rate below 65% for three consecutive years, little increase in fill rates during that period), the WTO said. The key outstanding issue on that paragraph was how to arrive at “closure” on underfill for a developing importing member that does not achieve the required increase in the fill rate in the final stage of the mechanism.
The final deal said an developing importing member not meeting the required increase in fill-rate after two years "will be subject to the standard requirement set out in the first sentence of paragraph 4, if so requested by interested exporting members. In the absence of such a request, the concern should be marked as closed," acccording to the WTO. The proposal gained universal support from WTO members at the March 29 meeting of the Agriculture Committee.