After months of negotiation, the UK and EU agreed a Brexit deal in November 2018. However, this deal cannot come into effect until it has been passed by Parliament. This set of FAQs has been put together to help explain what it might mean for farming if the deal (as currently agreed) is approved.
What is a Customs Union and what would it mean for farming?
Read an explainer from our EU exit team here.
How will a 'deal' be approved?
The 'deal' is made up of two documents - the Withdrawal Agreement and the Political Declaration - and must be ratified by the respective UK and EU Parliaments. In the UK this involves a 'meaningful vote' in the Commons to approve both documents. If the UK Government successfully passes the 'meaningful vote' then the Withdrawal Agreement will be ratified before entering into force as an international treaty. The Withdrawal Agreement will then only be implemented in the UK once the EU Withdrawal Agreement Bill receives Royal Assent. This must occur before the UK leaves the EU in order for the Withdrawal Agreement to have domestic legal effect and to ensure an 'orderly withdrawal' from the EU.
On the EU side the European Parliament will also need to give its consent on the final deal. Return to menu Share this link
When will the UK leave the EU?
EU leaders in Brussels have agreed a 'flextension' of Article 50 until 31 October 2019. This is the new deadline for the UK to leave the EU. However, the UK can leave before then if the Prime Minister can get a deal approved by Parliament.
Background: The UK had been due to leave on 29 March 2019, two years after it started the exit process by invoking Article 50 of the EU's Lisbon Treaty. But the Withdrawal Agreement reached between the EU and UK was rejected three times by UK MPs. Prime Minister Theresa May went back to the EU to ask for another extension, which was agreed. Return to menu Share this link
Why does the NFU think a 'no deal' scenario is catastrophic for British farming?
There are a number of reasons why the NFU believes a disorderly Brexit would have severe impacts, not just on farm businesses and fragile rural economies, but on the wider food industry and the entire UK public who enjoy and rely on a safe and affordable domestic supply of high quality food.
While the precise impact can never be predicted with complete accuracy, it is clear to us that for food and farming, and more broadly for our natural environment and rural communities, there are serious implications of a 'no deal' Brexit. They include:
Exports: In a 'no deal' scenario, EU legislation relating to trade with third countries would effectively result in a trade embargo on the export of UK animals and animal-based products (meat, eggs, dairy, and so on) to the EU. This is because the EU requires third countries to be listed as an approved country for export to the EU. This is not currently the case for the UK, and it could take months after Brexit for such status to be granted. In 2017 the total value of agri-food exports in animal and animal products was £3.15 billion. The lamb industry would be particularly impacted given that in 2017, 31% of domestic sheep meat production was exported and 94% was destined for the EU.
Export tariffs: In 2017 60% of UK food, feed and drink exports were to countries within the EU. In a 'no deal' scenario, UK exports to the EU would face the same tariffs as goods entering the EU from third countries without a preferential trade agreement. Those EU tariffs are set out in the EU’s Common Customs Tariff (CCT) and are particularly high in relation to many agricultural products. For instance, the equivalent ad valorem tariff is 27% on chicken, 46% on lamb, and 65% on beef. The impact on these sectors and many others, all of whom export substantial quantities of product to the EU, would be devastating.
Import tariffs: The 'no deal' applied tariff policy announcement from the UK Government confirms the NFU's view that to leave the EU without a deal in place would be a catastrophe for UK farming. We have very significant concerns with regards to the damage this policy will cause to our farmers as well as to the wider British public. We are deeply concerned that the approach to tariffs published in March 2019 will mean a greater reliance on food produced overseas and with it a diminution of our high environmental and animal welfare standards, a scenario that will not best serve the interests and expectations of the British public.
Inputs: Many farm inputs and supplies are distributed via closely integrated and fast moving European supply chains, including fertilisers, plant protection products, machinery parts and animal feed. For example, we import over 90% of our animal vaccines and medicines and it has been estimated that 20% of veterinary medicine products could face shortages, especially vaccines and biological products. For many of these products it is simply not possible to stockpile, as products have strict sell by dates and often require refrigerated storage.
