Chief Horticulture Adviser Hayley Campbell-Gibbons looks at possible trade outcomes and implications for the horticulture sector post-Brexit.
Trade negotiations between the UK and EU are ramping up, and the UK is eyeing up potential suitors for future deals. Meanwhile face-time with staff at the World Trade Organisation’s (WTO) Geneva headquarters is in high demand as delegations from every sector of industry and hierarchy of government embark on fact finding missions to comprehend the complex legalities and practicalities that the UK’s new found independence within the WTO will involve.
Trade talk is everywhere. From cabinet level statements, positions from all sectors of industry, intelligent ‘thinkpieces’ from intelligent ‘thinktanks’ and media analysis of the suitability of the UK getting into bed with any number of international players.
Agriculture and horticulture feature prominently on the trade agenda, and have received due attention in the debates so far. But, from a grower’s perspective, what aspects of the trade negotiations are relevant to an individual business, and what are the nitty gritty issues at the forefront of food producer’s minds?
Let’s start with what we do know about trade in our industry.
The UK imports 67% of all its fresh produce, almost 6 million tonnes, from over 95 countries, with a third coming from the EU. Fruit and vegetables form the highest value category of imports for unprocessed food, worth over £5 billion – a figure that has risen in recent years. Of the products we import bananas account for over 1 million tonnes, followed by apples, tomatoes, citrus fruits, onions, peppers and grapes each accounting for between 200,000 and 300,000 tonnes.
Non-food imports are also significant, cut-flowers alone account for £666 million. 78% of ornamental imports hail from The Netherlands, mainly cut roses and carnations, and Columbia 3.4%.
The trade we have with the EU is nothing short of vital for ensuring that we all, as consumers, continue to enjoy a consistent and reliable supply of the fruit and vegetable products we want to buy, at a price that isn’t inflated by import tariffs.
From a horticultural point of view alone it’s plain to see why it is in the UK’s interests to develop a beneficial or ‘special’ trading relationship with the EU, one where we can still enjoy free trade between the UK and EU member states.
But, it’s equally vital that the UK Government extends these special trading agreements to encompass the third countries from whom we import in order to sustain our supply of products throughout the year.
Here’re the questions and concerns I’m hearing most from growers:
For some growers and packers, the ability to import food – either from farms located abroad, or overseas suppliers – is critical for ensuring efficient year-round supply to retailers and efficient throughput in a pack house. Any changes to tariff free trade within the EU, or disruption to the supply of goods from third countries could quickly and drastically affect the availability and cost of fruit and vegetables. The ability of the UK government to replicate the existing EU Free Trade Agreements, like the West Africa agreement, will be critical to a seamless transition. The UK Government has committed to replicate all the existing free trade agreements the EU has in place; but there are still question marks over whether it is in the UK Government’s gift to inherit such agreements, especially as an independent member of the WTO.
Being part of the EU customs union has meant food from the EU can be imported with no customs barriers. But, the Government has stated that the UK will be leaving the customs union. If the Chequers Plan wins out, we should, with everything crossed, expect things to carry on as per usual. If not, there’s potential for a whole heap of problems. Trading with the EU is very easy at present. Portsmouth, Southampton, Dover and Tilbury ports do not have the staff, IT systems or physical infrastructure to meet the increased demand that would come with checking EU and non-EU imports. Any delays could choke the UK’s ports and threaten the availability of some food products. UK business would face new paperwork requirements making trade more complicated and less efficient. It’s likely this could have a bigger impact on competitiveness than tariffs, especially for small companies. The Government’s proposed alternative is to allow EU imports through with no, or very few, checks: this raises safety concerns as well as questions over how customs charges would be processed.
