The implications of the UK withdrawal from the EU are the subject of much speculation and the agri-supply trade, like most sectors of our economy are working to understand and plan for the likely outcomes.
The three major challenges we will face post Brexit are about: A.- Maintaining trade with our nearest neighbour, Ireland. B. - Future agricultural policy and support payments which will reduce farm incomes. C.- Future trade agreements on agriculture that drive down the price of food in the UK.
The issue of the Irish border and the ability to continue the trade across this border depends on the establishment of practical arrangements to facilitate certification of standards consistent with EU regulation and to deal with collection of taxes on goods where duty differentials exist.
Today, we trade in feed and in animals and animal products seamlessly in both directions across the border, businesses always chasing the highest prices that exist in either market, driving competition on the island. Tomorrow, even under a free trade agreement we will face restrictions. Our work with DEFRA in London has been useful in understanding impacts on our business and it is clear that in both the UK and EU, restrictions on where we source grain and cereal by-products will apply on goods trading across the border. Businesses selling either way across the border will have to comply with “Rules of Origin” in terms of the ingredients which they can put into rations, inevitably increasing the cost on cross border trade. Free trade is not as free as the name might suggest, however we have thrown the challenge to DEFRA to ensure this does not happen.
Duty differentials across the border offer opportunities for profit to the unscrupulous and smuggling could well emerge as a major issue. With the potential for the UK to charge lower duty rates on imports of agricultural products in the future, (South American beef trades at 50% of UK prices), it is easy to see how an open border will drive much more than just fuel smuggling in the years to come. Europe will not be able to accept a soft border if cheap smuggled product is driving down local farm gate prices in the South as well as the North. The only way to remove the incentive to smuggle is to standardise the tariffs so that imports into the UK and EU from third countries have the same “Gate Fee” regardless of the port of entry. The two ways to deliver this we believe are a Customs union or with more difficulty, the New Customs Partnership.
Assuming a solution results in no duty differentials - then things get a lot easier. With no incentive for the smugglers, we could expect lighter touch customs policing and are left with disease and contamination regulations, (often referred to as the Sanitary and Phyto sanitary controls or SPS) to be managed. Checks on up to 8% of cross-border movements have been suggested by some. However the Good Friday Agreement resulted in all island policies and collaboration on disease management, with the closure of our ports to GB imports during Foot and mouth being but one example of this. There appears be a consensus around the principle of managing disease on an all island basis between the UK and EU and if so, another hurdle to cross border trade disappears.
Whilst the challenges to trade are significant, it is possible with goodwill on both sides of the negotiation table to avoid a hard border on the island.
A free trade agreement, with no duty differentials, a common approach to disease and contamination management on the island and what we could be left with is the need to effectively file our goods movements (HMRC equivalent to delivery notes), electronically and ideally on a monthly return. Failure to deliver on either of these two areas will frustrate trade, add bureaucracy, cost and delays and ultimately with smuggling damage our reputation internationally. We wait to see if common sense will apply.