How do we avoid a cliff-edge scenario in dairying?

A customs arrangement “never seen before” is required for the Irish agri-sector should a hard Brexit occur, according to Alison Graham, Irish Co-operative Organisation Society (ICOS) ‎European Affairs Executive.

Speaking at the recent Arrabawn Co-op annual general meeting, Graham warned suppliers that under a hard Brexit the dairy sector, particularly cheese, will feel the brunt. With prospects the way they are, the Brussels-based expert advised securing a new customs relationship with the UK.

The requirement for a transitional trade agreement, for the period after the UK leaves the EU, was also expressed as a high priority.

A sudden Brexit could be ruinous for many in the sector.

Graham noted that the UK position may “soften” after the general election, scheduled to take place on June 8.

“The UK has previously said it would be open to some kind of customs arrangement with the EU. Brexit is an entirely new situation and there is certainly the idea that we could create an entirely new kind of customs relationship with them, in order to accommodate continued trade,” she said.

Alison Graham, ICOS European Affairs Executive, guest speaker at the Arrabawn AGM. Photo: Arthur Ellis

50,859t of butter and 114,749t of cheese were exported to the UK in 2016, according to Graham. She said Brexit is the most significant threat to the growth and development of the Irish agri-food sector.

“Without any agreement, tariffs could potentially be as high as 60% on dairy and beef products, and there would be major implications for the supply chains,” Graham stated.

With the future EU-UK relationship still unknown, Graham told the Arrabawn suppliers that the upcoming snap general election in the UK could possibly see a strengthening of support for a more “moderate” Brexit.

“Therefore, perhaps we will see more of a conciliatory mood after the general election,” she added.

Graham expressed the critical importance of a transitional agreement for all businesses, in order to avoid a “cliff-edge scenario”; if customs borders and tariffs on Irish exports were introduced overnight.

Maintaining customs arrangements under a transitional arrangement would allow the sector the time to implement risk-mitigation measures; such as adjusting supply chains and finding new markets.

Into the future

Graham highlighted the potential of Asian markets. She noted that while Ireland is already expanding international exports, these markets will need to grow at a faster pace than initially thought, to compensate for potential market loss in the UK.

However, she also noted how difficult it is to establish a consumer brand or a new product in these markets. It requires a lot of time and investment.

Even then, there is a concern that we will not receive the same price premium that we currently get from the UK market.

Graham spoke also about the threats beyond tariffs, that would reduce Ireland’s competitiveness in the UK market. Among those mentioned was the potential for increased third-country competition, particularly from New Zealand and Australia.

“This would not only threaten our market share, but also prices,” she said.

Futhermore, Brexit could result in an economic slowdown in both the UK and Ireland, which would impact consumer spending, according to the ICOS European Affairs Executive.

Graham also mentioned the potential disruption to supply lines to continental Europe. The UK is used as a land-bridge for many Irish exports into the continent.

The impact of the UK on the CAP budget was also mentioned by Graham. She expects the impact will be significant. The UK is a net contributor to the EU budget. Their departure will reduce the CAP budget by at least 5%, according to Graham.

Concluding her address, Graham outlined Ireland’s key priorities ahead of Brexit negotiations. Three priorities were highlighted; to maintain the current, tariff-free access to the UK market; protect the price premium of the market; and to minimise the border controls and administration costs under any new trading arrangement.