Organic produce: In a 'no deal' scenario, the EU will no longer recognise UK organic certification bodies, and so we will not be able to export organic products to the EU. The process for applying for approval can only commence after we leave and can take up to nine months. The overall export value of organic products in 2016 was around £188 million. Organic exports are particularly important for the dairy industry, accounting for around 20% of total organic sales.
Jobs, prosperity and the economy: Agriculture is the bedrock of the UK’s largest manufacturing industry, food and drink, worth £108 billion. Volatile farm prices and interrupted supplies risks the jobs of the 4 million people employed in the supply chain. The agricultural implications of a 'no deal' go well beyond the farm gate and the rural economy.Return to menu Share this link
What is the NFU doing to secure the best Brexit outcome for British farming?
The NFU is determined to work on behalf of its members to get the best possible outcome for British farming from Brexit. Avoiding a 'no deal' scenario is the first of the NFU’s six core principles to achieve this. Top of this list is to avoid a disorderly withdrawal from the EU. We have created a dedicated Brexit hub on NFUonline, including a Brexit toolkit which seeks to answer a number of questions and provide help for our members to navigate Brexit. We have written to all MPs in the UK setting out our concerns. We have set out our concerns on the UK’s import tariffs to a letter to the Chancellor and we have engaged in the Government’s 'no deal' preparedness operations to ensure that the concerns and position of UK farmers is taken into consideration. We continue to engage through our offices in Westminster and Brussels, and through the media, to influence decision makers and ensure that the voice of British farming is heard loud and clear.Return to menu Share this link
What is the NFU doing to persuade more people to back British farming and buy British food?
The NFU continues to make the positive case for British food and farming in the media, reaching millions of shoppers through TV and radio interviews, newspaper articles and the associated websites and social media. On top of this the NFU connects with 100,000s of shoppers every week through its Facebook, Twitter, Instagram and Youtube channels. And the NFU's Countryside magazine which is read by 100,000 members of the public every month, proudly tells the positive story of British food and farming in print and online, giving consumers reasons and ways to buy British food and back British farming. Its mission is to champion British food, farming and rural affairs.Return to menu Share this link
What is Operation Yellowhammer?
Operation Yellowhammer is the UK Government’s code name for managing issues arising from a no deal Brexit. The NFU is involved in a number of ways including regular ministerial briefings and frequent conference calls with officials.Return to menu Share this link
Do we have national storage capacity if the government were able to buy up surplus beef and lamb that should have been exported to EU post Brexit?
There have been reports in the media that suggest civil servants are planning for government to buy excess lamb and beef at a predetermined price. The NFU’s priority is to make sure that the EU market remains open for UK beef and lamb and that our product remains competitively priced on the EU market. We don’t believe simply freezing, storing and paying for excess products (which ultimately will return to the market and depress prices at some later point) is the right strategy for government to pursue at this point in time, nor do we believe that there would be sufficient storage facilities in the country to deliver such a plan in practice. Indeed the industry body which represents businesses that store frozen and chilled food show they are at capacity and "full to bursting".Return to menu Share this link
What does the NFU believe the industry will need to mitigate the effects of a no-deal Brexit?
The NFU is working closely with government to determine how best to ensure that the financial viability of all UK farmers is not called into question as a result of a disorderly Brexit. This includes specific aid schemes for farmers in the most affected sectors, rapid payment of all existing farm support payments due, protection from imports of food produced to lower standards and turbo charging investments in productivity and growth to ensure that post Brexit opportunities for the sector are realised.Return to menu Share this link
No deal and tariffs
What is the current situation with tariffs?
