16 January 2017
Guest blog by Katie Doherty, Policy and Operations Manager at The International Meat Trade Association
Though a significant challenge, Brexit presents an opportunity for the UK to devise its own import quota system. The current EU Tariff-rate Quote (TRQ) system is out of date and does not reflect the modern trade. For example, there are many frozen meat quotas that, as technology has developed, would be better suited as chilled meat quotas. Additionally, due to the exceedingly high EU MFN tariffs, it is generally not economically viable to import into the EU unless under a Tariff Rate Quota.
I spoke at a UK Trade Policy Observatory event at Chatham House last week alongside Professor Alan Swinbank. In his briefing paper on World Trade Rules and Policy Options for British Agriculture Post-Brexit, he refers to the potential difficulty in dividing certain elements of the EU’s current WTO schedule with the UK, including TRQS.
I visited the WTO in October last year and it was the consensus of the various WTO missions we met with that TRQs posed one of the most contentious and tricky issue to resolve.
‘As it was neatly put to us during our WTO visit there are rules for marriage, joining a customs union but there are no rules for divorce’.
For that reason alone, I can’t see the Brexit process being easy. Added to that the fact that the WTO has not delivered significant gains in tariff barrier reductions in recent years, there will be an appetite for Brexit to provide an opportunity for a shift in tariffs. Although from an economic perspective it might seem logical that the EU will trade access for its products to the UK for access for UK products, this cannot be taken for granted. It is more than just an economic issue.
In Professor Swinbanks’ paper, he refers to how if no agreement is reached between the EU and the UK that this would mean a default to MFN tariffs applied against each other, which would mean considerable disruptions to existing trade flows.
In this situation, though the UK government wouldn’t be able to control the MFN tariffs faced in accessing the EU market, it is within its remit to set autonomous quotas though these must be erga omnes and open to all trade partners including the EU, Brazil and Australia. Whatever the relationship the UK must ensure that there is continued access to imported meat supplies.
If the UK leaves the single market and there is no FTA in place, the UK would face the EU external tariff. Around 40% of British lamb is exported to the EU and could face the full rate of duty. This would not be economically viable.
Another consideration which is high on our agenda and to which Professor Swinbank refers are border checks. Non-EU imports must enter the EU via a Border Inspection Post (BIP) which are only available at certain ports. Notably, Dover is not one of these. All non-EU imports are subject to 100% documentary checks and then 20% physical checks for red meat and 50% for poultry-meat. These could also include sampling where lab results can take days, and even weeks. All non-EU imports must also be customs cleared upon entry to the EU. Currently, there are no veterinary checks or customs clearances required between member states.
If the UK becomes a third country whether in an FTA or otherwise it is difficult to see how checks would not be required for EU-UK trade. This could have significant impacts on the meat trade, especially where a fresh product is concerned. For example, fresh poultry-meat only has a 7-day shelf-life. If you were importing fresh poultry-meat from The Netherlands and a sample is taken at the BIP, but the lab test takes longer than 7 days, then the product risks being wasted.
Transport across the EU is facilitated by the absence of border formalities. The single market has facilitated the way we eat today with a broad range of products on shelves all year-round.
The Northern Irish border is of particular concern and, as Professor Swinbank states, avoiding a hard border for Northern Ireland is especially important for agriculture. Border formalities pose several infrastructural challenges – such as building a BIP at Dover.
A careful balance is required to meet the needs of the consumer, to ensure the UK is food secure and that domestic production is sustainable and profitable. It is also essential to maintain flexibility of supply to allow for seasonal variations and adaptability in times of crisis. The meat industry, which disassembles its product, means that markets must be found for all parts of the animal. Due to progress in technology, trade is no longer in carcass form but by cut, allowing placing of products onto the markets where they are desired. In the UK consumer preferences are for chicken breasts, steaks and lamb legs. Suggestions that the UK should become self-sufficient would rely on UK consumers being persuaded to value chicken gizzards and feet as highly as chicken breasts! Therefore, the UK must import the deficit of chicken breast while exporting the gizzards and the feet. This adds value to the UK producer and avoids waste. Self-sufficiency would not be in the interest of the producer or of the consumer
‘It is my opinion that devising new trade policies for UK food and agriculture will be challenging, and for this reason, I would argue that it needs to be high on the governments’ agenda’.
We urgently need a trade policy that facilitates the balancing act which is integral to the meat trade but also a trade policy where the consumer is at the heart. As Professor Swinbank suggests total elimination of tariff barriers would not be desirable. The UK desperately needs an import policy that is more flexible and fit for purpose system.
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.
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