The Government is considering special measures to support food exporters to the UK in the event of no trade deal being reached between the EU and UK and the imposition of tariffs on trade. This would be in addition to a wider range of measures to support companies hit by Brexit, including the repurposing of some of the schemes introduced to help firms cope with Covid-19.
While the UK’s exit from the EU single market will lead to extra costs and difficulties for many companies, the imposition of tariffs on food exports to the UK in the case of a no-deal will create an immediate problem. Under the plans outlined by the UK, tariffs – or import duties – of more than 70 per cent would apply on beef exports, effectively pricing many Irish products out of the market. Some dairy exports would also be hit hard.
Special supports
The Government is believed to be examining what special supports would be needed for the food sector to help protect jobs and farm incomes. Bodies such as Food and Drink Ireland and Meat Industry Ireland have called for special tariff support mechanisms to compensate for the impact of tariffs and allow Irish companies to keep selling into the UK market.
This would be costly, however, as some €1.4 billion in tariffs would be levied on food under current UK plans, with more than €700 million of this on beef alone. It is also not clear whether a scheme could be designed within EU state aid rules. A key uncertainty facing the Government is that there will be no way of knowing whether the EU and UK might resume negotiations in 2021 on a tariff-free deal. There are fears that deteriorating relationships due to a no-deal might make this impossible.
The Government set aside €3.4 billion in a recovery fund in the budget for 2021 to deal with Covid-19 and Brexit. Some of this is now likely to be earmarked for Brexit . The Government also hopes to win a significant share of the EU’s special €5 billion Brexit Adjustment Reserve fund to help pay the bills.
Wage subsidy
Sources believe that a number of the schemes established to help firms deal with the Covid-19 fallout are likely to be repurposed to help firms hit by Brexit. These include the wage subsidy scheme, the scheme which allows companies to warehouse tax liabilities and a range of supports to help firms enter new markets, including marketing and trade support and loan schemes. The sector has also pushed for export credit insurance support to help target new markets.
About 37 per cent of food exports, valued at €4.5 billion, go to the UK market each year, with beef – which sells nearly half its exports to the UK – being the most exposed. Tariffs are likely to apply immediately in the wake of a no-deal, though industry sources speculate that the UK might give some leeway for a period by allowing certain quotas in tariff-free.
Trade experts say it is unclear whether this would be permissible under WTO rules, but it could meet opposition from other food-exporting countries outside the EU.
The Irish Farmers’ Association ( IFA)called on Government to prepare for “all eventualities” with Brexit talks on a knife-edge, and to ensure Irish farmers are “top of the queue” for the EU’s €5 billion Brexit fund.
Tim Cullinan, president of the IFA, said that “farming is unquestionably the most exposed to a no-deal” with agri-food exports facing potential tariffs on food of up to €1.4 billion.
“Now is the time for it to be recognised. The intense discussions to secure a deal must continue, but we must also prepare for the post-Brexit scenario,” he said.
