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Brexit & the Pig Sector

10 September 2020

At the start of the year, Brexit was very much in the limelight with much being made of the short timescale for both the UK government and the EU to reach a trade agreement that was acceptable to both sides.

The last six months have however seen Brexit take a backseat to much bigger worldwide issues but the clock is still ticking with only a few months remaining of the transition period.

As things stand the UK will have a new trading relationship with the EU from 1St January 2021. Negotiations have seen slow progress recently with both sides blaming the other with the fishing rights and the UK’s future use of state aid to provide a competitive advantage among the main reasons. Despite this, the UK government and its negotiating team remain hopeful a deal can be done in time.

Tariffs

While reaching a suitable trade deal is the goal of both sides, the UK will be treated as a third country on WTO trading terms from January 1st if no deal is reached. With significant volumes of pig meat traded between the UK and the EU and its importance to both parties (the EU is the biggest single destination for UK pig meat with EU being the UK’s biggest importer) this clearly could have a huge impact on the pig sector if tariffs are applied both on exports and imports.

One ray of light for the UK pig sector and agriculture, in general, was the UK’s replacement for the EU’s Common Tariff, with the UK Global Tariff due to take its place on the 1st January. While it had been feared that tariffs on imported pig meat would be greatly reduced from current levels, opening the door to cheaper foreign product the decision was taken to maintain them at current EU levels and will be applied to imports from countries that the UK has no trade deal agreed.

Hopefully, negotiations will progress much more smoothly in the weeks and months ahead with an agreement reached that ensures a successful future trading relationship between both parties and does not put the UK industry at a disadvantage.

Elsewhere negotiations are continuing with other major players, though COVID has slowed some of these as they approach the finish line. There are also ongoing issues with a tariff of 25% applied to UK pig meat imports to the US as part of the ongoing Boeing / Airbus subsidies disputes which, in a curiosity of Brexit could see these WTO authorised tariffs continuing to be applied to UK pig meat. Unfortunately, due to timing, the UK may not see any benefit of upcoming similarly WTO authorised retaliatory/rebalancing tariffs permitted to the EU.

Border Controls

Failure to reach a deal could have huge implications not only in terms of tariffs but also to logistics with changes to the levels of checks required with the UK assuming third country status.

The potential requirement for physical inspections of pig meat, breeding stock and other animal products on the arrival in the EU will put significant pressure on existing facilities.

One key export from the UK to the EU is cull sow meat which, under current rules, enjoys a relatively smooth transport process. Having ready access to this marketplace and being able to rapidly deliver to the processors has helped support the value of this product over the years. The imposition of extra border controls and checks will slow down the logistics process putting the trade-in jeopardy.

The UK has also built an export market for breeding stock, which currently travels by sea to France however there is concern that there may not be the facilities there to handle live inspections (something that may be required whether a suitable deal is reached or not). Alternative destinations are further away, and air travel is currently felt to be unviable. An unwanted consequence of this may see breeding companies relocate to the continent. On this side of the channel, the government has indicated it will phase in its checking process over the next year. Despite this there are concerns from the British Veterinary Association (BVA) as to whether it has the capacity to carry out the extra tests required as well as a lack of clarity on the proposed testing protocol.

With a few months to go the race is very much on for both parties to reach an agreement and put things in place. Hopefully, the only sore heads on January 1st will be from the night before rather than the disruption to come.

George Chalmers for the Farm Advisory Service

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