Brexit may slash UK farmer subsidies
Prime Minister Theresa May’s leading policy advisor, George Freeman, MP, said it will be hard to convince the British public that the UK agricultural industry is an important strategic sector that deserves a high level of funding from the government.
However, any weakening of the UK agricultural industry could soften the Brexit blow for Irish farmers and food exporters.
Already, the UK’s post-Brexit plan is constrained in how much import tariffs it can impose on food imports, because high tariffs would lead to a politically unacceptable food price rise.
The more likely UK option in 2019 is to to open up wider access to the UK market, at least for some foods.
It could do this by lowering or removing tariffs, or using import quotas to allow a defined volume of product to enter the UK market tax-free.
Either approach would open many UK industries, including agriculture, to increased competition.
Weakening of domestic UK production could leave Ireland still a significant food trading partner.
In the dairy sector, Ireland could win back the 25% of its liquid milk which comes from Northern Ireland, and replace other UK imports, if tariffs were put in place on UK imports and exports.
This could help to compensate Irish dairy processors for lost exports to the UK, but would pose major challenges for milk processors in Northern Ireland.
But the biggest winners could New Zealand, the main global exporter of butter, if import quotas allow increased shipments to the UK, compared to its current EU quota access to the UK.
New Zealand butter could become a stronger competitor for both UK and Irish supplies, according to one of the scenarios presented by the UK’s Agriculture and Horticulture Development Board (AHDB), in its latest report on how Brexit will affect trade in agricultural products.
The AHDB says there could be a significant short term tightening of beef supply on the UK market, if the UK limits import,s or makes them much more expensive, by imposing tariffs.
If domestic UK beef producers are slow to react to beef scarcity, especially if farm subsidies are slashed, Irish exporters could gain some reprieve.
According to AHDB, any deal with the EU short of membership of the Single Market or EU Customs Union would leave the UK free to negotiate trade deals, as preferred by senior Vote Leave campaigners, who argued that increasing trading with the rest of the world would be a benefit of leaving the EU.
However, the position of agricultural goods within these negotiations is likely to be extremely complex.
In many trade agreements, tariffs remain in place on sensitive products, and these products are very often agricultural goods.
In addition, non-tariff barriers are often used to limit trade in agricultural goods, according to AHDB.
Meanwhile, the food and retail industry scramble caused by Brexit kicked off early with Unilever’s demand of across-the-board price rises of about 10% in the UK for its brands.
