Tag: Trade

UK Border Controls

The UK Government has confirmed (yet another) delay to the implementation of its post-Brexit border controls on food and fresh products entering the UK from the EU.  This time due to concerns around their impact on inflation.  This is the fifth delay since 2020.

Based on the previous plan, new paperwork requirements including health certificates for certain animal and plant products, as well as for high risk foods, were going to be required from the end of October.  These plans will now be delayed by a further three months meaning that the new paperwork will now not be required until the end of January 2024.

Similarly, the previous plan had envisaged physical checks at the UK border to begin in on 31 January 2024. These will now be deferred by three months until the end of April 2024. Safety and security declarations for EU imports will be delayed until October 2024.

The Cabinet Office published its latest strategy for the Target Border Operating Model (previously called the Border Operating Model) on 29th August. More detail is accessible via: https://www.gov.uk/government/news/new-border-controls-to-protect-the-uk-against-security-and-biosecurity-threats-and-ensure-smooth-flow-of-goods

Separately, the HMRC has also announced a ‘phased approach’ to moving exporters to its new Customs Declaration Service (CDS) which will replace the 30-year old CHIEF IT platform.  The deadline for moving all export declarations to CDS had been 30th November, but exporters will now have until 30th March 2024 to move across to CDS.  Notably, all import declarations have been managed by CDS since October 2022.

These delays once again illustrate the difficulties involved with replacing systems which have been in place for decades. Whilst it is important that the UK gets its border control systems right, there are concerns amongst many in the food industry that imports from the EU are essentially not getting checked. Therefore, the UK is exposed to increased risks from a food safety and food crime perspective.

UK Joins CPTPP

On 16th July, the UK Government formally signed its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).  This comes approximately four months after accession negotiations were agreed and concluded in March (see previous article).  Despite the formal signing of the accession agreement, the entry into force of the agreement will not take place until the latter part of next year.  In the interim, each of the existing CPTPP members will need to ratify the UK’s entry.

Although there has been some lobbying by the Canadian meat industry for Canadian MP’s to vote to block the UK’s entry, this is not anticipated to scupper the deal.  Canadian producers remain unhappy that the UK refuses to recognise Canada’s food safety and animal health systems as being equivalent to its own.  This is chiefly due to Canada’s acceptance of hormone-treated beef and the use of antimicrobial carcase-washes in Canadian abattoirs.

As reported previously, whilst joining the CPTPP might help the UK to gain greater access to some Asia-Pacific markets (particularly Malaysia), its impact from an agricultural perspective looks set to be limited.  This is because the UK already has bilateral trade deals with most CPTPP members and most agricultural trade will continue to be conducted via these bilateral trade deals.  

EU-NZ Trade Deal

On 9th July, the EU and New Zealand (NZ) reached an agreement on a Free Trade Agreement (FTA).  From an agricultural perspective its key provisions include:

  • Elimination of all duties on EU agri-food exports to New Zealand: will be effective upon entry into force.  This also includes wine, confectionary and dairy products including speciality cheeses.
  • NZ access to the EU: greater access has been achieved for its agricultural exports to the EU, including for;
    • Beef: a new tariff rate quota (TRQ) for 10,000 tonnes (t) with a reduced duty of 7.5%.  This volume will be gradually phased in over 7 years from entry into force of the agreement.
    • Sheepmeat: a new 38,000t TRQ to be imported duty-free. Again, this volume will be gradually phased in over 7 years.
    • Milk powder: a 15,000t TRQ with a 20% import duty, to be phased in over 7 years.
    • Butter: for the pre-existing TRQ of 41,177t which currently attracts a 38% import duty, for 21,000t of this TRQ, the duty will gradually be reduced to 5%. There will also be a new butter TRQ of 15,000t which will also see in-quota duty rates gradually fall to 5%. This means the NZ TRQ access will increase to 56,177t, with 36,000t of this seeing duties gradually fall to 5%.
    • Cheese: a new TRQ of 25,000t to be imported duty-free. This will gradually be phased in over 7 years. NZ’s existing TRQs of 6,031t allocated under the EU’s WTO schedule will see tariffs eventually reduced to 0%.
    • High-protein whey: new 3,500t TRQ to be phased in over 7 years at 0% duty.
    • Other TRQs: for sweetcorn (800t) and ethanol (4,000t) will also be eventually at zero duty.
  • Sustainability: both sides claim that the dedicated Chapter on Sustainable Food Systems and Animal Welfare makes significant advances on the provisions of most existing trade deals and that the parties will work together on animal welfare, food, pesticides and fertilisers.
  • Geographic Indicators (GIs): the EU claims that 163 of its most renowned food GI’s will be protected in NZ as well as the full list of GIs for EU wines.  GIs for 23 NZ wines will also be protected in the EU market.

