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Brexit: understating the case

2018-02-12 06:20:20

Flagged up in an article in the Sunday Times yesterday was a letter (spool down) from 34 signatories including the National Farmers' Union, the Food and Drink Federation and the British Retail Consortium, warning that a "no-deal" Brexit would be "bad for UK food".

To say that the letter is bizarre is not untoward, not because it raises the alarm on the effect of Brexit on food and farming but because it fails to do so sufficiently. It grossly understates the impact a hard Brexit is likely to have on the food industry - and farming in particular.

That is not to say that the letter does not raise concerns it does. A "no-deal" Brexit, we are told as conveyed by the article which draws attention to the letter "threatens to raise prices, undermine quality and risk farmers' livelihoods". It would, the signatories say, "be bad for the country's landscape, the economy and our society".

This is in the context of "industry figures" being keen to make Brexit a success, but increasingly fearing that the country will crash out of the EU with no deal. They say it is vital the UK goes on trading freely with the Continent, and call for "free and frictionless" trade with the EU.

This is expanded upon by Nick von Westenholz, the NFU's director of EU exit and international trade. He says that the food sector would face big additional costs under a no-deal Brexit because of tariffs and border checks, adding: "We have high welfare and environmental standards in this country. If we open up our markets, it will be bad for the consumer because there will be less high-quality, British-produced foods".

In assessing this letter, one must pay particular attention to the context which is framed by the authors, where they make particular reference to the "no deal" scenario. And this is what makes it so utterly bizarre.

Forget for a moment anything that has been written on this blog, or my Monograph 17. On 1 February, the European Commission, as part of its "Notice to Stakeholders" series, issued its advice on Withdrawal of the United Kingdom and EU Food Law".

Anyone with the slightest knowledge of how the EU works will know that the food sector is covered by one of the best developed and most extensive of all the EU's specialist acquis, allowing the free circulation of food and animal products throughout the Union.

On Brexit, the UK will automatically become a "third country" for the purposes of EU law, which means that different and provisions will apply. The Notice to Stakeholders sets out in detail the effects of a "no deal" scenario.

What will happen immediately is that much of the labelling on foods produced in the UK will have to change. The official marks can no longer carry the EU designation and in many cases, foods from the UK imported into EU Member States will have to carry the name and address of the importer (which has to be established in EU).

Certain foods cannot be placed on the EU market unless their additives, food flavourings, vitamins and minerals used, and food supplements, as well as any "novel food" has obtained an authorisation by the Commission.

In many cases, the food business operators, authorisation holders, or their representatives have to be established in the EU. As of the withdrawal date, establishments in the United Kingdom will no longer complies with this requirement and the authorisations will no longer be valid. Furthermore, no new applications can be processed through the "competent authority" of the UK.

This alone will have a major impact on the sale of processed foods to the EU, but the most problematical changes of all will affect food of animal origin. As we have pointed out in the blog many times, and now confirmed in the Notice to Stakeholders, on becoming a third country after Brexit, the UK will no longer be listed as a country from which foods of animal origin may be imported.

This alone will mean the complete cessation of imports until such time as the UK is listed a process which must apply product by product, and sector by sector. There is no single listing applying to all products. And how long that will take simply isn't known. The EU can fast-track certain provisions by, in the main, full listing could take anything up to six months or even more.

On that basis, it would be extremely unwise of the UK authorities (and producers) to assume that, in the event of a "no deal", there will be any exports to the EU of either live animals (including racehorses) or foods (and many other products) of animal origin for a period of up to a year. And that includes movements across the border from Northern Ireland to the Irish Republic.

Even then, all the food establishments (such as slaughterhouses, meat processing plants, dairies, etc.) must be individually recertified before they can recommence exports. Additionally, provision must be made for issuing the veterinary certificates and other documentation that will become necessary and was not required under Single Market procedures while the UK was in the EU.

Then, as the Notice to Stakeholders points out, the food can only enter the EU-through approved "border inspection posts" (BIPs). Each consignment must undergo documentary and identity checks, as well as at an appropriate frequency physical checks anything up to 50 percent of all consignments with the payment of an appropriate inspection fee.

And, as we have pointed out many times, there are no BIPs serving the Channel Tunnel or the port of Calais. The nearest BIPs on the French Channel coast are at Dunkirk and Le Havre. Collectively, neither has the capacity to handle but a small fraction of the traffic currently passing through the Channel ports.

Food of non-animal origin will not have quite the same problems although it must be routed through Designated Entry Points, and again the facilities simply do not exist. Furthermore, official controls at the EU end are organised on the basis of "multi-annual national control plan and in the light of potential risks".

Once we leave the EU, our current multi-annual plan will lapse, and until a new one is vetted and approved by the Commission's Food and Veterinary Office, a high level of inspection will be required with no provision to execute the required level.

Similar provisions will be required for plants, plant-based material, seeds and bulbs, timber and certain timber products including many types of wooden pallets currently used on cross border trade. Changes to the rules on what are permitted pallets alone are expected to have a higly disruptive effect.

Another unwelcome twist is that organic foods that require certificates before being placed on the EU market can no longer be certified by the UK authorities, and existing certification will no longer be valid.

Then, as for imports into the EU from the EU, currently, foodstuffs are not checked at the border on entry to the UK. But, if we are to maintain border checks on produce from third countries, under WTO rules, those same checks must be applied to goods of EU origin. And simply, there are neither the facilities not the resources to carry out these checks.

Putting this altogether, there can be absolutely no doubt that a "no deal" Brexit would not just be "bad for UK food". It would be catastrophic. The tight margins and the fragile economics of farming and the food industries are completely dependent on the free circulation of goods within the EU (as it is now).

Without market access, livestock producers and growers would be dealt a massive blow from which they would struggle to recover, while the difficulty in producing supplies would cause huge disruption to the industry and almost certainly trigger shortages in most fresh food commodities.

The question then arises as to why the food and faming interests are so drastically downplaying the damaging effects of a "no deal" Brexit. And here, the explanation is complex.

In essence, though, these sectors which are highly regulated and also highly dependent on taxpayers subsidies have developed a conformist "Uncle Tom" relationship with government. They so greatly prize their privileged access to government departments and live in fear of hostile government action, to the extent that they mute any criticism they might have.

On top of that, it has been so long since businesses operated outside the EU's Single Market (and the EEC before it) that the top brass simply have no knowledge of how third country systems work, and the hoops third countries have to go through in order to export to the EU. We have become complacent after the easy life of the Single Market.

Furthermore, many have drunk the "Kool Aid" of the "ultras", believing that the EU will afford us "mutual recognition" and other privileges when we leave the EU. Under the best of circumstances, this is unlikely to happen and, in a "no deal" scenario, it most definitely will not.

Thus, the very last organisations which are going to raise the alarm about the effects of a "no deal" are going to be the trade bodies representing food and farming industries. That they have even written this mild, cap-doffing reproach is itself an amazing development and signifies considerable and growing unease within the sectors.

But generally, this dog will not bark for fear of upsetting its master. The disaster will be upon us before it ups the volume.