Farm Ireland

Sunday 19 November 2017

Are there opportunities for Irish agriculture post Brexit?

The magnitude of any opportunity for the Irish agri-food sector will depend on several factors. Photo: Reuters
The magnitude of any opportunity for the Irish agri-food sector will depend on several factors. Photo: Reuters

Kevin Hanrahan and Trevor Donnellan

If the level of financial support offered by the UK government to UK farming under the BAP is lower than under the CAP, will this provide the Irish agri-food sector with greater export opportunities?

The magnitude of any opportunity for the Irish agri-food sector will depend on several factors:

  • the size of the reduction of direct income support under a future BAP, as compared to the CAP;
  • the supply response from UK farmers to reduced levels of decoupled direct payments (i.e. by how much will UK production contract) and;
  • the trade policy setting (whether Irish exports to the UK face tariffs and whether other non-EU suppliers faces higher or lower tariff barriers).

A contraction in the indigenous UK supply of agri-food commodities such as beef, sheep meat, butter or cheese might be expected to lead to opportunities for Irish exporters.

However, the competitiveness of Irish exports to the UK market in the future will depend on whether tariffs are applied to EU and non-EU exporters to the UK.

The uncertainty over the shape of both future UK agricultural and UK agri-food trade policy is unlikely to be resolved rapidly. The process of negotiating the UK exit from the EU and of agreeing a new trade agreement with the EU could extend beyond 2020.

This means that the current uncertainty concerning access to Ireland’s most important market in the post-Brexit era will continue.

For the next two years at least, while the UK will certainly remain an EU member, access to the UK market will continue to be unimpeded.

However, the challenge faced by the Irish agri-food sector will prepare it for a world where the UK is not as important or lucrative a market for Irish agri-food exports as it is currently.

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What will be the impact of high and low barriers for agriculture post Brexit?

If the UK does not remain a member of the Single Market, then any UK trade policy put in place will mean at least some increase in the costs of exporting to and importing from the UK for the Irish agri-food sector.

Without access to the Single Market, UK exporters would face the so called EU common external tariff when exporting goods to Ireland and other EU Member States. This is the tariff that the EU currently applies to imports from fellow WTO members.

In these circumstances it is not clear what tariffs Irish exporters to the UK market would face, as it would be a decision which the UK government would independently make. In this regard, the UK would have two options:

  • No tariffs on imports to the UK: If the UK chooses not to levy any tariffs on imports of agri-food goods, ie, to unilaterally liberalise trade, then the terms of market access for Irish firms to the UK will be just as they are now. However, Irish exporters would still face greater competition in the UK, as countries such as Argentina, Australia, Brazil and New Zealand would now also then have tariff-free access to the UK market.
  • EU/WTO tariffs on imports to the UK: If, on the other hand, the UK exits the EU, and as a WTO member decides to adopt the existing EU levels of tariff protection, then Irish and other EU suppliers will face new trade barriers.

These new barriers to trade would be similar to those faced by existing non-EU suppliers to the EU market. The cost of Irish exports in the UK would increase due to the imposition of tariffs and could exceed the price of exports to the UK from non-EU countries. What is clear is that both of these UK trade policy outcomes would reduce the differential between the price of Irish exports to the UK and exports to the UK from non-EU countries.

Online Editors