The agreement will draw inevitable comparisons with the UK-NZ trade deal.  Certainly, NZ’s access to the EU market is much more curtailed for beef, sheepmeat and dairy products in comparison to the relatively more generous access that the UK has granted.  Therefore, the competitive pressures exerted on EU producers as a result of this deal will be much less pronounced.  Over the longer term, for EU Member States such as Ireland, the UK-NZ trade deal could end up being more influential on its animal product sales as NZ exports to the UK could displace notable volumes of Irish beef exports to the UK.

Both the EU and NZ will now begin the ratification processes for this deal. Therefore, the entry into force of this FTA is still some time away. 

Trade Deals Study

The Scottish Government has published a study on the impact on Scottish agriculture of Free Trade Agreements (FTAs) between the UK and four selected non-EU partners, namely: Australia; New Zealand (NZ); Canada; and the Gulf Cooperation Council (GCC).  It found that these free-trade deals could have a significant negative impact on certain sectors of Scottish farming, particularly sheep.  The study was undertaken, in 2022, by Andersons and Wageningen University and Research (WUR).

The study quantifies the FTA impacts on selected Scottish agricultural sectors namely: cereals (wheat and barley); livestock (dairy, beef, and sheep); and potatoes.  This was done using two FTA scenarios; high and low liberalisation.  These were modelled alongside the current status quo (UK has left the EU but the Trade and Cooperation Agreement (TCA) is in place).  An Alternative Baseline (No-Brexit) scenario was also briefly examined.

The research was undertaken in collaboration with Wageningen University and Research (WUR) and used a combination of MAGNET, a computable general equilibrium economic model to assess the individual and aggregated impacts of each FTA, as well as desk-based research and interviews with industry experts based in Scotland, the UK, Australia, New Zealand, Canada, and the Gulf region.

Key Results

  • Impact of the selected FTAs is generally limited, but significant in some sectors: as Table A depicts, the projected long-term impact of the FTAs on Scottish output is relatively small in most cases. The exceptions are sheepmeat, where output is forecast to fall by around 10.5% to 11% under the Low and High Liberalisation scenarios. Beef and wheat are also projected to fall (both by around 3% to 6% depending on the scenario). Conversely, liquid milk output is forecast to grow by 3% to 9% in value terms, indicating significant FTA opportunities for dairy products. Barley is forecast to show a small long-term gain.
  • Cumulative impacts of future FTAs will be more significant: although the aggregated impact of the selected FTAs is relatively limited, the cumulative effect of multiple trade deals over the longer term should not be underestimated. This is especially so if the UK agrees FTAs with agricultural powerhouses such as the US and Mercosur (including Brazil and Argentina).
  • FTAs with Australia and NZ are main drivers of declines Scottish sheepmeat output: the new FTA is seen by many as a strong signal for NZ businesses to recapture trade with the UK, which was lost when the UK joined the EEC. Australia will also be keen to increase sheepmeat exports to the UK.
  • Beef sector will come under pressure but some opportunities also exist: whilst imports from Australia and NZ will create more competition, a trade deal with Canada is likely to generate some export opportunities. Given the brand recognition of Scotch beef, it should be relatively well-positioned to exploit such niches. That said, safeguarding domestic sales, particularly to UK retailers, from overseas competitors will remain most crucial.

