Written by Harry Western

 

 

This article first appeared in Briefings for Britain and we republish here with kind permission.

 

 

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Editor’s Note: This is the final part of a two-part article. You can read the first part right here on Independence Daily.

EU agri-food trade barriers are extremely high:

In our past work we have argued consistently that many ‘mainstream’ estimates of the extent of EU non-tariff barriers to trade are exaggerated. We continue to take this view. However, one area where such barriers are undoubtedly high is agri-food and the experience of the last month has confirmed this. Exporting agri-food produce to the EU requires a significant amount of documentation and is subject to potential inspection delays that can damage the value of fresh produce. Many UK agri-food exporters appear to have been unprepared for the scale of these non-tariff barriers (perhaps not understanding that high EU tariffs on foodstuffs are often not the main impediment to trade) and serious problems have ensued as a result. The EU’s SPS (sanitary and phytosanitary) regulations are not designed for the large-scale movement of fresh produce; rather, they are a major hindrance to it. In particular, attempting to move mixed loads of various goods including agri-food products is a major headache with a multiplicity of paperwork. This mode of transporting such goods will probably need to end.

The fishing industry has (again) got a raw deal:

As with other agri-food producers, UK fishermen appear to have been unprepared for the extent of barriers to trade with the EU. Some have instead sailed to Denmark to land catch, this being the better option than sending goods by land down to the channel ports. This situation has exposed how bad the UK-EU trade deal is for UK fishermen. We argued in the past that while UK exports of fish to the EU were likely to decline due to Brexit, the expected large-scale transfer of quota to UK boats from EU boats would more than make up for this. But the actual transfer, totalling just 25% of the EU’s catches in UK waters by 2026, is not nearly big enough to allow this – a transfer of 60-80% was expected. Moreover, UK fishermen now face the ridiculous situation that EU boats have a big competitive advantage against UK boats in terms of landing fish caught not just in EU waters but in UK waters too.

The Northern Ireland Protocol is totally unworkable:

Overall, we would say that the first month of the UK-EU trade deal has worked out better than many predicted albeit with notable exceptions. But for one part of the UK – Northern Ireland (NI) – this is not the case. There, new rules (especially SPS rules) have clearly disrupted trade. Some GB-based firms have stopped selling to the province and the range of goods available in supermarkets has narrowed. This problem will get much worse once ‘grace periods’ covering checks on supermarket produce expire later this year, as major UK retailers have already warned. Concerns have also surfaced over a variety of detailed issues including the import of seed potatoes and pet movements between GB and NI. Michael Gove’s recent letter to the EU’s Maroš Šefčovič outlines the UK’s concerns on all these issues – issues which tend to undermine of the integrity of the UK internal market.

Regulatory barriers to trade between GB and NI are a much bigger problem than those that now exist between GB and the EU. NI is heavily reliant on GB for supplies of goods of all types. NI goods imports from GB account for over 20% of NI GDP, more than double the share of UK goods imports that come from the EU. Moreover, for many key goods it is estimated that supplies from GB account for 70-90% of NI imports. So, NI faces a much bigger economic shock from trade frictions created by the NI protocol than the UK as whole does from leaving the EU customs union and single market. If unchecked, the protocol will, over time, cause a significant rise in prices for NI consumers and cause massive inefficient trade diversion towards the EU. Some NI exporters (especially but not exclusively in agri-food) also face issues given the crucial importance of GB-sourced inputs in making their goods (typically around 30% of inputs are from GB). The province’s more agricultural trade pattern and smaller average size of firms just worsen all these effects.

On top of all this,

with NI left behind in the EU single market for goods, it stands to benefit less from smarter regulation and new trade deals that the rest of the UK. So Northern Ireland in our view faces serious economic harm if the Protocol is not radically changed.

The obvious solution to the problem is to exempt the bulk of GB to NI trade, which goes to identifiable end-customers, from both customs and regulatory checks. We doubt the EU will agree to this or anything like it. But given the scale of economic damage and trade diversion the Protocol could cause the UK government would have a strong case for doing so unilaterally under the aegis of Article 16 of the Protocol. The EU’s own abortive and illegal use of the Article 16, to try to prevent Covid-19 vaccines from moving into NI and then on into GB, makes this politically easier. Such a move would endanger the broader UK-EU trade agreement. But with the EU having shown in the vaccine debacle that is willing to simply disregard its agreements with the UK if it sees fit, it is open to question whether the agreement can be stable in the long term in any case.

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