Analyst Insight: No-deal Brexit in the seed potato sector

Friday, 27 September 2019

The seed sector makes up around 11% of potato production in Great Britain. Most (c.70%) is planted in Scotland, where unique growing conditions help to assure the high health status of the seed.

We typically export 16-17% of our total GB seed crop each year. Around three quarters of UK seed exports, c.70Kt, is destined for non-EU countries. Egypt is the largest market by far, purchasing approximately half of all UK seed exports. This is followed by Morocco with a smaller but still significant proportion (c. 10% of all UK seed exports). Within the EU, we ship the most to Spain and the Canaries (c 10% of all UK seed exports); the Netherlands and the Republic of Ireland are also key destinations.

Imports vary from year to year depending on the availability and price of domestic seed, and industry requirements for specific varieties. Most of this comes from the Netherlands for use by growers in England and Wales. According to APHA, around 30Kt of seed was imported in 2018-19 for this purpose. The situation is different in Scotland. A voluntary arrangement with industry is in place meaning only locally sourced seed can be used. This was set up to maintain the high health status of its seed by making sure disease is not introduced through imported material.

Sara Maslowski

Senior Analyst

Barriers to trade

In the event of a no deal exit, both tariff and non-tariff barriers will come to bear.

  • Non-tariff barriers - the UK would be unable to export seed potatoes into the EU until the UK is granted third country equivalency. Varieties registered on UK National Lists but not the EU Common Catalogue would no longer be marketable in the EU. A full explanation of non-tariff barriers can be found here.
  • Tariff barriers - tariffs would apply to all destinations. The EU has a tariff free arrangement with Egypt and Morocco but after GB leaves the EU, these agreements would no longer be applicable. If current tariff rates stand, these would be 2% to Egypt and 2.5% to Morocco. For EU destinations, if third country equivalance is granted, allowing for exports from GB to the EU to resume, a tariff of 4.5% would apply. This is based on current tariff rates and assumes no trade deal is in place.  More details on individual tariff rates can be found here.

Day 1 impacts

As most of the UK’s seed exports are to non-EU destinations, longer term impacts would seem minimal but a no-deal scenario could have significant impact to individual businesses in the short term. As well as tariffs, logistical delays and increased red tape around the border is likely to cause disruption and would add to the cost of doing business. This is applicable for importers as well as exporters.

Most non-EU seed is exported in November and December each year. So, as the current deadline of 31 October stands, it would be difficult for arrangements to be in place in sufficient time.  

For the EU, there would be no export trade allowed at all. This would have a significant impact on those businesses with shipments to EU destinations planned for November and December. Trade routes to third country destinations that rely on passing through Europe could also be disrupted.

Longer term

The UK will need an agreement in place with Brussels before exports to the EU can be restarted in a no-deal scenario. There is the possibility that separate agreements with individual EU countries would need to be negotiated before trade could take place, although this may be done “en masse”. It is unclear how long this would take and seems unlikely that this would be a priority for the EU.

Some of the larger export tonnages to Europe are shipped from February to April, so if the EU does grant the UK third country equivalence soon after the current 31 October deadline, there would be a short time for an agreement to be put in place. If this happens then the impact could be minimised somewhat. But if the EU denies the UK third country equivalence status, or delays the decision, then this seed intended for export could end up in the domestic market. The resulting extra supply could put local prices and businesses under pressure. Saying that, for the quantities involved, the impact of this for the industry as a whole is likely to be restricted to very specific regions.     

If third country equivalence status is granted, seed intended for EU markets may still need a phytosanitary certificate or additional testing to comply with EU regulations. This may make exports to the EU more expensive and less competitive against our European counterparts. However, if this happens it may also drive opportunities for our own seed industry to investigate new markets.

For imported seed, the latest SASA and Defra information at the time of writing, says that EU certified seed potatoes will continue to be recognised in England, Wales and Northern Ireland for one year following exit day. A phytosanitary certificate will be needed for all imports. While this may seem straight forward, there would still be disruption at the border. After this time, if an agreement with the EU isn’t reached, third country rules would apply and domestic purchasers would incur additional costs. Scotland will continue to operate its voluntary arrangement with industry to only source local seed potatoes. 

There is also concern by some that leaving the EU, in whichever scenario, will have a detrimental impact to the access of new genetics and varieties from within the EU.  Varieties on the EU’s Common Catalogue will need duplicate testing to be added to the UK’s National List. This will delay introduction by 5 years compared with the current process.