  • The FTAs with Australia and NZ set important precedents: the recently agreed FTAs with Australia and NZ give important signals to other countries on what the UK is willing to cede in trade negotiations. Therefore, the standards that the UK is willing to accept for imports is pivotal, especially as other FTA partners will likely push for more concessions during negotiations. Any significant changes to standards relating to food safety and hygiene, the environment and animal welfare will have major implications for Scottish produce. This is not just on the home market, but overseas as well, especially in terms of highly-renowned brands such as Scotch Beef.
  • FTA opportunities for dairying the dairy sector is best positioned to see export growth, particularly to the GCC, where Scottish dairy produce has already gained traction in high-end segments. UK exports to GCC in 2018-20 are valued at £38m and could rise by as much as 49% in a High Liberalisation scenario. Opportunities theoretically exist to export to Canada, but, as it is highly protectionist, sales are likely to be limited to select niches.
  • Long-term impact of Brexit is deemed to be limited: Table A also shows relatively small differences in output under the Main Baseline (incorporating Brexit) and the Alternative Baseline (No-Brexit scenario). Although seed potatoes were not modelled, the loss of the EU markets for Scottish seed potato exports is significant and the restoration of this market access is a key goal for the sector. It should also be a primary objective for policy-makers.
  • Significant Farm Business Income (FBI) declines: of up to 60% in some sectors, in both the Main Baseline and FTA Scenarios in comparison with the Base Year (2019/20) although the differences between the Main Baseline and FTA scenarios are quite small. This is chiefly linked with declining prices.
  • New FTAs to have negligible impact on potatoes: industry input suggests that the new FTAs will have minimal impact on seed potatoes’ profitability. Instead, the impact of the loss of the EU market for Scottish seed potatoes is estimated to have led to a decline in seed potato prices of approximately 4%. Restoring market access to the EU27 and Northern Ireland is a priority for the sector.

Overall, the findings that more pressure will be exerted on the Scottish (and UK) beef and sheepmeat sectors are unsurprising as Australia and New Zealand are widely regarded as significant and highly competitive players on the world markets.  That said, the projected extent of declines on output is perhaps not as pronounced as some might have feared, although the declines are still significant.  The report also suggests some opportunities for dairy products, particularly in the Gulf region. 

The Summary Report is available on the Scottish Government website via: https://www.gov.scot/publications/analysis-impact-future-uk-free-trade-agreement-scenarios-scotlands-agricultural-food-drink-sector/

 

Trade Policy Blueprint

The UK Trade and Business Commission, a body consisting of business and political leaders from opposition parties as well as international trade experts, recently launched its blueprint for future trade policy.  It is designed to address key barriers to trade and help grow of the UK economy.  The blueprint was launched at the Trade Unlocked conference in Birmingham.  This event was attended by over 650 businesses, industry leaders and several Labour MPs, including the Shadow International Trade and Foreign Secretaries.  As such, the conference provided an interesting insight to the potential direction of a future Labour Government.  The Commission’s recommendations, if enacted, would have significant implications for agricultural trade.  They include;

