Wednesday, 13 March 2019
An initial assessment of impacts for key sectors is set out below. AHDB will be updating its modelling work to assess the impact of Brexit on farming businesses, but it is clear that new trade dynamics will impact different farming sectors in different ways. Previous modelling work and analysis is available at ahdb.org.uk/brexit
For tables showing the increase in price that these tariffs will add to the cost of imported products compared to the EU’s common external tariff, visit our UK and EU import tariffs under a no-deal Brexit page.
In simple terms, the UK grain and oilseed rape market would be open to all global exporters after previously seeing protection from the EU’s tariffs and TRQ trade barriers. Domestic importers would face no extra costs to import from any origin worldwide for wheat, barley, maize and oilseeds.
As part of the EU, UK growers are partially protected from global markets by the TRQ system, which allows a specified volume of grain into the EU at a preferential tariff (€12/t) and anything outside this TRQ allowance would face the “bound” tariff of €89-95/t (dependant on product).
The risk for growers is that alternative, cheaper, grain imports would be freely available to import into the UK. Therefore in a no-deal scenario, the domestic price of grains specifically could move lower in order to compete against cheaper imports to find demand.
For the potato sector, the move to zero tariffs would, in theory, open up the UK to all global markets. However, the UK has previously imported the majority of its potato requirements from the EU at a zero-tariff rate. As such, in a no-deal scenario, the impact upon the potato sector would be lessened due to the continuation of existing trading relationships with zero tariffs and favourable logistics from near-continent suppliers.
More specifically, for imports of new potatoes from Israel, currently we import under an EU-wide preferential agreement that sets tariffs at zero. This trade will not be harmed by the move to zero-tariffs in a No-Deal situation.
In 2018, the UK imported 380,000 tonnes of beef, either fresh, frozen or processed. Of this, 340,000 tonnes was imported tariff-free from the EU. About 30,000 of the other 40,000 tonnes would have come in at a reduced tariff under pre-existing EU quotas.
Under the new tariff rates published today, tariffs will be applied to beef imports, albeit at a lower rate than current EU tariffs. For instance the tariff level for fresh of chilled boneless beef would fall from 12.8% + €303.4/100kg to 6.8% + €160.1/100kg.
However, a TRQ of approximately 230,000 tonnes would be implemented. This allows tariff-free access to the UK, and can be used by any country, including EU members. This is in addition to 55,000 tonnes of pre-existing EU TRQs that the UK has agreed to take as its share after Brexit, at a 20% tariff.
This leaves approximately 95,000 tonnes of beef imports that will be subject to the new UK tariffs.
The tariffs released today detail no change from the EU MFN tariff rates for sheep meat. This means the volume currently imported from the EU (21,400 tonnes cwe in 2018), could now face an effective tariff over 40% on average. Most of the remaining UK imports of sheep meat will continue to be imported tariff-free under quotas from New Zealand and Australia. There is room within the New Zealand quota for volumes to increase, although this is unlikely considering current global market conditions and tightening production in New Zealand.
If there is a no-deal Brexit, UK exports to the EU will face the same tariff as any other country without preferential access to the EU. In 2018, the UK exported over 80,000 tonnes of sheep meat to the EU which accounts for around 95% of UK exports.
Tariffs on most pig meat products will remain in place, but will be reduced to around 13% of the current rate the EU applies to countries outside the bloc. The tariffs are applied on a per kg basis, but are higher for more valuable goods.
UK pig meat imports are currently sourced almost entirely from the EU, and these shipments account for around 60% of domestic consumption. In a no-deal scenario, these imports would face tariffs for the first time.
Looking at the breakdown of products the UK imported last year, and the average prices for these products, the tariffs equate to around 4-5% of the price of pork, bacon and ham imports. Noticeably, sausages have not been included in the tariff schedule, so presumably will be zero-rated. Sausages account for up to 15% of UK pig meat imports annually.
|Product||Weighted average tariff rate (€/100kg)||Effective ad valorem rate (2018 prices)|
Source: AHDB analysis based on HMRC trade figures, obtained via IHS Maritime & Trade, Global Trade Atlas®
Tariffs have been announced for butter and a selection of cheeses including processed cheese, cheddar and blue-veined cheeses (excl. Roquefort and gorgonzola). The butter tariffs are €605/tonne for butters and €738/tonne for butteroil; for butter this is about one third of the current MFN tariff. For the cheeses with tariffs, the rates range between €180-290/tonne, and are generally 13% of the current MFN tariff. There are also tariffs that currently exist on dairy products such as milk, cream, powders and yogurts will be dropped to zero.
In 2018, 99.8% of UK dairy import volumes came from the EU and were therefore tariff-free. Under a no-deal scenario, approximately 18% of total dairy imports would be subject to a tariff. This tariff would on average be €622/tonne for butter (inc. butteroil) and €214/tonne for tariffed cheeses.
One notable consideration will be the Republic of Ireland, which accounted for 54% of UK butter imports and 88% of cheddar imports by volume in 2018. It is unclear how much of this product currently enters the UK via Northern Ireland, which according to the Government announcement would be exempt from tariffs, although imports from ROI into GB would still be tariffed.
Tom Hind, AHDB Chief Strategy Officer, said: “Government has been faced with striking a balance of price stability, safeguarding sensitive products and ensuring our ability to negotiate new trade agreements is not compromised.
“The proposals take account of sensitive agricultural products, such as meat and some dairy products. But cereals, potatoes and most fresh produce imports will face no tariff barriers.
“Many EU imports to the UK would face tariffs for the first time under a no deal scenario. Our exports to the EU will still face the EU’s common external tariff in a no-deal scenario and this will impact trade flows and market dynamics. Sheep meat is the most extreme example, where approximately one third of UK production is exported and the overwhelming majority currently goes to the EU.
“Trade implications remain substantial. Businesses will be considering variables such as currency, non-tariff barriers, the perishable nature of many foodstuffs and the proliferation of just-in-time supply chains.”