Tag: agri-food

NI Protocol and Trade

With a deal on implementing the Northern Ireland (NI) Protocol supposedly imminent and with the Irish Central Statistics Office (CSO) releasing its latest trade data for 2022, it is an opportune time to examine the impact of the NI Protocol on agri-food trade on the Island of Ireland.

The chart below shows how agri-food trade for selected commodities has evolved in monetary (Sterling) terms between Northern Ireland and Ireland (Republic of Ireland (ROI) since 2017.  It shows that since the introduction of the NI Protocol from January 2021, which has enabled Northern Ireland to stay de-facto part of the EU Single Market for goods, that trade between NI and Ireland has increased substantially for most products.

Dairy trade has seen the most significant increases, with exports of dairy produce from NI to Ireland rising by 120% since 2020 (from £202m to £446m).  Imports in the opposite direction have also risen substantially from £169m to £427m.  Exports of beef from NI to Ireland have doubled since 2020 and are valued at £64 million in 2022.  Again, there has been a notable, though less sizeable, increase (25%) of beef imports into NI from Ireland.

Trade has also risen substantially for other commodities since 2020 with animal feedstuffs’ exports from NI to Ireland up by 125% (to £262m), whilst pigmeat exports have risen by 128% to £46m. Poultry meat exports in 2022 are estimated at £25.5m, 82% higher than in 2020.

The data presented in the chart above are in current terms.  In other words, they do not take account of inflation which has been significant across agri-food during 2022.  That said, given the increases reported on NI-Ireland trade, which has more than doubled in several cases, it is clear that the NI Protocol is having a significant impact on trade on the Island of Ireland.

This impact becomes clearer when agri-food trade between Ireland and NI is compared with trade between Ireland and Britain.  The table below shows that total agri-food trade for 2022 (imports and exports combined) between NI and Ireland is 80% higher than in 2020, whilst Ireland’s agri-food trade with Britain has fallen by 6%.  This shows the clear impact of the imposition of regulatory barriers on trade between Ireland and Britain as a result of the implementation of the Trade and Cooperation Agreement (TCA) between the UK and the EU in January 2021.

Within this, it is also notable that exports from Ireland to Britain are 12% higher in 2022 versus 2020, whilst imports into Ireland from Britain are 26% lower over the same period.  This shows the clear impact of the imposition of regulatory controls by EU Authorities (including in Ireland) on imports from the UK (GB) from January 2021.  At the same time, the UK has continued to delay the imposition of its regulatory controls (previously called its Border Operating Model, and now termed as its Target Operating Model) until late 2023.

Overall, the CSO trade data reveals that all-island trade has increased substantially as a result of the NI Protocol and supply-chains on the island of Ireland have become much more integrated.  Within this, there is also a noticeable shift in Ireland away from importing from Britain (which is now subject to regulatory controls) and sourcing more locally from Northern Ireland where there is unfettered trade.

Of course, the CSO data does not assess how NI trade with Britain (GB) has performed during this time.  It is important to highlight that NI continues to have unfettered access to the GB market for its exports and the various grace periods implemented by the UK Government have, thus far, limited the imposition of regulatory checks on produce moving from GB to NI.  The extent to which this trade will be affected in future is of course contingent on the detail of any agreement between the UK and the EU on implementing the NI Protocol.  We will be analysing this detail as soon as it becomes available.

Brexit – Future Relationship

Future Relationship Agreement

On 25th November, EU leaders agreed the Withdrawal Agreement (see accompanying article) in addition to a 26-page Political Declaration on the UK’s Future Relationship with the EU.  Although not legally binding, this Declaration turned out to be more substantial than the 5-7-page document rumoured before its publication.  That said, its contents unsurprisingly adopt a high-level approach given that Future Relationship negotiations have not yet formally begun.  Key points include;

