If you’re bored by tractor production figures then best to look away now. If however, you’re concerned about how your business might cope post-Brexit then read on.
The announcement that Nissan would not only produce the latest Qashqai model in the UK but also relocate production of the X-Trail to Sunderland was very welcome. Very clear. Britain is open for business.
A series of assurances that Brexit wouldn’t effect competition or trading conditions for the automotive industry was the driver behind the decision and a big win for Greg Clark, the Business, Energy and Industrial Strategy Secretary.
You can see why car manufacturers were worried. Britain’s automotive sector exports vast numbers into the EU whilst importing manufacturing components from different Member States. A potential 10% WTO tariff increase could be tricky for an industry where volumes are high and margins are low.
However, these negotiations may prove to be a walk in the park compared to the tsunami of regulation that has got the Department of the Environment and Rural Affairs battening down the hatches.
Figures published by Nick Clegg, in his current guise as a humble Spokesperson on Europe, make chilling reading for the food and drink industry.
According to Clegg, Liam Fox, the Secretary for State for International Trade, said that the UK will inherit the minimum Most Favoured Nation (MFN) tariff which, according to World Trade Organisation (WTO) rules apply where Free Trade Agreements don’t exist (which will be everywhere until they can be negotiated after the completion of Article 50).
Hold your breath – this means tariffs for access into the single market of 47% for milk, 40% for cheese, 59% for beef and 40% for lamb. Cook them up into a nice pie and you find that the EU charges different tariffs on baked goods depending on ingredients. There are 504 different combinations of ingredients and 27 recognised products comprising of 13,608 categories of bread, biscuits, confectionary etc. with separate tariff rates for each. And that’s without getting into whether a Jaffa Cake is cake or a biscuit.
The food and drink industry relies on exports into the EU even more so than the automotive industry, simply because of the perishability and proximity to the market. This makes it highly likely that the UK will choose to comply with EU standards because divergence will be prove to be a barrier to a negotiated FTA.
Before you start to panic however, the Great Repeal Act, announced by Theresa May last month, doesn’t mean that individual EU regulations are going to be debated line by line by bureaucrats with a magnifying glass. Rather, a single food bill will mean that all the relevant EU regulation will be passed wholesale into British law. The key for the food and drink industry, and its continued trade with Europe and the rest of the world, will be to keep it there.
The food and drink industry will need to guard against swash buckling elements from among the Brexiteers who see all regulation as Brussels red tape and want to throw open the doors to the world with tariff free access. While it may sound exciting, and a bit Errol Flynn, the reality could leave British farmers, as one example, fending off an influx of cheap beef from South America on one hand whilst trying to meet EU standards and tariffs on the other for access to its biggest market.