The European Livestock and Meat Trades Union (UECBV), the body that represents producers, consumers and distributors of meat, has commissioned a report entitled The EU Meat Industry in a hard Brexit scenario – CRISIS. The major finding of the report concludes the impact of a hard Brexit would be a catastrophic disaster for both UK and Europe because of the reversion to World Trade Organisation (WTO) tariff arrangements, writes Allan Barber.
A hard Brexit would arise if there is no agreement between the UK and Europe on key issues – the divorce bill, the Irish border, citizens’ rights, future trade relationship – by the end of March 2019 when the notice period expires. At this point, nearly 18 months since the referendum voted to leave the EU and eight months since the final exit date was triggered, but looking at it from the outside British negotiators had made no tangible progress at all until an announcement of an unspecified agreement on the exit cost late last week.
The parties had been miles apart on the exit cost and, despite the rumoured agreement, Prime Minister Theresa May appears to be just as far from gaining agreement from her own party, as David Cameron was before he called the referendum. The big difference is Cameron didn’t think he could lose, whereas May doesn’t look as though she can win. May is fighting with her fellow Tories who can’t agree amongst themselves, while the main EU politicians, such as Donald Tusk, Jean-Claude Juncker, Angela Merkel and Emmanuel Macron, are unwilling to cut her any slack by relenting on EU demands.
The UECBV report, prepared by Irish firm Red Flag Consulting, highlights the serious amount of damage that would result on both sides of the Channel including:
- Estimated average tariffs under WTO rules of 50 percent with some exceeding 100 percent;
- Increased export costs (tariff barriers, customs and veterinary charges, and transport costs would reduce EU exports of beef by 84 percent, sheepmeat by 76 percent and pigmeat by 48 percent;
- The effect of the reduced level of exports would create a structural surplus of EU beef and pigmeat, resulting in a price fall of more than eight percent for beef, reducing the value of beef and pigmeat production by more than €2 billion each;
- The EU’s production self-sufficiency would rise to 116 percent and alternative markets would be very difficult to find;
- A hard Brexit could result in the loss of 32,000 jobs.
The recommendations for overcoming these dire forecasts read more like wishful thinking than an achievable strategy, given the obstinacy of the protagonists. The report suggests a sufficiently long transitional period so businesses can adjust, regulatory convergence between EU and UK, a future trading relationship that changes as little as possible, and market support mechanisms for affected businesses.
On the other side, UK exports to the EU are forecast to fall by 90 percent for beef, 53 percent for sheep meat and 56 percent for pigmeat. The UK’s volume of lamb trade with the other 27 EU countries is balanced between imports and exports, but it mainly imports legs, five times as much chilled as frozen, while exporting carcases. This is an example of the importance of intra-EU trade in achieving a market equilibrium which will be completely disrupted in the event of a hard Brexit.
Another significant casualty would be Ireland which exports 56 percent of its beef to the UK, while failure to agree a soft border between the Republic and Northern Ireland will cause all sorts of problems. Britain is what is termed a ‘land bridge’ between Europe and Ireland and failure to agree suitable border arrangements will dramatically increase costs of doing business between EU members separated by water.
While none of this targets New Zealand’s trade with either the EU or UK directly, it will inevitably have serious repercussions for our meat exports. The desired free trade agreements with both trade blocs will take a long time to restore the previous levels of trade access New Zealand has enjoyed. It is difficult to be too optimistic, unless the apparently impossible happens and peace breaks out between UK and EU negotiators.