Customs Union

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March 2019 In event of 'no deal' government plan to slash 80% tariffs, including those on many finished food products (pies, cakes, biscuits etc) and some farm produce including cereals. Sheep will retain its tariffs (100% of MFN taxes) Beef around 50%, but Cheddar like cheese only 13%. Details and farmers reaction here. Dairy farmer would go out of business

July 18 Chequers Plan talks about 'Facilitated Customs arrangement'. This involves "control its own tariffs for trade with the rest of the world" without causing border disruption.How on earth is this going to happen - renegotiate all 2000 agric tariffs and 15000 Processed Foods? Say we'll stay in the Customs Union.

The idea of leaving the Customs Union (The EU area with tariff walls around) is usually described as a 'hard' Brexit, and is necessary if the UK wishes to negotiate other 'Free Trade Agreements (FTAs) round the world. Labour unveiled a shift in Labour’s Brexit stance in favour of A (not 'THE) “new and comprehensive” customs agreement to allow tariff-free trade with the EU. Corbyn says they would want a say in determining the tariffs the EU set.
Full Speech thanks to openDemocracy. "Economic activity is more like a bowl of entangled spaghetti than separate dishes neatly labelled as goods or services; and this is particularly true of trade inside the EU. "

It is 'like exchanging a three course meal for the promise of a bag of crisps'.
The EU response to 'customised' UK trade deal with the EU (March 2018) is to take an austere approach with severely limited arrangements for services and regulatory co-operation. No mention of financial services is made. "Divergence in external tariffs and internal rules as well as absence of common institutions and a shared legal system, necessitates checks and controls to uphold the integrity of the EU Single Market as well as of the UK market. This unfortunately will have negative economic consequences.”
The most optimistic predictions on how much other 'unilateral free trade' deals are worth amount to 0.75% of UK GDP - but that 'still leaves the UK underwater relative to the cost of Brefta'. I described that in Bittersweet Brexit FTAs are 'not worth a bag of beans'. But Sir Martin Donnelly, who was permanent secretary at the Department of International Trade, put it better when he said:

The EU Deal

We keep hearing about getting 'the best possible deal'. What is this best possible deal we are aiming for in terms of food and farming? If ever there was a case of 'what's good for the goose isn't necessarily good for the gander', this is it. Many in the finance houses will be pushing to make overseas food as cheap and as freely available as possible, but that would be disaster for our green and pleasant land producing food.
Theresa May says an “implementation period” keeps the relationship with the EU all but identical for up to two years. However, this could be imperiled by the status of 975 global deals struck by the EU with countries outside the union. Britain ceases to be a legal part of these agreements from Brexit day in March 2019. 63 of these are free trade deals and will include the new EU-Japan deal
Rounds of 'long and messy' Brexit negotiations are predicted by one of most knowledgeable people on UK-EU relations, Sir Ivan Rogers. "I can assure you as an ex-insider that this process of agreeing their own negotiating ambitions for the deal with us will, itself, be long and messy. And they will most certainly not start with the view that we all must simply try and keep as close as possible to existing trading conditions across all your interests.”

Many of possible alternative deals are not possible according to BrexitFinancial (who look after the City). See book for more on possible trade models - e.g. Norway and Turkey.
Canada style deal is not good enough. EU diplomats appear to have rejected May's 'deep and special' post Brexit relationship, suggesting that the only option left is like the EU-Canada deal. Lucia Zitti, economist at NFU, says " The EU-Canada Deal does not eliminate tariffs and some sectors would be completely excluded and would not suit our future trade relations with the EU". Trade expert Allie Renison says that EU-Canada deal is 'nowhere near' what is needed. David Davis says we want 'Canada plus plus plus'...see Chap 3 for details of what that may mean - EFRA Gove & Eustice session (Canada +++ 11.25).