As a member of the EU and its single market, we trade freely with the EU. This means there are no tariffs or restrictions on goods moving from the UK to the EU, and vice versa. The EU currently charges non-EU members (that do not have a specific trade agreement in place with the EU) significant import tariffs. In the event of a no-deal Brexit and we leave without an agreement in place, the EU has said it will apply those same significant tariffs to product entering the EU from the UK. On the other hand, the UK has set out its plans to apply much lower tariffs, and in many cases no tariff, on product coming into the UK from the EU. Under the WTO rules, the tariffs applied to EU imports must also apply to imports from the rest of the world, significantly liberalising the UK market.Return to menu Share this link
How are 'no deal' trade tariffs decided by the Government?
We understand that the UK Government used three principles to guide it in this decision. Return to menu Share this link
Firstly impact on consumer prices, secondly impact on domestic producers and thirdly impact on future negotiating capital. In short the UK Government tasked itself with trying to find the sweet spot where tariffs wouldn’t increase prices for the consumer, wouldn’t damage domestic producers and finally doesn’t give everything away now (and therefore leaves leverage to secure concessions for the country in future trade negotiations). This was not an easy task. These three principles sit against the backdrop of the World Trade Organisation (WTO) Most Favoured Nation principle, which means that one country cannot discriminate against another so we cannot, in the event of no deal, offer the EU a preference (for example free market access or a lower tariff) without offering that concession to everyone else.
Why won’t the UK Government apply like-for-like tariffs on imports and exports?
It is for each individual trading nation to set its own import tariffs. The UK currently imports 40% of its food, with 30% of UK food supply coming from the EU. The EU is more than self-sufficient in a number of agricultural products and applies significant tariffs to imports of agri-food products in order to protect EU farmers that produce food to high animal welfare and environmental standards. If the UK applied the same level of tariffs to imports that the EU does, food prices may increase in UK shops. In the event of leaving with no trade agreement in place the EU cannot, under the WTO’s Most Favoured Nation rules, discriminate in favour of the UK. If it offered lower tariff access to the UK, it would have to offer the same to the rest of the world and it will not do that.Return to menu Share this link
Why doesn’t the UK Government change import tariffs to protect our farmers if export tariffs are applied by other countries?
The UK currently imports 40% of its food, with 30% of UK food supply coming from the EU. It has sought to balance the interests of consumers, domestic producers and maintain some leverage for negotiating free trade agreements in the future. If it applied the same level of tariff that the EU currently applies to imports, it is likely that we would see price increases for consumers and significantly higher commodity prices for farmers.Return to menu Share this link
If less British produce goes from the UK to the EU (because they don't want to pay the higher tariffs), does that mean more British produce will end up on British shelves?
Yes it could mean that we seek to sell product that historically there has been limited demand for here in the UK, for example dark poultry meat, pork bellies, offal and greater quantities of lamb.Return to menu Share this link
Wouldn't farmers having access to other international markets instead of just the EU ones be a good thing?
The UK is currently party to hundreds of international agreements through its membership of the European Union, including around 40 Free Trade Agreements (FTAs) with over 70 international partners. These agreements are worth more than £2.8bn in agri-food exports. When the UK leaves the EU we also leave these agreements behind. In order to provide continuity the UK Government is seeking the agreement of our international partners to roll these agreements over. If we leave the EU with a deal the EU agreements will continue to apply during the transition period and we have that time to agree new post Brexit UK-third country agreements which would come into force at the end of that period. However, if we leave the EU without a deal these new agreements must be ready to go from the point of exit or we face a hiatus.
If the agreements cannot be transitioned before the point of exit then the preferences agreed under these deals will be lost. This means that the UK will revert to trading with these partners on WTO non-preferential terms. UK agri-food businesses have been benefiting from the provisions of these EU agreements and have built a customer base who now demand Great British food and drink.
For example in 2017 we exported £4.2 million worth of cheese to South Korea. If the South Korea agreement is not transitioned this cheese would face a tariff of 95% compared to the free access it currently benefits from. In the same year the South Koreans bought £30.2 million worth of British beer made from British malt. Without an agreement this faces a tariff of 30%.
