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How will the ‘no deal’ import tariffs impact key UK agricultural markets?

After Theresa May's Brexit deal was defeated again, the UK government has released its proposed 'no deal' tariffs for imported food and drink products, which provide protection for certain 'sensitive' agricultural sectors

The UK has announced it will suspend the application of import duties on 87% by value of products entering the country under a ‘no deal’ Brexit scenario. But what will change for the agricultural sectors that will see import duties applied?

The UK 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.

The difference from now being that if the UK leaves the EU without a deal, then these tariffs will also apply to EU imports.

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.

IEG Policy looks at what analysts, commentators and industry representatives are saying about these tariffs and how they will impact certain industries.

Beef

Dylan Bradley senior policy consultant at IEG Policy’s sister company Informa Agribusiness Consulting: “There will be increases in prices of EU imports, there may be some cheaper imports from South America.  The imposition of tariffs on our exports to the EU may have consequences for the carousel trade where carcases are exported to the EU, processed and imported back into the UK.”

Gail Soutar, chief advisor at NFU England & Wales (NFU), tweeted: “TRQs for Beef. Volumes lower than existing imports from EU. in quota duty zero, out of quota duty cut to 6.8% and €93.3/100kg (as opposed to EU tariff of 12.8% + €176.8/100kg). TRQ managed in way that all fresh chilled lumped together.”

NFU President Minette Batters: “The approach taken by the government to lump products under the same high-level tariff code, for example whole carcases and high value cuts of fresh beef, means there is a high chance of market distortion.”

Sheepmeat

Dylan Bradley: “UK producers will be protected from cheaper imports, but exports to the EU will be less competitive. There will be a possible price reduction for consumers as there will be more domestic lamb on the UK market.”

Gail Soutar: “[The tariffs will provide] full protection for sheep meat sector. [There will be] no additional market access concessions beyond WTO commitments, and the full tariff maintained.”

Farmers Union of Wales President Glyn Roberts: “[The tariffs] will have a devastating impact on many UK exporters, in particular the sheep sector. The combination of tariffs and a no-deal Brexit would also sever thousands of established supply chains causing unprecedented disruption.”

Poultry

Dylan Bradley: “The UK has a significant import requirement for fresh chicken breast from the EU.  The short shelf life means it is unlikely that fresh imports can come from Thailand or Brazil.  This tariff will increase prices. On the other hand, exports of UK dark meat to the EU will be less competitive. UK producers may need to extract more value from chicken breast to compensate for lower revenues from exported dark meat.  On balance, this will probably increase prices for consumers. There may be some reduction in prices for frozen and other processed chicken.”

Gail Soutar: “TRQ for poultrymeat (nothing for eggs). UK duty will be €61.8/100kg, as opposed to EU tariff for 3rd country imports of €102.4/100kg.”

Pigmeat

Gail Soutar: “No TRQs for pork.  UK tariff depends on the cut, but is significantly lower than the level the EU currently applies to 3rd country imports. For example, fresh boneless pork would be UK tariff €11.4/100kg as opposed to EU tariff €86.9/100kg.”

Dairy products

Dylan Bradley: “These tariffs will increase prices which will have a knock on impact on domestic UK milk prices, but this impact will be reduced as butter and cheese account for a relatively small proportion of the utilisation of milk.”

Gail Soutar: “No TRQs for dairy. But tariffs on butter and cheese imports (€60.5/100kg for butter, multiple tariff lines for cheese) including €22.1 /100kg for cheddar). The UK tariff is significantly lower than EU applies (Butter = €189.6/100kg and cheddar = €167.1kg/100kg)”

Fertilisers (proposed UK tariff = 6.5%)

Dylan Bradley: “The UK imports substantial quantities of fertiliser from the EU and these will be more expensive. This will raise production costs for farmers.”

James Warner, phosphate analyst at IEG Policy’s sister title Fertecon: “Across the three major chemical fertilizer nutrients (nitrogen, phosphate, potassium), the UK posted a net trade deficit with the EEA of £464 million in 2018. Should the UK impose a 6.5% tariff on fertilizers from the EU the total cost to importers would be £37 million/year – assuming the continuation of current trade patterns.”

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Further reaction

NFU President Minette Batters said that while there is relief in the farming sector that tariffs will be applied on imported food, she described it as “appalling” that they are only just seeing what they will be, a fortnight before they could come into effect.

“Farmers and food businesses have no time to prepare for the implications, which will be exacerbated by the fact that we will face tariffs on our own exports on food into the EU and other countries with whom we currently enjoy free trade arrangements,” she said.

The government was originally expected to unveil the proposed ‘no deal’ tariffs at the end of February but this was postponed. Business was not consulted by government before deciding on the tariffs, reportedly as this was considered ‘too sensitive’.

Batters continued: “Although we are pleased to see that the government has listened to our concerns and elected to treat many agricultural sectors sensitively, which may support farmers who are already facing disastrous disruption from no-deal, it is enormously worrying that some sectors will not have this protection – noticeably eggs, cereals, fruit and vegetables.”

Food and Drink Federation (FDF) chief executive Ian Wright said the tariff announcement “underlines why the UK is not ready to exit the EU” at the end of March.

“Business cannot adapt to this new regime in just two weeks. It is disgraceful; that we are, only now, getting to see these. There must be proper consultation with business before a change of this magnitude is introduced,” Wright said.

“We were promised that business would only have to adapt to one new change of rules; it’s now clear that promise has not been kept.”

He added that the proposed system is “Confusing and complex”. “New tariffs will apply to some foods that are currently imported tariff-free, yet no tariffs will be applied to goods that cross the border between Ireland and Northern Ireland,” he explained.

“This is likely to result in massive trade distortions. In a world where it is costly and complex to export finished goods to the EU, and costly and complex to import key ingredients, many food and drink manufacturers who trade with the EU will surely question whether the UK is the right place for them to be.”

CLA (Country Land and Business Association) Deputy President Mark Bridgeman said: “We welcome the limited protections announced today for some areas of the farming industry. However, we should be under no illusion about the consequences of these tariffs coming into force. Under this potential trading regime many of our products will become uncompetitive in Europe, while quotas for global tariff-free imports will create further uncertainty.”

He called for “early action” to be taken by the government to help producers directly affected by the new tariff regime. “Market interventions and encouraging consumers to “buy British”, will also help mitigate economic and social hardship in the event of a “no deal” Brexit and significant market disruptions,” Bridgeman said.

Allie Renison, head of Europe and trade at the Institute of Directors, said: "While the information provided is the bare minimum needed to mitigate the full impact of no-deal for goods traders in particular, it has come far too late to allow businesses to be ready in just a few short weeks.”

She continued: "Cutting tariffs unilaterally is a necessary and welcome part of a country's trade policy, but it is crucial to do so in a measured, open and consultative way to get buy-in from both businesses and the public. Unfortunately, there has been virtually none of that from Government in the run-up to this point.

"Making these tariff decisions temporary will lead to widespread confusion about what may change and when, as firms will want to know well in advance about how duties may rise. Such unpredictability may also have consequences for our trading relations with countries outside the EU as well.”

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