"Any negative consequences from changes to current quota arrangements would be a major concern and we will continue to protect the interests of our farmers against any actions that would reduce Australia's existing market access.

"I have raised these concerns with both the EU and the UK and will continue to pursue clarity and certainty on behalf of Australian farmers and exporters."

Separately, Mr Birmingham and his Canadian trade counterpart Jim Carr agreed in Ottawa to try to expedite a negotiation over protectionist barriers imposed against Australian wine.

"It's clear these measures instituted by some Canadian provinces unfairly restrict Australia's exports of wine to Canada," Mr Birmingham said.

British international trade secretary Liam Fox acknowledged that his government would have to negotiate its way through the tariff rate quota impasse. Bloomberg

"I welcome the signals from my counterpart that Canada is open to negotiating an outcome outside of the WTO dispute process."

Britain's trade minister Liam Fox on Thursday acknowledged that Australia and others had drawn a line in the sand on the post-Brexit tariff and trading regime.

"As expected, some trading partners have expressed reservations about our proposed treatment of tariff rate quotas," he said in a written statement to Parliament.


Dr Fox said Britain would now enter what is known as an "Article 28" negotiation with "relevant partners", and would soon formally invite them to submit claims.

"Through the Article 28 process the aim is to reach a mutually satisfactory conclusion that maintains the balance of rights and obligations for the UK and our trading partners," he said.

A spokesperson for the Department for International Trade said Britain would press on with its current quota plan while the negotiations continued.

"The terms we have set out will form the basis of our trade policy while we engage with our WTO partners to address their concerns," the spokesperson said.

The issue is unrelated to any free-trade agreement talks that Australia has, or will have, with the EU and Britain – it is about what post-Brexit Britain's baseline trading arrangement will be.

The EU currently stifles imports by allowing only a limited amount of other countries' beef, sheepmeat and other agricultural products to come into the European market at reduced or zero tariffs. Above that quota, the tariffs are so punitive that further exports to the EU aren't viable.

With Britain leaving the EU, these quotas have to be resubmitted to the WTO – and it's that submission to which Australia has objected.

What's the beef?


The current EU tariff quota limits Australian beef exports to 7150 tonnes, although Australia also shares an additional 45,000-tonne quota with the US, Uruguay, Argentina and New Zealand (with the five countries competing on a first-come, first-served basis, although the US is currently negotiating to reserve a share of this for itself). Similarly, there's a 19,186 tonne sheepmeat quota.

Britain and the EU propose to split these tariff quotas proportionately – that is, based on how much of Australia's beef and sheepmeat went to Britain and how much went to the other 27 EU states in the period 2013-15.

The main problem is that in past years much of the product would be shipped to one EU port but then consumed across the bloc. If the quota split is based on port of entry, it may not reflect where Australian exports actually ended up. This means Australian exporters won't be able to sell where the market demand is, nor shift to meet changes in demand, as they'll be restrained by the inaccurate quota.

And in the case of sugar, dividing up an already parsimonious quota into smaller pieces could make shipments too small to be commercially viable.

Under WTO rules, changes to tariff schedules have to be negotiated and agreed with affected parties in order to be "certified". If Britain and the EU reach Brexit day with uncertified schedules, they can still go ahead with their current plan but are likely to be challenged via WTO dispute mechanisms.

The negotiations may also cover some of the trade-distorting subsidies that the EU, and post-Brexit Britain, pay to their farmers under the Common Agricultural Policy, a longstanding bete noire of agricultural exporters to the EU.

It would be awkward for Britain, which is likely to present itself as a champion of trade liberalisation after Brexit, to be involved in a protectionist dispute of this kind.

The value of Australia's beef exports to the EU in 2017 was $238.4 million, and the value of mutton and lamb shipments was $152.6 million.

As previously reported in the AFR, uncertainty around the quota is already an issue for Australian beef farmers. Because the EU requires beef to be hormone-free, and it takes six months to rear the cattle earmarked for that market, commercial decisions on shipments have to be taken now even though the quota dispute is unresolved.