It’s not just finished products at risk, for example in 2017 we also sent £14.2 million worth of frozen poultry offal to the South African Customs Union (Botswana, Lesotho, Namibia, South Africa and Eswatini). Without an agreement in place this faces a tariff of 27%. Without access to this market it puts the delicate carcase balance equation at risk, something which ensures value is derived for the whole bird.Return to menu Share this link
What is the situation on trade with Japan?
Japan is not a significant producer of lamb and there is no tariff on imports of lamb to Japan. This trade in UK lamb would in theory continue in the event of a no-deal Brexit, but the size of the market is relatively small - worth a projected £10m per year for UK lamb sales in comparison to the EU market worth £389m. The bigger picture is that Japan has said that it will not 'roll over' its EU trade deal to the UK in the event of a no-deal Brexit, meaning that other British products such as beef, beer and whisky would be subject to high Japanese import tariffs.Return to menu Share this link
What is the Withdrawal Agreement?
The Withdrawal Agreement is a legally binding international treaty between the EU and UK. Essentially it is the legal divorce between the two parties and primarily covers six main areas:
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- Citizens’ rights – provides the ability for citizens in either jurisdiction to apply for settled status.
- Separation provisions – such as what happens to goods already on the market (e.g. in transit) at the point of exit.
- The financial settlement – the so called ‘divorce bill’, it does not put a value on the figure but sets the mechanism for working it out. The National Audit Office expects this to be in the region of £39 billion.
- Transition period - the Withdrawal Agreement provides for a transition period of 21 months, starting from the point of exit and ending on 31 December 2020.
- Institutional arrangements – these set out how the agreement will be governed.
- Protocols on Cyprus, Gibraltar and Northern Ireland – the section on Northern Ireland is the so called 'Irish backstop'.
How long will the transition be? Can it be extended?
The transition period as provided for in the Withdrawal Agreement will start from the point of exit and ends on 31 December 2020. If the future relationship negotiations have not concluded there is scope for the Transition Period to be extended once for a period of one to two years. The EU–UK Joint Committee which oversees the transition period (made up of EU and UK representatives) must agree an extension of the transition period before 1 July 2020.Return to menu Share this link
What is the 'Irish backstop'?
The Irish backstop has been agreed to ensure that in the event that the future relationship between the UK and the EU is not in place by the end of the transition period, the Good Friday Agreement will be upheld and there will be no hard border on the island of Ireland.
The Irish backstop establishes a Single Customs Territory (or Customs Union) between the UK and the EU, thereby ensuring the free flow of goods between Northern Ireland and Ireland. The agreement is clear that Northern Ireland will not be part of a separate customs territory to the rest of the UK.
A Single Customs Territory would mean no customs duties or quantitative restrictions between the UK and the EU, and it would prohibit taxation on imports in excess of those applying to similar domestic products (i.e. a tariff-free and quota-free market for goods between the EU and UK). It would guarantee that Northern Ireland would be in the same customs territory as Great Britain, therefore ensuring there would be no tariffs, quotas or checks on rules of origin within the UK.
As part of this Customs Union the UK would be committed to align with the EU’s Common External Tariff, and with the Common Commercial Policy on trade in goods with third countries to the extent necessary to give effect to these provisions.
Further to this, Northern Ireland will largely remain in the EU’s single market for goods. This requirement does not extend to the rest of Great Britain, meaning that GB will essentially be treated as a third country by NI for goods passing from GB to NI. It will be for the UK Government to decide the extent to which the UK as a whole will align with single market rules to reduce the inevitable friction that will arise from this arrangement.
Read more about the backstop in the NFU's briefing on the Withdrawal Agreement here.Return to menu Share this link
Can the UK (or the EU) choose to leave the backstop unilaterally?
No, the UK cannot choose to leave the backstop unilaterally unless another alternative is in place which guarantees no hard border on the island of Ireland. The legal advice from the Attorney General confirmed that if no alternative is in place the backstop will be triggered at the end of the transition period and it will continue to apply unless and until, it is superseded by a subsequent agreement.
