As we continue to navigate through the complexity of the Brexit process, one of the main issues to be considered after the terms of exit have been agreed on, is what the future relationship between the UK and the EU could look like. With the UK voicing its intentions to break away from the EU’s single market and customs union, negotiators are likely to turn to a free trade agreement as a basis for this relationship.
The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada is one of the most recent trade agreements concluded by the EU and is often suggested to be a model the UK-EU deal. But what would the impact of a CETA-type post-Brexit agreement be on the UK food and drink industry?
In 2017, 60% of UK food and drink exports went to the EU while 30% of the UK’s food imports came from the EU. The UK relies particularly on imports from the EU for fruits and vegetables and meat. Out of the 400,000 workers in the UK food and drink industry, a third are EU nationals.
To understand what impact a free trade agreement would have on food businesses in the UK, it’s important to note the differences between the benefits of EU membership (what the UK currently enjoys) and a trade deal with the EU (what may be achieved).
What does EU membership do?
As a member of the EU, the UK’s participation in the EU customs union and single market has removed tariffs and quotas on products moving between the UK and the rest of the bloc. Furthermore, rules on food safety are mostly harmonised and where this isn’t the case, the mutual recognition principle applies, which ensures that any product lawfully marketed in one Member State, can be sold in another, even if that product does not meet national standards. EU membership has therefore removed most barriers to trade as businesses don’t need to pay taxes or change the composition or labelling of products when trading. This has provided businesses with the opportunity to freely and easily reach consumers across the bloc.
Of great importance to food businesses as well are geographical indications (GI), distinctive food and drink products from specific towns or regions in the EU which are protected under EU law. The market for EU geographical indications is around €54.3 billion, and together they account for 15% of total EU food and drinks exports.
What does CETA do?
CETA has removed customs duties between Canada and the EU on 92% of agricultural and food products. There are still some limited quotas in place for a few sensitive products such as beef, pork and sweetcorn for the EU and dairy products for Canada. Also, the markets of the EU and Canada have not been opened for eggs and poultry.
Under CETA, the EU and Canada exchange information, identify areas for regulatory cooperation and examine opportunities to minimise unnecessary divergences in technical rules that may have an impact on trade. However, the EU and Canada do have their own regulations in place to protect public, animal and plant health and the environment. If these diverge, businesses have to adjust their products to comply with the regulations before entering the market.
With regards to GIs, CETA gives 143 EU products the status of GI, thereby protecting them from any imitations.
A good post-Brexit model?
CETA offers nearly full tariff liberalisation, so in terms of taxes on imports and exports, CETA is very similar to EU membership. As the UK is very reliant on EU imports, it will be crucial to achieve tariff liberalisation in a future UK/EU deal. However, in contrast to EU membership, CETA does not provide for a customs union, meaning costs and administrative burdens related to border controls between the EU and Canada still exist. This could therefore be a big change for businesses trading across the EU/UK border if this model were adopted.
In terms of regulatory alignment, the EU’s harmonised rules – combined with mutual recognition – has removed most non-tariff barriers to trade for businesses. CETA, on the other hand, provides for a framework that still allows for the existence of technical barriers to trade, meaning businesses may have to adjust their products significantly before being able to market them.
CETA shows that GI’s can indeed be protected in free trade deals. 86 products originating from the UK currently benefit from GI protection. The UK Government has confirmed it wishes to enable producers to apply for GI equivalent status under domestic law.
In terms of access to EU labour, the single market currently allows EU citizens to work and reside in the UK. CETA does not give Canada unrestricted access to EU labour and vice versa. Therefore, a post-Brexit visa system would have to be put in place, which may result in extra costs and bureaucracy for SMEs and suppliers.
Overall, using CETA as a model for the UK’s future relationship with the EU will achieve many important things for UK food businesses, such as tariff-free trade and the protection of GIs. The terms of any free trade deal are still subject to negotiations, however, under this model, the UK food and drink industry will likely face some challenges it hasn’t faced for a long time under EU membership.
It is therefore crucial for businesses to engage with the Brexit process as much as possible, not only with regards to the withdrawal terms, but also the future relationships the UK can establish with the EU as well as other countries. The UK Government has asked the industry for feedback on for example future trade deals with Australia, New Zealand and the US. These opportunities allow businesses to put pressure on the Government to ensure their commercial activities won’t be negatively impacted by Brexit.