Brexit will cost farmers

Ahead of Boris Johnson being installed as Prime Minister this week, three reports have been published on Brexit and agriculture, all with a similar negative message.

These include Con Lucey’s report for the Irish Institute of EU Affairs, (IIEA) which focuses on support for agriculture in the UK after CAP, and explores their policy on standards and trade.

In Britain the levy boards in England, Scotland and Wales commissioned Andersons to do a study of Brexit’s impact on the meat sector, while in the North, in the absence of a devolved government, the Civil Service has published an economic analysis of what a no-deal Brexit would mean.

Cross-border trade

The immediate effect of Brexit will be felt first by farmers engaged in cross border trade. For farmers in the north, almost half their lambs come south for processing, with 420,000 doing so last year, while 35% of northern milk comes south for processing.

The UK is committed to leaving the border open for products coming into the north

The pig trade is the opposite, with 466,000 pigs making their way north, predominantly to Cookstown in Co Tyrone, for processing.

The UK is committed to leaving the border open for products coming into the north, so there is no reason why the pig trade cannot continue, though of course it will be impacted by the UK’s low tariff policy on pig meat imports, which is 13% of the EU rate of €536 per tonne.

However it is a different issue for produce coming south, out of the UK into the EU. If there is no deal, there will be full EU tariffs applied, which would mean 85.5c/kg on live sheep or lamb exports from NI into the EU, which would make it commercially non-viable.

Milk would incur a tariff of €21.8/100kg, adding 68% to the cost of the milk according to AHDB dairy, the UK levy board.

Tariff impact

While tariffs alone would frustrate exports from either Northern Ireland or Britain, the no-deal proposed UK import tariff structure on agricultural products will undermine the value of the UK market.

Not only would this devalue the UK market for Irish exports, but it will also severely undermine it for domestic production as well

This will be particularly applicable in beef, where a zero tariff quota of 230,000t is to be created by the UK.

This, in effect, opens the market up to South American imports, where the current market price is the equivalent of €2.17/kg for cattle similar to R3 steers.

Not only would this devalue the UK market for Irish exports, but it will also severely undermine it for domestic production as well.

Non-tariff measures (NTM)

The arrival of the EU single market in 1993 meant that for the purposes of quality standards, product from every area of the EU is deemed of equal standard and no checks are necessary when travelling between member states.

The default for imports to the EU from non-EU countries is that 20% of deliveries will be physically inspected

For the UK, this ends with a no-deal Brexit and the likelihood is it will revert to the pre-single market area, where exports travelled accompanied by a veterinary certificate and under seal.

The Anderson report looks at this area in some detail.

The default for imports to the EU from non-EU countries is that 20% of deliveries will be physically inspected.

The free trade agreement with Canada (CETA) has a reduced rate of inspection at 10% for Canadian imports and New Zealand has as low as 1% for lamb deliveries to the EU. Andersons predict that with a deal, UK exports could get the Canada terms of 10% of exports being physically inspected and no-deal would mean 20%.

Cost

Andersons have estimated the cost of these scenarios, although heavily qualified because of the complexity in making the estimates.

In the best case scenario, checking would add a cost of £29/t when averaged over 100 loads, while a 10% inspection rate, as is the case with Canada and in a possible EU-UK deal, the cost rises to £44/t.

In a no-deal scenario with a 20% inspection rate, the cost per tonne would rise further to £94/t.

While recognising the caveats included in making these estimates, it is very clear that there is a significant cost to inspections for product coming into the EU from outside the single market.