Peter Lilley once said that a trade deal with the EU should take no more than ten minutes. Liam Fox said it should be the easiest trade deal in history. Well fantasy just had a serious coming together with reality. One of the first things we needed to do was to separate our Tariff Rate Quotas (TRQs) from those of the EU.
"...... a two-tier tariff, with a certain amount of produce allowed in a reduced or zero rate, the rest subject to a higher rate on a WTO Most-Favoured Nation basis. These quotas can be open to all countries (erga omnes), or to specific countries (Country Specific Tariff Quotas). Bilateral Free Trade Agreements (FTAs) may also include specific TRQs, although as yet the EU does not have FTAs with major agricultural exporters such as Brazil, Australia and New Zealand".
As an example, New Zealand has a TRQ allowing 228,000 tonnes of sheep meat into the EU each year before WTO tariffs apply. The problem is trying to divide this between the UK and the EU27.
At the WTO we are struggling to reach agreement already as this paper: The UK’s First International Trade Negotiation – Agriculture at the WTO (HERE), explains.
Argentina, Brazil, Canada, New Zealnad, Thailand, USA and Uruguay have all objected to Britain and the EU just splitting the quotas on a percentage basis, with the total adding up to 100%. You would think this is a simple thing but no, it isn't. First of all, the exporters say this limits their flexibility in that if consumption in the EU goes down they can't switch the unused part of the quota to the UK or vice versa. There is more difficulty because in some cases commodities are shipped into the EU, for example, but then distributed to various member countries, including the UK. But nobody tracks where it goes. So, the quota split is pretty arbitrary anyway.
Liam Fox thought we could make these changes by simply asserting the revised schedules but it looks as if we will have to go through a full renegotiation at the WTO which is going to take far longer than we thought, perhaps years, and involve balancing the competing interests of UK producers, consumers, the EU, exporting countries and various others. It looks decidedly problematic. A very steep learning curve is coming. And notice the countries objecting are our friends - the USA, Canada, New Zealand - countries we are hoping to sign future trade deals with.
However, for the moment, if I was a Welsh sheep farmer I would be getting very worried. The paper gives the world price for lamb (described as sheep meat in the paper) as 3172 Euros per tonne. The EU price (i.e. the price Welsh farmers get) is 5070 Euros per tonne. Quite a difference isn't it?
The average income of a Welsh sheep farmer in 2016 was £27,500 and this was with lamb prices about 60% above world prices. If the Brexiteers get their way tariffs will drop, even down to zero according to professor Patrick Minford of economists for Brexit, in which case the incomes of Welsh sheep farmers, not very high now, will fall significantly. It may end sheep farming in Wales for ever.
The Welsh voted 52.5% in favour of Brexit. I wonder how many sheep farmers voted for it?
