UK announces new agri-food tariffs and TRQs for ‘no deal’ Brexit
Under a no deal departure from the EU, the UK plans to suspend import duties on most agri-food products
The UK will suspend the application of import duties on all but a handful of agri-food products if it leaves the EU without a deal at the end of this month, according to a temporary tariff schedule published this morning (March 13).
As had previously been indicated, the UK government will continue to apply tariffs, and in some cases tariff rate quotas (TRQs), on sensitive agricultural products, including beef, butter, cheese, sugar, poultrymeat and sheepmeat.
Tariffs will also continue to apply on bananas, cloves and vanilla, cocoa, crude palm and coconut oil, rice, rum, and some fertiliser and fish products. But all tariffs on cereals, fruit (other than bananas) and vegetables are set to revert to zero.
Meanwhile, the UK government has also stated that, in a bid to avoid breaching the Belfast Agreement which calls for the absence of border infrastructure between Ireland and Northern Ireland, it would not enforce any checks or tariffs on Irish cross-border trade. This would appear to open up the prospect of EU27 exports to the UK being channelled via Ireland, to avoid payment of new border taxes.
In reality, the new tariff schedules may not ever come into effect. UK MPs are voting this evening on a motion to rule out a no deal Brexit, and this motion is widely expected to be approved.
But with the EU-UK Withdrawal Agreement having once again been resoundingly defeated in a vote in the House of Commons yesterday, a no deal Brexit will come into effect from March 29 and can now be avoided only by a temporary extension of the Brexit Article 50 process – on which MPs are now due to vote tomorrow (Thursday). This would delay the prospect of a no deal Brexit, but not prevent it altogether.
Disruption for EU exporters
If the UK left the EU with no free trade agreement in place with the EU, WTO rules would compel the UK to apply its new tariffs on an ‘erga omnes’ basis – i.e. they would have to apply to EU and non-EU suppliers alike.
For the most sensitive agricultural products, significant trade disruption is likely to arise from the application of tariffs to imports from the UK from the EU27. TRQs, where applied, are to be reserved either for traditional suppliers (e.g. New Zealand sheepmeat), or applied ‘erga omnes’, which would leave EU and non-EU suppliers competing for access to the UK market.
Imports of butter are to be subject to a new tariff of €605 per tonne, applying to all suppliers. EU dairies sold butter worth €406m to the UK in 2018 within the Single Market. But the EU tariff on butter imported from third countries is €2,313 per tonne, and London has clearly calculated that a tariff any lower than €605 per tonne would open the door to damaging quantities of butter imports from suppliers such as New Zealand.
A similar political calculation has been undertaken for each ‘sensitive’ agricultural product. In each case, UK tariffs have been set at a given percentage of the EU’s MFN tariff. These are as follows:
No TRQs have been announced for any dairy product. It is not immediately clear what this would mean for the status of existing EU TRQs, such as the New Zealand butter TRQ or the various country-specific TRQs for cheese.
Contentious WTO TRQs to apply for sheepmeat
For sheepmeat, the EU’s Most Favoured Nation (MFN) tariffs apply, i.e. a tariff of 12.8% ad valorem, plus a specific duty depending on the type of cut.
TRQs are to be offered to existing third country suppliers, but - controversially - these represent the UK share of the existing EU TRQs, as already agreed with the EU, but which are hotly disputed by as many as 20 supplier countries.
Thus, for example, New Zealand would have a country-specific sheepmeat TRQ of just 114,138 tonnes – only half of its existing EU TRQ. It would however allow New Zealand to deliver to the UK market at more favourable terms than EU member states, all of which (apart from Ireland, apparently) would have to pay the MFN tariff.
For poultrymeat, TRQs are established for fresh / chilled chicken (166,197 tonnes, split over four quarterly sub-quotas), and for frozen chicken (79,510 tonnes, again split over four quarterly sub-quotas). There are also TRQs for fresh/chilled turkeymeat (16,008 tonnes) and for frozen turkeymeat (4,198 tonnes).
For beef, TRQs are established for fresh/chilled product (124,201t, split over four quarterly sub-quotas), for frozen beef (56,217t, again split over four quarterly sub-quotas), and for dried, smoked or preserved beef (50,043t).
There are also to be TRQs for poultrymeat, applying for fresh / chilled chicken (166,197 tonnes), for frozen chicken (79,510 tonnes), for fresh/chilled turkeymeat (16,008 tonnes), and for frozen turkeymeat (4,198 tonnes).
Sugar and bananas
For sugar, the UK will retain the existing MFN duty on raw cane imports of €419 per tonne, outside of a new TRQ of 260,000 tonnes a year. The in-quota duty-rate within this TRQ is to be €339 per tonne – a discount of just 19% on the MFN duty rate.
The bulk of UK raw sugar imports, however, are supplied from developing countries such as Belize and Guyana, where preferential zero duties will continue to apply.
A tariff of €150 per tonne is to be applied on imports of white sugar. This will disrupt UK imports of white sugar from EU refineries in particular – in 2018, the UK imported some 487,000t of white sugar, mostly from France.
For bananas, the UK will retain the EU’s standard MFN duty of €114 per tonne - primarily in order to preserve existing preferences for ACP and LDC suppliers, who will continue to export to the UK at zero duty.