  • Ambitious Partnership: the Declaration seeks to form parameters for a ‘broad, deep and flexible’ partnership spanning multiple areas including trade, security, and law enforcement.
  • Trade: no tariffs, charges or quantitative restrictions across all areas, with parties seeking to improve the Single Customs Territory (essentially a Customs Union) set-out in the Withdrawal Agreement.
  • Irish Backstop: linked with the previous point, parties stress their ‘determination’ to replace the Northern Ireland backstop with alternative arrangements.  These should ensure that the absence of a hard border on the island of Ireland are put on a permanent footing.
  • Trade Regulation: disciplines concerning technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures should go above and beyond respective WTO agreements.  This will be necessary to have any chance of achieving a frictionless border on the island of Ireland, or between Northern Ireland and the rest of the UK under a backstop arrangement. 
    • Technology: the Declaration acknowledges that technical solutions should be considered when seeking alternative arrangements to ensure that there is no hard Irish border.  However, as previously mentioned, such technologies appear to be several years’ away.
    • Regulatory checks and controls: in acknowledging the scope for technology and facilitative arrangements, it also highlights that the integrity of EU and UK markets and legal orders must be respected.  This reinforces the point that, even with advanced SPS and TBT arrangements, it will not completely obviate the need for regulatory checks on products of animal origin and live animals.  It also implies that a level of regulatory checks along the lines of New Zealand or Canadian arrangements with the EU will be required.
    • Competition: the document emphasises the need to ensure a level playing-field between the UK and the EU as there are concerns, on the EU side in particular, that once outside of the EU, the UK will seek to deregulate and gain a competitive advantage.
  • Migration and Travel: in the Withdrawal Agreement, the UK Government was keen to ensure that free-movement would end.  The Political Declaration echoes this, but mentions that arrangements for entry and temporary stay for specific business purposes will be permitted.  It is also intended to have mobility arrangements between both sides, based on non-discrimination and reciprocity between the UK and the EU.  The Common Travel Area between the UK and Ireland would remain unaffected. Building on the provisions of the Withdrawal Agreement, the status of EU migrants already residing in the UK should be relatively unaffected but future migration will be subject to restrictions.  Without an adequate agri-food migrant workers scheme, which encompasses full-time and seasonal workers, this is likely to make access to labour more challenging for businesses. 
  • Transport: there will be arrangements for continued connectivity across aviation, road and maritime transport.  Exactly what will be required for road hauliers to transport loads from the UK to the EU remains to be seen and is an important area to monitor from an agri-food trade perspective. 
  • Governance: a new overarching legal framework is envisaged with a Joint Committee to be established to oversee and manage the implementation of the Future Relationship.  The Declaration emphasises that both parties’ legal statues will be respected.  Any disputes that are unsolved by discussion and consultation would be referred to the Joint Committee which may seek input from an independent arbitration panels whose decisions would be binding on both parties.

Further information on the Political Declaration is available via: https://www.gov.uk/government/publications/withdrawal-agreement-and-political-declaration

Next Steps

The Withdrawal Agreement and Political Declaration will now be subject to ratification by both the UK and EU Parliaments.  The (first) vote in Westminster is due on 11th December.  At present, it looks highly unlikely that it will get passed as there is widespread opposition.  Many privately concede that a second Parliamentary vote will be required and it has a (somewhat) better chance of passing at that point.

All the while, there is momentum building for an alternative ‘Norway plus’ plan being put forward by Nick Boles MP.  As the name implies, the UK would be part of the Single Market (most likely via EFTA/EEA) but agri-food would also be included (agri-food is not part of the Norway deal).  Otherwise, it would not be possible to have frictionless trade on the island of Ireland.  Until alternative Customs arrangements are put in place between the UK and the EU, it is also likely that the UK would be part of a Single Customs Territory as envisaged in the Withdrawal Agreement.  This prevents the UK doing separate Free Trade deals with the rest of the world in the short term.  This plan has many attractions but the biggest issue is that the UK would have to accept free movement which, for many, was the main reason for voting Leave. Without some form of emergency brake on migration being applied for a period of time, it is difficult to see this option succeeding.

Brexit Impact

On 28th November, the Government published its estimates on how Theresa May’s Brexit plan would affect economic output.  It projects that, in 15 years time, using today’s prices, the UK would take a 3.9% hit on national income in comparison to staying within the EU.  These estimates were not modelled exactly on the Withdrawal Agreement provisions but were also partly based on the Chequers plan published during the summer.  Therefore, the Customs Union (Single Customs Territory) that now forms part of the Withdrawal Agreement was not explicitly modelled.  One anticipates that the Government could claim that this arrangement, although politically toxic to some, will mitigate a significant proportion of the GDP hit.

The projections also show that a Canada-style deal would result in a 6.7% hit whilst a No-Deal scenario would shave 9.3% off GDP.  If the UK kept frictionless trade and free movement (i.e. like the Norway plus option) the impact would be just 0.6% of GDP, whilst frictionless trade with migration restrictions would result in a 2.5% hit.

Overall, from an agri-food perspective, if the Withdrawal Agreement is ratified, there would be ‘little’ change for trade until the end of 2020.  Thereafter, regulatory checks of some description are likely to be introduced and these will have a cost impact if imposed.  In the past month, there has been significant progress on the path to withdrawal.  The next phase of the negotiations is likely to see more ‘national’ interests come to the fore from an EU perspective as the French President’s remarks on fisheries access have already alluded to.  All eyes are now on Westminster and the crucial December vote with all scenarios ranging from No-Deal to No-Brexit still in play.