spring / summer 2017 |
aspects of land
sk most farmers what impact Brexit could have
on their business and you will usually get a
response that mentions the word “subsidy”.
Worth £2.5 billion a year to UK agriculture, there is
nothing surprising about that.
Trade, however, is only just starting to get mentioned,
which is important, because the agricultural sector
could lose £2.1 billion if standard tariffs are applied to
trade between the EU and the UK post Brexit. Tariffs
would also mean that a large quantity of food and drink
produced both here and in the EU would be looking for
a new international home to avoid these tariffs.
In short, there are two extreme scenarios. One, tariffs are
levied on trade between the UK and the EU, which would
increase UK food prices substantially because the UK is a net
importer of goods and the EU a net exporter. Or two, tariffs
are not imposed, which would leave the door open for
imports from some of the world’s lowest cost producers.
HOW DO TARIFFS WORK AT THE MOMENT?
Because British products enjoy tariff-free trade with any
of the EU’s 27 other member states, food and drink can
be bought and sold across borders without any tariff cost.
This makes British produce price-competitive in European
markets and EU production competitive in the UK.
Other regions of the world can, of course, also trade
within the EU, but they usually have to pay a tariff
making their produce more expensive.
The tariff rate other nations pay is worked out through
all sorts of reciprocal agreements and varies from product
to product – and even sub-categories within that product.
“For example, a tariff will be levied on beef imported into
the EU, but the exact amount of that tariff will depend on
what cut that beef is and the specific trade deal that has
been agreed with the exporter,” explains policy specialist
Simon Ward of The Policy Group. “That tariff could
change once a specific volume of sales is exceeded and
it may well be different to the one paid by its exporting
neighbours. Changes to tariffs could change the relative
price of fore and rear quarters of beef.”
WHAT MIGHT CHANGING TARIFFS MEAN TO OUR MARKETS?
Another curiously complex example of a current trade
agreement is with New Zealand.
When Britain comes out of the European
Union, the replacement trade deals that
are struck will be crucial for the potential
profits – or not – of Britain’s farmers
CLYNT GARNHAM AGRICULTURE / ALAMY