As 2018 has progressed quickly, less can be said of the negotiation process for the UK’s exit negotiations from the EU.
So slow has been the pace of negotiations that there are now Ministers on both sides of the channel who are seriously talking up the chances of the UK leaving the EU without any kind of deal in place; with issues such as the Irish border, VAT and customs procedures to be agreed fully. Furthermore, many Leave supporting MPs have suggested that a no deal scenario would not be a problem for the UK.
For the UK pig sector, it is important to look at the overall balance in trade with the EU. The UK is about 54% self-sufficient in pork, although it imports about 60% of its pork because of increased UK exports in recent years.
By contrast, the overall import volume of pork from outside the EU is minimal – barely 1%. This means that a no deal situation would severely limit the amount of pork both imported to and exported from the UK, given the very high tariff rates for pork, which would render a lot of trade unviable.
The UK and EU would be obliged to adopt these tariffs on day one, and assume one another to be ‘third’ countries – in other words treated like Vietnam, Chile or Zambia, with customs and VAT declarations to be made at point of import, as well as going through full inspection processes.
It is worth noting that a no deal would be damaging to EU exporters to the UK. Nearly 80% of all Danish bacon is exported to the UK, and EU meat exporters have estimated that a no deal would see pigmeat exports to the UK decrease by 48%, taking 7% value off the EU pigmeat market (2.3bn euros total).
This shows that there is impetus on both sides to come to an agreement, though the effects in the UK would become more pronounced as we would be looking at food shortages as opposed to the EU looking at oversupply of pork products.
AHDB analysis has suggested such a situation could benefit UK pig producers as the price of UK pork would rise sharply, given the reliance on imports. While this may be true in the short term, it should be noted that there would be inevitable knock-on effects from such a shortage in pork:
- The UK would face difficulties exporting to the EU as well – in 2017 we exported 157,000 tonnes of pork to the EU, worth £208m, our biggest export market. This includes not only fresh product, but also cull sows, which we would not realistically be able to export to Germany because of the tariff costs.
- A rise in pork prices of this nature would arguably suppress demand for pork products – given the fact that other meats such as lamb would be in oversupply in this same scenario. Consumers could shift from one meat product to another due to price concerns.
- The Government will be very keen to do all it can to prevent sharp food price rises, and it is conceivable that it would go from the one extreme in food prices to another in unilaterally lowering or abolishing tariffs on food imports (the UK has the discretion of lowering tariffs unilaterally. However this cannot be done on a country by country basis – with the exception of free trade agreements). With the UK struggling to export to the EU, this would be a lose-lose scenario for everyone, surely?
Ed Barker is NPA’s senior policy advisor. He previously worked for rural business advisors Cheffins and Country and Business Association.
