Experts respond to Government's proposed tariff scheme

Brexit: UK Global Tariff positive for food industry

By Rod Addy contact

- Last updated on GMT

Government hails new global tariff regime planned from the start of 2021
Government hails new global tariff regime planned from the start of 2021

Related tags: Supply chain, Meat & Seafood, Regulation

Brexit trade tariffs will be applied to agricultural imports from 1 January 2021 under Government proposals, potentially protecting domestic producers against cheaper import prices and lower food standards.

The Government confirmed on 19 May that the UK Global Tariff, due to be introduced from the beginning of next year, would apply tariffs to all agricultural imports from nations with which it has not clinched trade agreements. However, it would apply zero tariffs to many imported goods, potentially making them cheaper for consumers.

In addition, the Government stated that it aimed to scrap unnecessary tariff variations on foods to which they had been applied under the terms of its membership with the EU. These included more than 13,000 tariff variations on products like biscuits, waffles, pizzas, quiches, confectionery and spreads. Tariffs will also be imposed in pounds, not euros.

A joint statement issued by the Department for International Trade (DIT), HM Treasury and international trade secretary Liz Truss read: We are backing UK industry by:

  • Maintaining tariffs on agricultural products such as lamb, beef, and poultry;
  • Maintaining a 10% tariff on cars;
  • Maintaining tariffs for the vast majority of ceramic products;
  • Removing tariffs on £30 billion-worth of imports entering UK supply chains – such as 0% tariffs on products used in UK production, including copper alloy tubes (down from 5.2%) and screws and bolts (down from 3.7%).”

Zero tariffs for some food ingredients

However, it said zero tariffs would apply to some imported food ingredients. This could reduce raw material costs for consumers and the food industry. This would relate to some cooking products, such as baking powder (down from 6.1%), yeast (down from 12%), bay leaves (down from 7%), ground thyme (down from 8.5%) and cocoa powder (down from 8%).

The proposed tariff scheme would apply after the Brexit transition period ends, from 1 January 2021, provided the period is not extended.

In response to the Government’s UK Global Tariff announcement, Andrew Kuyk, director general of the Provision Trade Federation, told Food Manufacture​: "It seems to have taken account of many of the points made in the Food Trade Association Roundtable consultation response earlier this year."

He said the Government's stance appeared to preserve negotiating power for future trade talks – including with the EU in the event of failure to reach agreement on the current timescale. It also seemed to balance this with "the need to protect UK farmers, while continuing to recognise the degree to which we depend on imports for choice, diversity and value"​.

'Relief for Scotland's farming and processing sector'

Andy McGowan, president of the Scottish Association of Meat Wholesalers, said: “This is a hugely welcome outcome and gratifying that our hard work in discussion with Government prior the new tariff regime being agreed has clearly paid off.

"The new regime is a relief for Scotland’s farming and processing sector with the tariffs for beef, lamb and pork remaining the same as current EU terms. Pigmeat, in particular, is much better served than in the original draft regime which proposed almost complete withdrawal of protection from this highly important part of the Scottish industry.

"We appreciate the changes which have been made in agreeing the final package which we see as a positive outcome for the whole livestock industry.”

Import standards

Andrew Northage, partner, regulatory & compliance team at law firm Walker Morris, said: "The application of trade tariffs on agricultural produce on 1 January 2021 will be welcome news to farmers and food manufacturers in the UK. As further detail is published, they will want to see a balance that protects the industry but doesn’t result in increased prices to consumers. They will also be keeping a close eye on further developments to ensure that British animal welfare and food safety is not diluted by a relaxation on import standards.

Vassilis Akritidis, partner, head of World Trade Organisation and international trade law at law firm DWF, said: "It is no surprise that the UK seeks a customised tariff schedule post-Brexit that would facilitate trade of non-sensitive products. Zero import duty would mean lower costs and improved life for society at large. At the same time, sensitive sectors of the UK economy, such as agriculture, the automotive industry and fisheries, will continue being protected by import duties.

"This post-Brexit new tariff is complemented by the DIT's carry-over of EU trade defence measures (anti-dumping, countervailing duties, safeguards) in favour of certain sectors of the UK economy.  Protecting sensitive sectors, liberalising non-sensitive ones, and shielding others in trouble is a balanced and considered approach for the UK economy. 

“But the early announcement of such large-scale tariff liberalisation, while the UK is still negotiating several trade agreements, could deprive it of some important bargaining chips​."