It is reported that DEFRA are preparing for No Deal with proposal to slaughter 1/3 of sheep to keep market buoyant.
Welsh NFO comments on prospects

Tariff Cliffs

Look at the tariff cliffs we will face if we come out of the EU Customs Union without 'a deal'. There will be tariff walls on 2000 agricultural products (+15000 on PAPs) ON BOTH SIDES OF THE CHANEL.
To move lamb from the UK to the EU there will be a 30+% tax/tariff. To import lamb from the EU will also attract a 30+% tariff. Value of Sheep Industry says "Small changes to trade deal tariffs or support payments are likely to disturb market stability, which would have wide implications in terms of percentage swing on domestic supply and net-trade balance."
It was to avoid this sort of thing that the Customs Union was created. EU tariffs on imported butter and cheese are £1500-2000 per tonne. Our cheese and butter exports will face this tariff. Ireland, within the EU would charge this on imported butter and cheese. But if we 'crash out', these same tariffs would apply to Irish cheese and butter coming into the UK. The tariffs work both ways - unless we do away with some.
DEFRA (Mar 19..2 weeks to go) have not carried out Impact Assessment of Brexit on the sheep industry. Lib Dems say "“This response shows that they have no interest in or concern for the hill farmers and crofters whose businesses are the backbone of so many of our remote rural communities. "
There will be food issues in event of cliff edge Brexit warns the British Retail Consortium. In a letter to key characters they highlight "how the UK’s highly complex food supply chain – and the excellent value and choice it offers UK consumers – depends upon frictionless trade with the EU."

Frictionless Trade

Many are arguing that even when we come out of the Customs Union we can maintain 'frictionless trade'.
This is how Financial TImes see it
My friend, Sir Wilfred, is explaining to me how a post-Brexit frictionless trading deal can work outside a customs union. He’s used the salt cellar and the pepper pot and he would now like you to wheel over the dessert trolley.’

The tariff cliffs are under most scrutiny along the Irish Border. If we come out of the Single Market, it will mean that checks will have to be made somehow to check the hygiene (phytosanitary or non tariff barriers) crossing the Irish/N.Irish border both ways.
If we leave the Customs Union it would mean Customs intervention to collect tariffs. Whatever anybody says about electronic tagging, using block chain technology. It would still need checking.
More on Working Together

Tariff Free Movement

Head of the dairy giant ARLA says "In order to protect the health of the dairy industry in the UK we need to have tariff-free and barrier free trading conditions." ie to stay in the Single Market (no 'Non tariff' barriers to trade) and the Customs Union (tariff free). Er, doesn't that mean not leaving the EU?
Businesses tell Davis The Government must secure a Brexit transition "as close as possible [to] the status quo" ahead of "serious decisions". These represent the companies deciding what to relocate - ie labour, in the coming months - perhaps out of the UK. All the big the five leading business lobbying groups (CBI, Chamber of Commerce, IoD,EEF, & Small Businesses) together formally warned David Davis. Their letter also addressed the tensions within Whitehall about whether Britain would accept new EU regulation during the period of a transition - something Boris and other Brexiteers have sought to oppose." Where were food and farm representatives in this letter?
Tariffs will be applied on Brexit from Single Market and Customs Union to protect EU farmers - just as they always have. Except now they will protect EU farmers against UK farmers. Conservative Julie Girling, who called a meeting of CLA (Country Landowners) in Brussels, was asked whether tariffs would be imposed to protect European farmers - as suggested by the vice president of the European Parliament, Mairead McGuinness, and the trade spokesperson for the biggest party in the parliament, Daniel Caspary". She said they were both being ‘very honest’ and their comments were an ‘accurate read out’ of the situation.
Tory MEP, member of Rural & Agric Committee, warns farmers will face high tariff wall to sell into the EU 'Farmers deluded if they think EU will lower the tariffs'. I certainly cant see French farmers lowering tariff levels as they have been complaining about Welsh lamb imports for years.

