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The issues are immense. Britain’s trading relationships depend on its E.U. membership. Its standards and regulations for food and farming are set as part of its E.U. membership. Its farming depends on subsidies under the E.U.’s Common Agricultural Policy. Its food and farming industries are heavily dependent on labor from other E.U. countries.
May is telling voters a bigger majority will enable her to negotiate a better deal from the E.U. and the ruling Conservative party is expected to do well, largely because of the disarray of the main opposition Labor party, under its left-wing leader Jeremy Corbyn.
The government has announced plans for what it calls a Great Repeal Bill, which would put E.U. laws into U.K. law and make it possible for the U.K. parliament to amend them once the U.K. has left the E.U. It has not said what type of deal it wants.
Some of May’s language has been confrontational, but food processing organizations and agricultural groups share with most of business a desire to see a smooth transition to a new arrangement that would make continued trade possible.
Alex Waugh, director general of the National Association of British and Irish Millers (nabim), sees the government’s official line as helpful.
“We know that the government, the previous government let’s say — let’s hope it remains consistent for the next government — said that its starting point will be to take the existing rules and existing tariffs and start with them when the U.K. leaves the European Union,” he told World Grain. “So that means in our sector, if that is to be believed, that we will start where we are now.”
It would mean no initial change in tariffs, for example.
“That is the starting point, which means that if you start off with the same tariffs you are in a better position to agree a free-trade agreement with the remaining 27,” he said.
He did not expect a final deal to be in place by March 2019.
“With that as a starting point, then the question is will that be done by 2019?” he asked. “The betting is probably not.”
Given the shortage of time, a transitional arrangement would be needed.
“Can we nevertheless agree that we are going to carry on as we are until we have agreed?” he asked. “That is not an impossible outcome and perhaps one that is made easier by the timing of this general election in the U.K., meaning that the electoral cycles in Europe are pretty much aligned in France, Germany and the U.K.”
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Photo by Chris Lyddon.
Trade relationship between Britain, Ireland is important
Nabim is an organization that covers the whole of Britain and Ireland, a geography that includes the U.K. and the Irish Republic, which remains a member of the E.U. The U.K.’s only land border is in Ireland, between Northern Ireland and the Republic, and the question of cross-border trade has been identified as important by the E.U. It’s particularly important to the grain processing sector.
“It is important for us because of the trade back and forth across between the U.K. and Ireland,” Waugh said. “Effectively, the U.K. and Ireland is one market. There seems to be recognition on both sides that the U.K. and Ireland relationship is important. It is even in the top list of things on the E.U. side. What needs to happen now is translation of recognition of the importance into solutions that are practical and pragmatic and work.”
He believes the two sides would like to come up with something that looks like what already exists.
“The challenge is to make that politically acceptable and economically acceptable,” he said. “On the things that are closest to us and most immediate to resolve, actually there is probably not that much of a difference of intent on either side. It is just a question of achieving it.”
There are things that get in the way.
“The first is money,” he said. “Who pays for what, when?”
The second is what he called citizens rights.
“With goodwill those should not be insoluble,” he said. “It just depends on the tone and the nature of the negotiations. Our issues are eminently solvable. A good outcome is possible provided that the negotiations are conducted in the right spirit elsewhere. I’m not saying there will be no problems in the trade-related things — there might be — but they are not perhaps going to be as fundamental as some of the other discussions.”
The government’s Great Repeal Bill plan means that a post-Brexit Britain will start with the same rules for issues like food safety and trade as the E.U.
“Then the discussion is to what degree they will be diverging,” he said. “There might be in time some modifications, but none that are going to seriously challenge the congruence of U.K. and E.U. standards and certainly not on April 1, 2019. Let us say that we have got to the point where there has been a free-trade deal agreed, a tariff deal. That has got the money out of the way. Then you have the question about what documentary, regulatory checks are going to be required and how are they going to be applied and when and where. Linked to that will be questions about the rules of origin. The U.K. government has been talking about frictionless trade. Nobody knows exactly what that means. I suppose the starting point would be let’s try to create as few impediments to trade. At the moment there are scarcely any impediments to trade. Let’s try to remain as close to that as possible. It is achievable.”
The logic of that would be that you move as much in the way of controls as you can have away from ports to elsewhere in the chain, he said.
“You spread out the geographic load,” he said. “You could have a version of the trusted trader scheme, where essentially there is an audit of the company and its systems and how it goes about things. And given a stamp of approval those goods, you could have a different system for checking up on those goods rather than somebody who has just shown up that you have never seen before. It is pretty clear that the U.K. Revenue and Customs isn’t really set up to handle three times as many transactions as it does today. My guess is nor would the French or the Belgians. The scope for difficulties doesn’t just exist in the United Kingdom; it is on the other side of the trade as well.”
The logical answer would be to carry on and develop a new system over time.
“The idea that you move to a transitional deal, an interim agreement, makes a lot of sense in practical terms,” he said. “I hope both sides come to that view and come to it quite quickly, because business tends to look ahead. And if you have a three-year deal with the customer and you and the customer are on different sides of the border, it is looking progressively risky.”
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U.K. millers could lose key markets in Europe
Regarding wheat flour and wheat, some is imported but the E.U. is not the only origin, he said.
“We don’t think that would necessarily change in imports from third countries or America or Ukraine,” he said.
There would be a bigger challenge if there were no trade deal with the remaining E.U.
“That would suggest our wheat would no longer be able to go to Spain and Portugal, which it does at the moment in quite large quantities, nor would we be able to have access to German and French wheat at the same cost as now. It doesn’t really seem in anyone’s interest to introduce those barriers. We are talking quite a lot to officials in the U.K. government. We are engaged with our colleagues in Europe, the European Flour Millers, because we think there is a mutual interest in pushing for the same thing and so we are hopeful that on the E.U. side they will also say to maintain the free-trade arrangements and simplicity in trade as close as possible to what we have now. This is a negotiation that is ongoing and clearly there is not much advantage in just talking to one side.”
Looking slightly farther ahead, but not that much, there is the concern about British agricultural policy, he said.
“Nabim’s overriding perspective on that is that we want our farmers to be able to produce grain for us, competitively,” he said. “Whether that means maintaining subsidies as they are or going about them a different way, we’re open to that but the bottom line has to be there is not much point producing grain that is £20 a tonne over the market. We are of course engaging with other organizations like the CBI (Confederation of British Industry) and the Food and Drink Federation. This is an issue where the various lobbies have to work together as best they can. We will make a case where we have a specific issue, where we supply the flour milling perspective or the grain trade perspective is different, where it’s unique or whether it’s a very good example of something. But we do everything that we can to play into a broader message about what is good for the U.K., what is good for the E.U.-27.
“Businesses, by and large, would like to minimize the amount of, let us call it environmental change, by which I mean business environments change so that they can get on and they know where they stand. There is no doubt that change also produces opportunities. The nimbler businesses will survive and profit from that.”