The risk of a no-deal Brexit has receded somewhat in recent days, but it remains a major concern for Irish business. And a key issue will be the details of the trade policy which the UK plans to apply after Brexit, particularly in food.
There are three possible scenarios.
One of these – cutting tariffs completely – appears to have been ruled out by the UK government. The UK will cut tariffs in sectors where it does not have a large domestic sector. But doing so in food would threaten to wipe out much of its industry and farming sector – and it won't do so. It would also have meant Irish beef being priced out of the market by cheap imports from South America, and also new threats in other sectors such as dairy.
The second option would be to impose full WTO tariffs on all imports, including food. This would protect UK producers, but would push up prices sharply and threaten food shortages, certainly in the short term. This would also cause huge problems for our beef and dairy sector in particular, with many products priced out of the market by tariffs of 50 per cent of more.
The third option – which the UK is likely to follow – is to allow some food produce in without tariffs, or with low tariffs, using a quota system. Anything in excess of these limits would then face full tariffs.
The UK has already indicated it will do this in relation to its portion of existing EU agreements with third countries like Brazil, Argentina and Australia. However, it may open up other quotas in key areas like beef, possibly for volumes roughly equivalent to those it currently imports, to try to ensure supply and stabilise prices.
If this happens the key issue will be how these quotas are allocated. Will the EU be given a quota related to historical volumes sold into the UK, which would give Ireland a chance to sell some product without tariffs?
This could happen, but there are fears that instead of this a first-come, first-served system would operate, which would give advantage to lower-cost producers and hit Irish food exports hard.
As the UK makes its intentions clear, this is a vital area to watch.