  • ‘Beneficial’ alignment with EU Standards and Regulations:  whilst staying outside the EU Single Market and Customs Union, the Commission suggests that there is ‘everything to be gained’ by the UK aligning with EU Standards and Regulations, where it is beneficial to do so.  The Commission also suggests that where it is sensible to diverge, the UK should use its freedom to do so, whilst acknowledging that costs would arise in such instances.  It argues that this would give greater predictability regarding the UK’s regulatory system,  helping investment.  It is also seen as key to achieving a UK-EU Sanitary and Phytosanitary (SPS) and veterinary agreement  – something that a future Labour Government is particularly keen on.  In addition to SPS, other areas where the Commission calls for alignment include;
    • Food safety: the UK should maintain and uphold the key principles of EU food safety standards, including the General Food Law (EC 178/2002) and EU regulation (EC 852/2004) on the hygiene of food stuffs.
    • Chemical contaminants and residue monitoring: continue to align with EU maximum residue limits (MRLs) for pesticides and align veterinary drugs’ regulations with the EU.
    • Foodborne disease surveillance and outbreak response: the UK should actively participate in the various EU surveillance networks and systems including the Rapid Alert System for Food and Feed (RASFF) and have close collaboration with the EU across a range of other disease-related areas.
    • Safeguard against lower quality imports: the UK Government should ensure that imported food products meet minimum regulatory standards that apply to domestically produced food, including on environmental requirements and animal welfare.
    • Organic food equivalence: maintain regulatory alignment between the UK and EU for organic food standards to facilitate continued equivalence beyond December 2023.
  • Establish a new regulatory forum for trade cooperation with the EU: this UK-EU Regulatory Council would be styled on the US-Canadian Regulatory Cooperation Council and would aim to reduce non-tariff trade barriers and build on the commitments made in the Windsor Framework.  It would be established ahead of the 2026 review of the UK-EU Trade and Cooperation Agreement. This is a sensible approach and the US-Canada relationship provides a useful template for how the future UK-EU trading relationship should be managed.
  • Establish a new UK Board of Trade: this would be an independent body acting for the Department for Trade and Business in much the same way as the Office for Budgetary Responsibility (OBR) acts for the Treasury. As such, it would impartially assess the UK’s trading performance and help to drive improvements across Government.  It would also provide impact assessments of new and existing trade deals and assess areas of divergence between the UK’s and other trading blocs’ regulations that will benefit the UK economy.  Its board would include representatives from major UK business organisations, SMEs, trade unions, devolved Governments, and senior experts in trade and regulation. One would imagine that if such a body were established that it would supplant many of the functions of the Trade and Agriculture Commission.
  • Visa system reform: to address labour shortages, including in agriculture.  This would include a comprehensive review of the Seasonal Worker Visa Scheme to determine areas for improvement and give greater long-term certainty to businesses.  It also calls for the reform of short-term and business visa rules to enable corporations to bring in highly-skilled personnel for short-term projects and to extend the maximum permissible stays under business visas to enable UK businesses to pursue longer-term projects.  It also calls for a bilateral and reciprocal Youth Mobility Visa Scheme with the EU allowing young people (aged 18-35) to travel and work in both UK and the EU for up to five years.  In addition, it calls for the UK to develop targeted skills development programmes to address labour shortages in specific sectors.  Many in the agri-food sector are likely to be sceptical about this latter recommendation as numerous organisations have tried to recruit and train indigenous workers, with minimal success. 

Overall, given the make-up of the UK Trade and Business Commission, and statements by Shadow Ministers at the UK Trade Unlocked conference, it is evident that a future Labour Government will seek a much closer relationship with the EU.  Whilst the EU will be open to such an approach, it has other priorities given what is happening in Eastern Europe.  Its appetite for any renegotiation of the Brexit deal is minimal.  This is recognised in Labour circles; hence the focus of the UK aligning with EU regulations.  The EU will also push back strongly on any attempts to dilute what it sees as the indivisibility of the Four Freedoms of the EU Single Market.  Without free movement of people and leaving open the possibility for UK regulations to diverge in the future, the EU will not offer the UK frictionless trade.  That said, significant improvements are possible and should be pursued. 

The full report is accessible via: https://www.tradeandbusiness.uk/blueprint

Image source: Best for Britain

Agreement Reached on UK Joining the CPTPP

On 31st March, the UK Government completed negotiations to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), following over 2 years of negotiations.  Whilst the accession agreement was signed at a virtual meeting of Trade Ministers, the legal text of the agreement has yet to be published, and there will be a ratification process in the UK similar to that of other recent trade deals (e.g. Australia and New Zealand).  The key points from an agricultural perspective are:

  • General economic impact: the UK will be joining a trade bloc of 11 countries, accounting for about 7% of global GDP.  The UK already has bilateral trade agreements in place (or pending ratification in the case of Australia and New Zealand) with nine of these members, the other two being Malaysia and Brunei. Therefore, the additional economic gain from joining the CPTPP will be limited at a national level, with the UK Government estimating that it will boost UK GDP by 0.08% in the next decade.  From an agri-food perspective, the UK joining the CPTPP will not alter the level of access that Australian and New Zealand exporters will have to the UK market.
  • Import tariff concessions:
    • Palm oil: controversially, import duties on Malaysian palm oil (currently up to 12%) will be eliminated upon entry into force.  Given the environmental concerns around deforestation associated with palm oil production in Malaysia, this will attract strong criticism.  The UK and Malaysian Governments have attempted to address this by publishing a joint statement as part of the environment chapter of the agreement which sets out commitments to promote sustainable production and protecting forests.  Palm oil may provide greater competition for domestically-grown oilseed rape.
    • Sheepmeat: Australian and NZ exports to the UK will remain subject to the TRQs outlined in the UK’s bilateral Free Trade Agreements (FTAs) with these countries.  Duties on imports from other countries, which are minimal, will be eliminated from entry into force.
    • Eggs:  Australian eggs will remain subject to the UK’s Global Tariff. Duties on imports from other countries will be eliminated over a 10-year period, although imports from these countries are likely to remain minimal.
  • Tariff Rate Quotas (TRQs) on Imports to the UK: the following new TRQs have been agreed
    • Beef: a new duty-free TRQ of 13Kt will be phased in over 10 years and will start at 2.6Kt.  It only be available to Canada, Mexico, Chile, Peru, Malaysia and Brunei.  Importantly, any beef imports will have to meet UK Sanitary and Phytosanitary (SPS) requirements.  The Canadians sought UK acceptance of its standards (which permit hormone-treated beef), but the UK withstood this.  Also, Australia and New Zealand will not get any further access to the UK market under the CPTPP.
    • Pork: a 55Kt TRQ will be phased in over 10 years (starting at 10Kt).  Again, this will be available to the same countries listed above.  Vietnam and Singapore will also have access to this TRQ for an initial 3-5 year period before their duties are eliminated via a bilateral FTA with the UK.  This TRQ could present some competitive threats from the likes of Canada and Mexico, although some commentators don’t believe that Canada will pose an immediate threat as it currently only utilises a small proportion of its potential TRQ under pre-existing agreements.
    • Chicken: a TRQ of 10Kt will again be available to the countries listed above.  A 10-year phase-in period will again apply.  Vietnam and Singapore will again have access to this TRQ for an initial 3-5 year period before tariffs on imports from these countries are eliminated.
    • Sugar: a 25Kt tonne TRQ will be shared by Brunei, Chile, Malaysia, Peru, and Vietnam.  Canada will also have access to this TRQ for an initial two-year period before its tariffs will be eliminated as per the bilateral (roll-over) FTA that the UK has with Canada.
    • Rice: for long-grain milled rice, there will be a 10Kt TRQ to be shared by Brunei, Chile, Malaysia, and Peru.  Most-favoured nation (MFN) duties will continue for rice from Australia, Japan and Mexico.
    • Other CPTPP countries: will have access to the UK market as agreed in existing (pending) bilateral trade deals.  As our previous articles on the Australian and New Zealand trade deals have noted, bilateral TRQs of beef and lamb will be phased in over 15 years, whilst dairy TRQs will be phased in over 5 years.
  • Tariffs and TRQs on UK Exports: as the UK was perceived to be quite defensive in the access that it is offering to importers, the market access for UK exports has also been limited to some key areas, including:
    • Whisky: exports to Malaysia will see tariffs of up to 80% being reduced down to zero over a 10-year period which should help Scotch whisky to gain further market share. This is seen as a significant win for the UK.
    • Dairy exports: the Canadian Government has not made any additional market openings available. This means that the UK will need to compete with other members for Canada’s CPTPP TRQs for dairy products (16.5 Kt). This is unsurprising given the UK’s stance on Canadian beef imports and the Canadian dairy sector is highly protected.  There will be similar additional cheese TRQ of 6.5Kt on exports to Mexico, again, this will be shared with other CPTPP members.  Similar arrangements to Canada will be put in place for to any UK dairy exports to Chile, Japan, Mexico, Peru and Vietnam.
    • Beef: British exports of beef will be subject to a TRQ under the CPTPP.  There is limited further detail at this stage and it will require the publication of legal texts to confirm what is available.   In 2022, it is estimated that the UK exported 4.4Kt of beef to Canada and the CPTPP potentially presents an opportunity to grow this volume.  Tariffs on UK beef exports to Mexico (up to 25%) will be eliminated after a staging period.  There will also be staged liberalisation on exports to Peru, although export opportunities to Latin America will be limited.
    • Pork and poultry: tariffs on UK exports to Mexico, of up to 25% and 75% respectively for pork and poultry, will be eliminated over a staging period.  Similar provisions will apply to poultry meat exports to Peru and pork exports to Vietnam.
    • Other goods’ exports: over 99% of UK goods’ exports will be eligible for tariff-free trade upon accession.  For other goods where tariffs are being phased out, the UK has agreed to catch-up to other CPTPP members who are in Year 6 of their various multi-year tariff phase-out schedules.  Importantly for the UK, this includes Malaysia agreeing to phase out its 30% tariff on car imports.
  • Sanitary and Phytosanitary (SPS) measures: as mentioned above, the UK has offered no concessions on this.  However, the deal does provide a framework for more transparency and information sharing on SPS issues, which would help with addressing food fraud.  The UK has also managed to formalise the principle of ‘regionalisation’ meaning that in the event of animal or plant disease outbreaks, trade restrictions would only be limited to affected regions.
  • Other provisions: for goods, there will be multilateral cumulation which basically means that intermediate goods (e.g. car parts) from any country will count as ‘local’ for the purpose of accessing tariff concessions on trade within the bloc.  So, UK car parts sold to a Vietnamese automotive plant would be classed as local for any Vietnamese car exports from that plant to Malaysia.  In terms of services, UK companies will be able to operate in all CPTPP countries without the need to establish a local base in each territory.  This will be a significant gain for the UK financial services sector in particular.  The CPTPP chapter on the environment largely formalises commitments made by the UK and other CPTPP members under other international agreements.