The Withdrawal Agreement creates a binding international obligation on both the UK and the EU to seek to use their best endeavours, acting in good faith, to reach an agreement on their future relationship that will mean the backstop either does not apply, or applies only for a temporary period.
There is a review procedure for the backstop built into the Agreement. If either the UK or the EU believe that it is no longer necessary, either party can unilaterally instigate a review. The Joint Committee will be obliged to consider the issue and can decide that the Protocol should cease to apply.Return to menu Share this link
What happens to freedom of movement of people?
Transition: Freedom of movement of people remains. UK and EU citizens are free to travel, live and work in either jurisdiction as they are now. All UK nationals residing in the EU, and EU citizens living in the UK at the end of the transition period, will be protected by the same rights they have now. These rights extend to these citizens’ families and family members who may still move freely to reside with others as under current EU law.
EU citizens, UK citizens and their respective family members who move to the UK or an EU state will be able to acquire permanent residence in the host state if they reside there for a continuous period of five years. This includes people who move to a host nation before the end of the transition period. Once they reach the five-year threshold they too will have the right to reside permanently.
Backstop: There is nothing to stop EU citizens travelling across the Irish border as the Common Travel Area between the UK and Ireland would remain in place. This does not extend to rights to jobs or social benefits, and the UK would seek to administer immigration through controls in the workplace and welfare regime.Return to menu Share this link
What happens to budget allocation during transition and during the backstop?
Transition: For the years 2019 and 2020, the UK shall contribute to and participate in the implementation of EU budgets.
If the transition period is extended the UK would cease to participate in the EU budget as if a Member State at the end of 2020. Instead, the UK would make an appropriate financial contribution for the duration of the extension. The UK-EU Joint Committee would agree the amount and a schedule for making payments as part of the decision on extension.
Backstop: If the backstop is invoked there is no commitment for the UK to contribute to the EU budget. However, if the UK chooses to participate in EU programmes during this time then relevant contributions may be due.Return to menu Share this link
Do we get the rebate?
During the transition period (point of exit until 31 December 2020) the UK will continue to receive a rebate as we do now. If the transition was extended past 2020 the UK would no longer receive a rebate. This is because post 2020 there will be a new EU budget which the UK will not be contributing to. If the transition is extended the UK-EU Joint Committee would agree the value of our contributions based on EU services used, so it would essentially become ‘pay-as-you-go’ and as such we would not be a net contributor so would not be due a rebate.
There is currently no commitment for the UK to contribute to the EU budget if the backstop were invoked, so there would be no need for a rebate.Return to menu Share this link
What happens to direct payments and CAP?
Transition: The UK Government has been clear that when we leave the EU we will also leave the Common Agriculture Policy (CAP). The CAP rules and regulations will be transferred over into UK law under the EU Withdrawal Act and so will continue to apply during the transition. However, the government has the power and it has indicated they will use it, to make simplifications to the regulations in 2020.
If the transition is extended beyond 2020 we will remain outside of the direct payments regulation and outside of rural development schemes but the single CMO as it stands at the time would continue to apply.
Backstop: We would be outside of the CAP and would be free to implement our own domestic agricultural policy as per any policies stemming from the Agriculture Bill.Return to menu Share this link
Can we enter into new Free Trade Agreements (FTAs) during the transition or during backstop?
Transition: We can negotiate FTAs but we cannot sign or implement these agreements. Any agreements negotiated would have to come into force after the transition.
Backstop: We are able to negotiate, sign, ratify and implement agreements with third countries. However, as we would be in a Customs Union with the EU we would have to abide by the EU’s external tariffs and customs policy, so any new FTA would have to be aligned with the EU meaning that concessions would have to be given elsewhere (as we would be unable to reduce the ‘tariff wall’).Return to menu Share this link
Will EU FTAs continue to apply to the UK during the transition period or the backstop?
