A close look at no-deal lamb tariffs

Tuesday, 19 March 2019

By Rebecca Wright

Last week the Department for International Trade (DIT) released details of what the UK’s temporary most favoured nations (MFN) tariffs would be in the event of a no-deal Brexit. AHDB then analysed the information and published this article. In the article the tariffs were shown on an effective percentage ad valorem basis (i.e. the amount they would add to the farm gate price). Another way of expressing the tariffs, for both importing and exporting, is in £/kg. As with the percentage increase, this needs to use a historical price for reference.

Import tariffs

The UK only has control over setting its own import tariffs, although once Brexit is complete the UK could negotiate its own trade deals with other countries. These might include access on either reduced or tariff free terms to those countries. Within the schedule released by the DIT the MFN tariff for sheep meat was set at the highest level it could be by the UK under WTO rules.

Approximately a quarter of UK sheep meat imports from the EU is frozen boneless lamb meat, which would attract a tariff of around £3.13/kg on average, according to data from the DIT and HMRC. This could almost double the cost of EU imports as the average value per kg in 2018 of frozen boneless lamb was £3.75, however it is likely that at least some if not all of the tariff would be passed back to EU farmers, especially if the price of lamb in the UK were to decline post-Brexit.

Export tariffs

Most imported sheep meat comes from either New Zealand or Australia under zero tariff quotas, and will continue to do so. Most UK exports are destined for the EU, and so EU import tariffs are perhaps most relevant to UK sheep farmers now that it is known that the import situation it un-likely to see anything significant change.

Half of UK exports destined for the EU are fresh or chilled lamb carcases and equate to around three million lambs a year. These carcases had an average delivered price of £5.40/kg in 2018, a tariff would have increased this by £2.63. Putting this into carcase terms, using an average carcase weight of 20kg, the total delivered price of the carcase would have been around £160, up from £108 pre-tariff. Again it could be expected that some if not all of the tariff would be passed back to farmers to keep the product at a competitive price level, and so this calculation supports the suggestion that the farmgate price for lambs could fall by a third.

While of course changes in the value of the product will affect the tariff duty charge, approximately three quarters of the tariff is comprised of the fixed duty charge, with the percentage proportion making up the remainder.

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