No Deal

'No deal' would mean being treated as a 'Third' country (like Venezuela and Yemen), and there is not the staff to run complex border inspection processes. Just look at all the discussion regarding the Ireland/N.Ireland border. Multiply that all round the mainland.IEA Report 'No Deal, no Disaster'If no EU-UK deal could be agreed, Mr Gove said: “My assumption and my preference would be we would maintain tariffs in order to ensure we did not have the sort of change occurring in agriculture which would lead to disruption which would be unhelpful for reasons of continuity of supply and health in the industry. "Grayling says they could 'throw open the borders' in event of no deal So much for Brexit 'taking back control of our borders'.

Parliament has still to decide...

What will happen should there be 'No deal' (lots more here).

Food Imports/Exports

Warnings from supermarket bosses that the UK leaving the EU in March 2019 without at least the outline of a future trade partnership would be bad for British consumers. Sainsbury's chairman David Tyler told the Sunday Times that a no-deal Brexit could result in an average 22% tariff on all EU food bought by British retailers.
Many talk about going to 'WTO rules' should there be 'no deal'. However, we need to be a member of the WTO to do that..and we need to apply to be a member, and that could take years...When Gove was asked what happens to tariffs if no deal - he said 'maintain tariffs in first instance' - EFRA Gove & Eustice session (11.35) and refers to the Resolution Foundation analysis 'Changing Lanes'. This examines the scenario where tariffs are maintained as they are, when "There is evidence that poorer households and less affluent parts of the country will be harder hit"
They say that in the other scenario - where the tariffs are removed, "evidence suggests that 1.4 million people are employed across all the sectors that could be affected by trade liberalisation and that the majority of these are in rural areas and in the Midlands and the North". Several studies have shown a unilateral drop in tariffs would be catastrophic for UK farmers, with prices across all commodities plummeting as cheap imports from the rest of the world flood into the country.
Dept of International Development has 'Project After' with various scenarios, including UK dropping its taxes protecting our food and farm producers - ie no taxes on any incoming foodstuffs. This is quick way to open up Britain to cheap food from anywhere.
Brexit Minister Steve Baker confirms parliament will not get a vote on 'no deal' - saying we have already voted to leave. So who decides whether we keep the tariffs or not? Mr Gove or all of us?For more on EU & UK trade deals see Book Chapter 4 and here on Trade

Quotas

BBC Countdown to Brexit explains quotas (ie amounts of food imported before taxes/tariffs kick in). The EU has about 100 of these negotiated at the WTO. The EU doesn't want to take the existing quotas for the 28 states and use them for the remaining 27, as the UK share of the overall quotas have often been large (eg NZ lamb), and the remaining 27 countries do not want a share of that quota as they do want tougher competition for their farmers.
The UK and the EU agreed in a letter, that they wanted to divide the quotas in line with recent trade flows, e.g the UK taking a large share of the quota for lamb. The UK has been importing much more NZ lamb than the other EU countries - that is why we see so much NZ lamb in supermarket freezers. The proposal was met with a raspberry by several countries, including the United States, Canada and New Zealand, as they would lose flexibility.
Tory MP Neil Parish, who chairs the environment, food and rural affairs (EFRA) committee in Parliament, raised concerns that "if the UK's exports to the EU were hit post-Brexit and more imports were coming into the country from further afield, it could affect industries on our shores". Shadow international secretary of trade, Barry Gardiner, also said the wider implications could see an impact on the British countryside."As you affect farming, so you affect the way our country looks....That means you also affect the tourist trade.” More explanation in the book in the Chapter 11 on More @ Favourite Foods: Lamb and Silence of the lambsI should rename that section 'Lamb farmers to the slaughter'

Carbon Tax

EU carbon tax could lock UK farmers out of European market. "A carbon adjustment tax at the EU border is ‘almost inevitably coming’ because the bloc wants to stop producers being undercut by lower standard imports and prevent pollution being ‘outsourced’ to other countries."

"The mechanism which the EU uses could leave UK farmers at a disadvantage, despite their positive track record on sustainability. Say something arrives in the EU, then the EU calculates how much carbon tax it would have paid had it been made in the EU. There would be a mountain of paperwork to show you had made it as clean, or even cleaner, and that could lock you out of the market."
Farming is not included in the EU Carbon Trading System

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