Brexit involves an unprecedented fracture of the single market, with Ireland particularly exposed. Agri-food and drink remains particularly reliant on the UK market and is the sector most exposed to Brexit. Whilst the UK as a percentage of our overall exports has dropped in recent years and now stands at 37%, in value terms it continues to increase and now stands at €4.5bn (a 32% increase since 2010).
This demonstrates the importance of maintaining our market position in this high value, high quality market that has a substantial food deficit and not losing the market to global competitors.
Ireland’s food and drink exposure in absolute value terms is similar to other large exporters to the UK, such as France, Belgium, the Netherlands, Germany, or Italy. However, in percentage terms it is four or five times higher: typically, less than 10% of their agri-food exports are to UK. This highlights the unique circumstances faced by Irish agri-food and the need for exceptional mitigation measures.
A further €4bn of exports go to EU26 with most using the UK as a land bridge. It is also an important trade route in the other direction for food ingredients and finished goods travelling from the continent.
Irish companies are already experiencing the effects of Brexit – from the pound’s depreciation since June 2016, to massive uncertainty for production, logistics and consumer sentiment, to the cost of contingency stocks.
In the event of a no deal Brexit and the immediate imposition of tariffs and restrictive tariff-rate quotas (TRQs), it is therefore vital that the EU institutions and national governments recognise the potential for economic disruption and take decisive steps to offset such risks.
Tariffs are in effect a tax on trade and commerce. They would decimate much of Ireland’s agri-food exports to the UK. In order to support businesses during a hard Brexit, alleviation measures will be needed to support Irish agri-food. Tariffs flow back to central exchequers at national and EU level and must be recycled into a tariff stabilisation fund to offset serious damage to exports and job losses.
Additionally, a temporary EU state aid framework to support companies through any adjustment period with funds amounting to 5% of the value of current annual export sales to the UK will be needed annually for three years from domestic and EU sources to help Irish companies innovate, diversify into new markets, train staff and invest for the future in capital towards enabling technology, carbon efficiency, plant renewal and expansion geared to improved competitiveness. Measures are also needed to ensure land bridge access to continental Europe and the provision of sufficient capacity on direct sea routes.
In the event of approval of the Withdrawal Agreement, discussions will begin on the future relationship between the EU and the UK. In addition to guaranteeing tariff and quota free trade, a priority for the food and drink sector will be the minimisation of regulatory divergence in the sector.
The focus should also be to establish a mechanism that will allow keeping EU and UK food standards under the scope of veterinary legislation as well as under food law in general, as closely aligned as possible and ensuring mutual recognition of SPS certification (food safety and phytosanitary) by the EU and the UK.
A continued close relationship between the UK and EFSA is also key to continued future alignment of food standards. The objective must be continuing joint risk assessment with a common database to minimise divergence in standards and avoid trade impediments.
By Paul Kelly, Director of Food Drink Ireland.
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.