That depends. If we leave the EU without a comprehensive trade deal; or any trade deal for that matter, the UK would revert to trading with the EU on the same basis as other WTO members. That means the UK government will have to decide what, if any, tariffs it applies on imports; including those from the EU. Anything the UK exports will be subject to EU tariffs too. We’ve established that exports of UK horticulture products are minimal; valued at just £250 million for fresh fruit, vegetables and ornamentals combined – a mere fraction of the import value of over £6 billion (see box below). So, it’s the deal on imports that matters most to the horticulture sector. Imports of horticultural produce into the EU are currently subject to import tariffs. In most cases, these are ‘ad valorem’ tariffs (a rate charged according to the value of goods and services, rather than a fixed fee) of below 20 per cent and, for some products, they vary seasonally. Importantly, though they seem to get the balance about right. They don’t present a disincentive to importers, yet they do offer something of a buffer to UK growers from extremes price competition, controlling volumes, and at what time of year from global suppliers. The bottom line is that if the government chose not to apply tariffs on imports from third countries after Brexit for fear of causing food price rises (which the Department of International Trade has already said it’s considering) it could leave British growers more vulnerable to cheaper imports and competition, and at times of year we aren’t currently.
It could be for some sectors! If the UK government does slap tariffs on goods coming into the UK British gear becomes more competitive overnight. Good, right? Well, maybe. If tariffs are applied to imported goods the CBI estimates that the cost paid by UK consumers and businesses on imported goods could reach £13 billion (around 0.7% of GDP, with an average tariff rate of almost 6%). That’s ‘gotta hurt. The CBI is not alone. The House of Lords EU Committee’s report into Brexit and food availability argued that ‘no deal Brexit’ would result in an average tariff on food imports of 22%, meaning that prices paid at the checkout would rise. These projections make tariffs an unlikely option for government, but if imported product does cost more it could drive sales of home grown fruit and vegetables, and, longer term, creates scope for British producers to seize a larger share of the home market. There is a sizeable chunk of imported produce that could be grown domestically – for example, imports make up the majority of supplies for apples (60 per cent), pears (85 per cent) and plums (80 per cent), and over 50% of brassicas and onions; so there could be opportunities from a change in trade arrangements. Let’s not fall into the trap that Donald Trump is accused of, however, in thinking that reducing a trade deficit is the Holy Grail. There is an argument that if somebody is able to supply something cheaper than you can, let them, leaving you to focus on adding value elsewhere.
Once the UK is flying solo the government is at liberty to negotiate FTAs with new partners of its choosing, as well as make amendments to any EU agreements we inherit. Just as significant as tariffs are non-tariff barriers - often used to limit trade in horticultural products on the grounds of environmental protection, safety, consumer information and to protect human, animal or plant health. The UK hopes to borrow from the existing EU rulebook to begin with in the form of some epic cut and paste exercise. To that end the EU Withdrawal Bill will enshrine EU regulations into UK law to begin with. Government has said that it won’t accept goods with standards lower than our own in new trade deals, but it’s difficult to guarantee this when trade deals are usually done on a macro-economic level. Agricultural products and market access could be a useful pawn in a bigger game of economic chess. It’s possible that supermarket’s own standards will offer an additional buffer, controlling what makes its way onto supermarket shelves. Until we actually leave the EU we won’t see the detail of any new deal. That said, the courtship of potential suitors has already begun. The most obvious being Trump’s recent visit to Blightly. Although his remarks about there being big opportunities for US producers in a UK/US trade deal won’t fill many of us with confidence. I have a mental image of Jonah and the Whale that I just can’t shake.
The UK imports around 3.7million tonnes of fruit a year, worth over £3 billion – largely crops that cannot be competitively or feasibly produced here such as bananas (which made up nearly a third of the total value), citrus fruit and melons.
On the vegetable side the UK imports 2.3 million tonnes of tomatoes, sweet peppers, lettuce, cucumbers, cauliflowers, broccoli, cabbages and onions to the tune of £2.1 billion. More than 80 per cent of vegetable imports come from the EU, with Spain, the Netherlands and, for some crops, Ireland, the major suppliers.
Outside fresh produce, the UK imports more than £1 billion worth of ornamental horticultural produce – mainly cut flowers from Columbia, Kenya and the Netherlands – but also live plants, cuttings and bulbs from the EU.
There are some exceptions on exports. Narcissus bulbs, worth up to £5 million annually, are exported predominantly to the US; and UK produced wine – in a good year the UK can produce between 5 – 8 million bottles and exports to the US, Australia and Japan. Source: AHDB