Transition: During the transition any international agreements (including FTAs) which the EU has negotiated will continue to apply to the UK as if it were a member state. The UK and EU have taken a co-operative approach and provided a deal is concluded the EU will notify third countries of this intention. In preparation the UK has been engaging with all relevant third countries and the vast majority support this approach. At the end of the transition period the UK will need to start operating on its own UK only agreements with these third countries.
Backstop: After the transition period the UK must operate on its own UK- third country agreements. It can no longer benefit from any deals negotiated by the EU on our behalf whilst a member state. The relevant sections of any such UK-third country agreements must be aligned to the relevant EU-third country agreement, this is because the EU and UK will be in a Customs Union so must have the same external tariffs and customs policy. For example if the UK were operating on its own agreement with Canada the relevant customs sections of the agreement would need to be aligned to the same sections in CETA (the EU – Canada deal).Return to menu Share this link
What is the Political Declaration?
The Political Declaration is a statement of intent from both the EU and UK and sets out how they envisage the future relationship might work once the transition period (as provided for in the Withdrawal Agreement) is over and the UK is no longer bound by EU rules. The Political Declaration is not legally binding on either party and the document is not all encompassing, meaning that the future relationship may encompass areas of cooperation beyond those described in the document if it is in their mutual interest.
The Declaration makes it clear that the future relationship will be a delicate balance of rights and obligations. It has a lofty aspiration to simultaneously respect the integrity of the EU’s Single Market and the four indivisible freedoms of the Union, alongside the UK’s sovereignty and its decision to end the free movement of people and strike its own trade deals.Return to menu Share this link
The EU and UK envisage a future trading relationship which is ‘as close as possible’, but how close is as close as possible?
The EU and UK envisage a comprehensive free trade area combining deep regulatory and customs cooperation. This should ensure no tariffs, fees, charges or quantitative restrictions across all goods sectors; it should also remove the need for rules of origin checks.
However, the parties also envisage that this trading relationship will be ‘as close as possible’. This is not the same as frictionless trade at the border as set out in the government’s 'Chequers Statement' earlier this year. The extent of UK commitments on customs and regulatory cooperation, including with regard to alignment of rules, would be taken into account in the application of related checks and controls at the borders. This essentially means that at some point in the future the UK will have to make a decision about how much it is prepared to stay aligned to EU rules and regulations in the knowledge that friction at the border would be the likely trade-off.Return to menu Share this link
What about freedom of movement?
The Political Declaration makes it clear that the freedom of movement of people will end after the transition period. In the Declaration both parties commit to the aim of visa free travel for short term visits and suggest similar arrangements would apply to students, exchanges or researchers. However, there is no commitment about those citizens wishing to live and work long term in either jurisdiction. This is something which will be negotiated as part of the future relationship.Return to menu Share this link
What form will the future relationship take?
In the Political Declaration the EU and UK suggest that their future agreement could take the form of an ‘Association Agreement’. The EU has historically used Association Agreements to create 'privileged links' with non-member countries, originally as a precursor to applying for full EU. These privileged links can involve setting up free trade areas, or creating broader economic and political co-operation on areas of mutual interest – so would theoretically fit the needs of our future relationship quite well.Return to menu Share this link
When will the future relationship be negotiated?
The future relationship between the EU and UK will be negotiated after the UK has officially left the EU. This is because the EU cannot negotiate trade deals with member states. In the Political Declaration both the EU and UK commit to beginning the formal process of negotiations as soon as possible after the UK leaves with EU, with the aim of the new arrangement coming into force by the end of 2020.
- Each party will engage in preparatory organisational work with the aim of enabling rapid commencement and progress in formal negotiations.
- Each party should draw up a proposed schedule to deliver the work programme required including identifying areas which will likely require the greatest level of negotiation.
Immediately after the UK’s withdrawal (and based on their preparatory work) both parties will agree a programme including:
- The structure and format of negotiation rounds.
- A formal schedule of negotiating rounds.
Review points: There will be a high level conference convened at least every six months from the date of exit. The conference will take stock of progress and agree (as far as possible) actions to move the negotiations forward.Return to menu Share this link