Overall, whilst joining the CPTPP might help the UK to gain greater access to some Asia-Pacific markets (particularly Malaysia), its impact from an agricultural perspective looks set to be limited.  As mentioned above, the UK already has bilateral trade deals with most members and most agricultural trade will continue to be conducted via these bilateral trade deals.  In the longer term, a bigger issue could be what happens if the US joins the CPTPP, as it had agreed to join its predecessor (the Trans-Pacific Partnership), until the Trump administration pulled out.  Although the current US administration is not overly focused on international trade, the prospect of a future US administration re-joining a Pacific trade bloc (CPTPP, or a subsequent deal) should not be ruled out.  This would have much more significant implications for agriculture from both a market access and SPS perspective.

What happens next?

  • The legal text of the agreement will be formalised and published in due course.
  • From there, the agreement will come under Parliamentary scrutiny and this should include an examination and report by the Trade and Agriculture Commission; similar to the reports it compiled for the Australia and New Zealand trade deals.  This will be done to verify that accession to the CPTPP is consistent with UK laws concerning animal welfare, food safety and environmental protection.
  • Existing CPTPP members will also have their own ratification processes, which could potentially result in delays, although this is not anticipated as things stand.
  • The UK is expected to be formally approved to join during a Ministerial meeting of CPTPP members during the summer, with the ratification process will then need to be completed by all CPTPP members.

Further information can be obtained via: https://www.gov.uk/government/publications/comprehensive-and-progressive-agreement-for-trans-pacific-partnershipcptpp-conclusion-of-negotiations/conclusion-of-negotiations-on-the-accession-of-the-united-kingdom-of-great-britain-and-northern-ireland-to-the-comprehensive-and-progressive-trans-pac

Windsor Framework Agreement

On 27th February, the UK Government and EU Commission reached an agreement on the implementation of the Northern Ireland (NI) Protocol – the ‘Windsor Framework’.  The deal emerged after months of, often arduous, negotiations and is heralded as a major breakthrough by both the UK and EU negotiators.  It is hoped that this framework will resolve the thorniest issue of the entire Brexit process and has been welcomed by most Northern Irish stakeholders, although the DUP have yet to give an official view on the Framework, which is not expected until April.

