Food & Beverage Update: The Impact of Brexit on the Agricultural and Fishing Industries
13 September 2018
The Irish agri-food sector is particularly vulnerable to Brexit because the UK and Ireland are each other’s largest export markets for agri-food produce. In this article, we consider the main areas of concern and key legal issues for businesses in the agri-food sector. Specifically, we seek to identify the potential shape of a future EU-UK trade deal and its implications for the Irish agri-food sector.
Areas of Concern and Uncertainty
A key uncertainty in a post-Brexit world is the border between Ireland and Northern Ireland. Although the Irish Government has secured a commitment from the UK that a hard border will not be introduced between Northern Ireland and Ireland, the reality of what border will be put in place remains unclear.
A number of trade issues are also causing concern for the agri-food industry. The first is the possibility of the introduction of trade tariffs. In the absence of a free-trade agreement between the EU and UK, any trade in agri-food products is likely to attract tariffs of at least 15% in accordance with the World Trade Organisation’s Most Favoured Nation rules.
The second trade issue is the possibility of non-tariff barriers to trade such as divergent regulations or product requirements and standards. The UK has agreed to maintain “full alignment” with the existing EU rules. Although this is a key commitment from the UK, in practice reflecting what “full alignment” means in a treaty may be very difficult. For this reason, the concept of full alignment is likely to be subject to extensive negotiation.
A third area of concern is post-Brexit industry financing. The UK is a significant net contributor to the EU budget as a whole. These include the CAP and CFP budgets, subsidies upon which Irish farmers and fishermen are heavily reliant. The UK’s withdrawal from the EU will result in a substantial reduction in the size of these budgets from 2020 onwards. Reduced payments to Irish farmers and fishermen, especially if combined with less competitive agri-food exports, may negatively impact the agri-food sector. In particular, it is anticipated that small farmers and spending power in rural communities will be most affected.
These are all issues expected to be heavily negotiated by Irish politicians in advance of the UK’s departure from the EU on 29 March 2019.
There are several potential ways in which the EU-UK trade relationship may be shaped post-Brexit.
The most favourable option for Ireland is likely to be the negotiation of an EU-UK free-trade agreement. This would ensure the free movement of goods between the UK and the EU, but would allow the UK to draw up its own free trade agreements with non-EU countries. An alternative is the UK negotiates to remain part of the customs union, ensuring the free movement of goods and allow the UK to avail of the free trade agreements which the EU has already negotiated worldwide. Either of these options would ensure minimal damage to the Irish agri-food sector in the short-term and secure the possibility of continued growth in the medium- to long-term. The least preferable option is a “no-deal” Brexit, causing even greater uncertainty for the Irish agri-food industry.
It is in Ireland’s interest for the EU and UK to negotiate a free-trade agreement or the UK’s continued membership of the customs union. This would eliminate the possibility of the introduction of tariffs and the damaging impact these would have on the Irish agri-food sector. This outcome could also stabilise the value of the sterling against the euro at a greater value, making Irish exports more competitive and helping restore profit margins. However, as the time until 29 March 2019 draws closer with little apparent progress towards either preferred solution, the true impact of Brexit on the Irish agri-food industry remains to be seen.
For more information on the potential impact of a ‘no-deal’ Brexit on your business, contact a member of our Food, Beverage & Agriculture team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.