Lessen complexity and regulation

Andrew Thurston, customs consultant at MHA MacIntyre Hudson said the proposals would lessen complexity and regulation in the agri-food industry. “There are two key advantages of the government’s proposed tariff regime. One is the simplification of large parts of agri-food related tariffs, and the second is abolition of many seasonal tariff rates for foodstuffs.

The EU’s additional rates on foodstuffs such as bread, confectionery and dairy spreads require importers to submit products for laboratory testing in order to find out four key content parameters; starch/glucose, sucrose/invert sugar, milk fat and milk protein, which are then used to calculate the appropriate tariff rate. Failure to calculate the right level of, for example, milk fat, can leave a company with a very large customs debt. The proposed UK tariff replaces all this with single, value-based rate. There will be no need to determine a product’s content, avoiding the need to use a laboratory, which can charge hundreds of pounds for each test. These changes will minimise administrative burdens, increase efficiency and should ultimately reduce costs to the consumer. 

“The scaling back of seasonal rates is another bonus. The EU’s common external tariff puts great emphasis on seasonal rates for fruit and vegetables not grown in the UK, such as citrus fruits, in order to protect continental farmers. Under the new system the UK will be able to take advantage of the world market for fruit without being tied to high rates in certain seasonal periods. The new tariff measures still aim to protect UK farmers, as seasonal rates on apples and pears and tariffs on beef and lamb are being maintained. This may be a precursor to a no-deal as it suggests competition against EU farmers.”

'Maintained many safeguards'

The four UK farming unions issued a statement, saying: “We are pleased the Government has listened and maintained many of the safeguards currently in place for UK farmers under its new UK Global Tariff schedule. This is particularly important in fulfilling the UK government’s commitment not to undermine our high food and farming standards.

“It is worth remembering, however, that these tariffs are likely to be negotiated away as part of any trade deals that will be struck in the coming months, and so those deals must include strong provisions ensuring food imports are produced to the same standards required of our own farmers. Not only will this help the government fulfil its vision of a sustainable and profitable UK farming sector but will also meet public demand that our standards are not undermined in future trade policy.

“Although the overall position appears to support UK farmers, we need to examine and fully consider all the implications of the simplifications involved. For instance, it is still likely that the changes will lead to increased competition for some domestically produced commodities and we will need to understand the precise nature and impact of that. We are also urging the Government to provide clarity around its ability to adjust the tariffs announced today, in particular in the event that there is no negotiated agreement with the EU on a future relationship by the end of the year.”

The UK food industry, including the farming unions, had expressed dismay at last week’s House of Commons vote on an amendment to the Agriculture Bill that required high standards on imported food to be maintained. The amendment was defeated by 328 votes to 277​, with many Conservative MPs voting against it.

Exchange rate impacts limited

Ian Wright, chief executive of the Food and Drink Federation (FDF), said: “The Government has taken on board FDF’s suggestions to maintain specific and compound tariffs on agrifood goods that limit exchange rate impacts on tariffs, and encourage the use of higher quality and value ingredients. This gives food and drink manufacturers time to prepare for the application of these tariffs after 1 January 2021.

​This is a sensible step back from the temporary tariffs set out in March 2019. This approach will preserve essential negotiating capital for the UK in trade talks with the EU, US and Japan. That said, it is vital that the UK secures a trade deal with the EU before the end of the year to avoid serious damage to manufacturers and for consumers.

“It will take time for business to understand the implications of these tariffs. The FDF will work closely with both members and government to identify any concerns and ensure the best possible outcomes.”

'Our own tariff regime'

International trade secretary Liz Truss said: "For the first time in 50 years we are able to set our own tariff regime that is tailored to the UK economy. Our new Global Tariff will benefit UK consumers and households by cutting red tape and reducing the cost of thousands of everyday products.

​With this straightforward approach, we are backing UK industry and helping businesses overcome the unprecedented economic challenges posed by coronavirus.

Speaking in the House of Commons on wider trade standards, environment secretary George Eustice said: ​We will protect food standards in all our trade negotiations, certain practices such as chlorine washes on chicken or hormones in beef are subject to a prohibition on sale in the UK, and that law remains in place.

1 comment

EU produce prices up

Posted by Rollo Thompson,

Implicit from this tariff announcement is that EU agri products will go up in price and some significantly so under WTO (pari passu ) it is not possible to treat one nation differently from another OUTSIDE an FTA - if EU does not reach an agreement then EU beef for instance will be uncompetitive once current tariff regime applied.

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