The key aspects of the agreement are:

  • Customs Procedures for Goods: there will be a ‘green lane’ for goods moving from Great Britain (GB) into NI which will be consumed in Northern Ireland and not deemed to be at risk of moving into the EU Single Market.  For such goods, nearly all customs procedures will be scrapped.  Goods deemed to be at risk of moving into the EU Single Market will be moved through a red lane, where EU border controls will apply.
  • Chilled Meats: products such as sausages which are sold in GB supermarkets will also be available in Northern Ireland, provided that they are shipped into Northern Ireland by trusted traders.  Chilled meats are usually prohibited from import into the EU Single Market or require arduous certification procedures (sometimes hundreds of certificates for a container with chilled meat and animal products for the retail sector).  This will now be replaced by a single document confirming that the goods will stay in Northern Ireland and are moved in line with the terms of the UK’s internal market scheme.  This is a significant concession from the EU.  It is also a sensible one on the basis that such products are for consumption in Northern Ireland and there is now real-time data on the movement of goods from GB to NI, giving the EU the visibility it needs to ensure that no fraudulent activity is taking place. Any physical or identity checks that do take place will be on a risk and intelligence-led basis, based on decisions by UK authorities.
  • Seed Potatoes, Plants and Trees: certain plant and crop products had been either prohibited from entry into NI from GB since January 2021, or required lengthy certification processes.  Such trade can now recommence under the provisions of the Windsor Framework.  This is seen as a big boost for the seed potato sector in particular.  However, seed potatoes will still be prohibited from being sold to the Republic of Ireland.
  • VAT and Excise Duties: the NI Protocol’s legal text has been amended so that the UK can set VAT and excise duties for the whole of the UK.  It means that the reforms to alcohol duties taking effect in the UK in the summer will now apply to NI, thus lowering the price of beer in NI pubs for instance.
  • Parcels and Online Shopping: no paperwork will be required for parcels moving from GB to NI.
  • Pet Travel: documentary requirements and associated treatments and inoculations that are usually required by the EU have been removed for travel between GB and NI.
  • Applicability of EU Law in Northern Ireland: has been reduced substantially (estimated by the NI Secretary to be 97%) and now only focuses on the ‘minimum necessary’ to avoid a hard border on the island of Ireland.  The EU notes that the European Court of Justice (ECJ) will still have a final say on Single Market issues.  However, it is envisaged that its role will be greatly reduced due to the provisions outlined above and also because of the data sharing, labelling and enforcement procedures within the Windsor Framework.  This will help to safeguard the Single Market whilst also giving opportunities to resolve differences without having to revert to the ECJ.
  • ‘Stormont Brake’: this new mechanism is designed to give the Northern Irish Assembly the opportunity to pull an emergency brake on EU legislative changes which would apply in Northern Ireland.  It is designed to address concerns, particularly amongst Unionists, on what they perceive to be a democratic deficit of the NI Protocol as agreed in 2020.

For the brake to activate, it would require cross-community support and would need a minimum of 30 Assembly MLAs from at least 2 parties to agree to its activation.  The EU stresses that this can only be activated in exceptional and emergency circumstances, where there is a significant impact specific to everyday life in Northern Ireland.  It is also planned to have greater consultation between the UK and the EU on new EU legislation so as to minimise instances of the Stormont Brake being activated.  Once triggered, the UK Government would notify the EU of its activation.  The rule in question would automatically be suspended from coming into effect.  It could only then be reapplied if the UK and EU jointly agree.  If the suspension remains, the EU reserves the right to respond with remedial action to protect its Single Market.  For the Stormont Brake to become an option, it requires a functioning NI Assembly and is seen as a bid to get the NI Executive back up and running.

Overall, the Windsor Framework strikes a pragmatic and careful balance between the concerns of the UK Government and Unionists who wish to ensure that Northern Ireland remains an integral part of the UK, and of the EU in ensuring that its Single Market is protected.  With hindsight, it was the sort of balance that should have been struck when the original Protocol was negotiated in late 2020, but which ended up being rushed and was negotiated without enough attention to the nuance needed for the unique circumstances of Northern Ireland.  Importantly, by giving NI unfettered access to both the UK Internal Market and the EU Single Market, the Windsor Framework gives Northern Ireland the potential for strong economic growth, not just in agri-food but across NI industry generally. Undoubtedly, the Protocol will need further refinements in the years ahead as will the UK-EU trading relationship more generally.  This is as it should be, as trading relationships between near neighbours are constantly fine-tuned.  The US-Canada relationship is a prime example of this.

NI Protocol Deal

At the time of writing (morning of 27th February), it is expected that a deal will be imminently reached between the UK Government and the EU on the implementation of the Northern Ireland (NI) Protocol.  The European Commission President (Ursula von der Leyen) is travelling to the UK today for high-level talks with the Prime Minister to address the final list of issues which are said to require top-level scrutiny by both leaders.

It is said that the remaining issues centre primarily around the role for the Northern Ireland Assembly in having a say around how EU Law is applied in Northern Ireland.  Some also suggest that there will be further discussion around the role of the European Court of Justice, although this is mainly seen as an issue for the European Research Group (ERG) within the Conservative Party.

Although both the UK Government and the EU have remained tight-lipped about the details of the deal, it is widely believed that the deal will remove checks for goods crossing from Great Britain (GB) into NI which are destined for Northern Ireland only.  Key to achieving this has been the real-time access to shipments’ data on goods crossing from GB to NI which has enabled the EU to adopt a more flexible approach.

After meeting with Ursula von der Leyen, the Prime Minister will hold a virtual Cabinet Meeting to discuss the details of the deal (if agreed).  From there, Rishi Sunak will then brief the House of Commons in the evening.  Whilst the deal is imminent, there will still be significant hurdles to surmount including whether the DUP and the ERG wing of the Tory party will support it.  However, Labour has said that it will support the deal.  Many are hoping that this will be one of the last major moments in the Brexit saga.  With numerous other challenges to tackle, all key stakeholders, particularly agri-food businesses are keen for these issues to be resolved so that there can be some certainty on trading arrangements between GB, NI and the EU in the coming years.

As soon as the text of the deal emerges, we will update readers via an online article.

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.

NI Protocol Negotiations

Negotiations between the UK and the EU on making amendments to the Northern Ireland (NI) Protocol have dominated the trade agenda in recent weeks.  There have been promising signs of progress, although significant hurdles need to be overcome if an agreement is to be reached by April (to coincide with the 25th anniversary of the Belfast Good Friday Agreement).

The announcement, on 9th January, of a data sharing agreement between the UK and the EU is key development as it permits the EU to gain real-time access to data on goods movements between Great Britain (GB) and NI.  The EU sees this as a critical pre-requisite towards rebuilding trust in UK-EU relations and in permitting the EU to consider introducing greater flexibility in how regulatory checks on goods coming from GB into NI are undertaken.  However, this data-sharing agreement is only a first step and there are serious differences to reconcile in other areas.

Most notably, an agreement on the levels of Sanitary and Phytosanitary (SPS) and Customs checks on goods remains unresolved.  This is especially important for agri-food trade.  Previously, the UK had proposed a ‘green channel’ at ports which would permit goods destined to stay in Northern Ireland to be waved through without customs paperwork.  A ‘red channel’ would be set-up for shipments destined for the Republic of Ireland.  This set-up would be complemented by a Trusted Trader scheme and fines to minimise non-compliance.  Such proposals were dismissed by the EU as being insufficient to protect the integrity of its Single Market.

Back in October 2021, the EU proposed an ‘express lane’ for goods destined to stay in NI, although Customs paperwork would still be required.  At the time, these proposals were dismissed by both the UK Government and the DUP as being unacceptable because of the border it would create on the Irish Sea which would undermine the integrity of the UK.

The current negotiations are focusing on finding a landing zone between the green channel and express lane approaches.  If this conundrum could be resolved, a pathway towards an agreement between the UK Government and the EU should emerge.  However, concerns persist as to whether the DUP would accept this.  So, whilst the mood music has changed and progress is being made, it remains premature to expect an agreement yet.  Talks are likely to continue until April and beyond. What might yet emerge is a ‘fudge’ based on more temporary arrangements similar to the extension of the grace period for checks on veterinary medicines traded between GB and NI agreed last month.