4Trade post-Brexit
56.Scotland has a global reputation for high quality food and drink, which is dependant on its agricultural sector. In 2017 the manufacture of food and beverages was the largest single exporting sector in Scotland worth £5.9 billion and accounting for 18% of all international exports.109 While most of these exports are whisky, the export of other food and drink goods is worth £1.5 billion.110
57.The importance of these agricultural exports to the Scottish economy was a major theme in our “Scotland, Trade and Brexit” Report, which we published in March 2019.111 In that Report we made several recommendations aimed at securing the future of agricultural exports including:
a)Calling on the UK Government to ensure that, when negotiating new trade deals, sectors of vital importance to the Scottish economy such as food and drink are not traded away to secure preferential agreements for other industries;112
b)Recommending that tariff-free trading for the food and drink sector with the EU be maintained - as the introduction of the EU’s WTO tariffs would make some sectors “uncompetitive overnight”;113
c)Welcoming the Government’s commitment not to lower safety, environmental or animal welfare standards for imported food products;114
d)That the UK Government must minimise non-tariff barriers trade with the EU, particularly for the trade in perishable products. Where the Government wants to deviate from EU standards it must clearly explain it reasoning and consult with business ahead of any changes being made;115
e)That “every effort” should be made to ensure that the return of powers to Westminster and Holyrood does not lead to any new barriers being created to trade between Scotland and the rest of the UK,116 and
f)That the Government should creating a register of UK Geographical Indications so that iconic Scottish products continue to benefit from the protection this status offers, and that protection of UK GI’s must be a “red line” in future trade negotiations.117
As we looked at these issues in detail during that inquiry, we have not done significant new work on these issues during this inquiry. However, there have been some new developments since then which we explore in this chapter.
Impact of post-Brexit tariffs and UK’s domestic tariff schedules:
58.On 13 March, the Government announced the tariffs it would apply to imports into the UK if the UK were to leave the EU without a deal. This regime would apply for up to a year, while a consultation on a permanent tariff regime takes place. While there will be no tariffs on the majority of products, a mixture of tariffs and quotas118 will be applied to beef, lamb, pork, poultry and some dairy products to support farmers and producers who have historically been protected through high EU tariffs.119
59.Responding to the tariff announcement, NFU Scotland said this “further exposed the catastrophic impact that a no deal would have on the nation’s farming; food and drink sectors and the wider rural economy”.120 In particular they were concerned about agricultural products, such as cereals, fruit, vegetables and eggs, which would receive a lower form of protection than under the current EU regime.121 Willie Campbell, First Milk, meanwhile expressed concerns about the impact on the dairy sector:
Dairy is perhaps unique in the respect that we have many end products. It is not just milk—we have many end products. If we put varying tariffs on different end products, what we actually do is bring down the price that will reach the farmer to the lowest common denominator.122
60.Under the Government’s no-deal regime, tariffs on imports of wheat, barley, maize and oilseeds will be set at zero. Although imports of these products from the EU are currently tariff free, imports from other countries have to pay tariffs set by the EU. Lorne Watson, Seeds Committee Chair, Agricultural Industries Confederation, gave a worrying assessment of the impact this change would have on the arable sector:
Maize is probably the biggest threat to UK agricultural production. Maize production in continental Europe, and now elsewhere in the world, is significantly cheaper than home-produced barley or wheat and that is imported. That is going to be a huge threat to the whole of the arable sector. Even contentious issues like the Scotch whisky industry. Already some of the grain distilleries have switched from wheat back to maize.123
61.John Fyall, Former Chairman, National Sheep Association Scotland, described the Government proposal for tariff for the sheep sector as “an absolute joke”.124 While the Government is proposing an average tariff of 40% on imports of sheep meat on imports from the EU, its proposals for tariff-rate quotas after Brexit would mean that, imports from New Zealand and Australia will continue to be imported tariff-free:125
How is it that we can accept 137,663 tonnes into the country when at the moment they only fulfil about 120,000 of that in a good year? If the pound was to strengthen again, the sheep industry will be facing an onslaught we could not stand.126
62.While the introduction of tariffs for some sectors should protect those industries from competition from cheaper exports, in a no deal scenario those sectors would also face tariffs on their exports to the EU. As we heard during our Trade inquiry, this is particularly concerning for the Scottish food sector as 70% of their exports go to the EU. The EU’s WTO tariffs on food range from 10% for fruits and vegetables, to 35% on dairy products and up to 50% for certain red meats.127 Sarah Baker, Strategic Insight Manager at the Agriculture and Horticulture Development Board, warned that the impact of these tariffs could result in Scottish industries such as the red meat sector becoming uncompetitive in the EU overnight:
There are not many products that could take a 40% tariff and still remain competitive, so at the stroke of a pen a lot of those industries will really struggle.128
63.When we raised these issues with the Secretary of State, he said that the UK’s domestic tariff schedule recognised the needs of specific groups such as upland sheep farmers.129 If a sector did encounter difficulties however, he said that the UK Government was willing to intervene with financial support,130 and that provisions had been made for this in Defra’s budget.131
64.We are alarmed by the negative reaction Scotland’s farming sector has had to the Government’s temporary no-deal tariffs, which appear to provide significantly less protection than the current regime and give industry very little time to adapt. The Government must address these concerns during this consultation period on its permanent tariff regime. The Government should also provide more detail on the financial support it will make available to farmers and crofters to offset the impact of the EU’s high no-deal tariffs on their exports.
Geographical Indications
65.In our trade Report we also highlighted the importance of Geographical Indications (GIs) in protecting and promoting some of Scotland’s most iconic agricultural produce including Scotch Beef and Stornoway Black Pudding.132 A GI is a name that can only be used on products that have a specific geographical origin and possess qualities or a reputation due to that origin. GIs protect products by preventing imitation, aid consumers be giving them an assurance about the quality of a product and ensure the production is kept in local communities and attracts a higher price.133
66.Since we published our previous Report, the Government has made progress establishing a UK domestic register for GIs. On 25 March the House of Commons approved The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019,134 This instrument amends retained EU regulations establishing GI schemes for agricultural products and foodstuffs to create a UK GI scheme.135
67.While it has not been possible to make progress on the recognition of the UK GIs within other countries as the UK has not yet left the EU, the Government has appeared reluctant to act on our recommendations to negotiate a mutual recognition agreement with the EU for existing and future GIs and ensure GI protection is a red line for all other trade negotiations. In response to our Report, the Government said it recognised the benefits brought to Scotland through the success of GIs but argued that a mutual recognition agreement with the EU would “undermine” the independence of the UK GI scheme in deciding what is and is not eligible for protection in the UK.
This is because the UK would be required to protect EU GIs which successfully gain protection under the EU scheme after we have left the EU, without the ability to assess the applications ourselves according to the guidelines set by the UK GI schemes.136
Furthermore, they argue that such an agreement is not necessary in ensuring continued protection for UK GIs in the EU, as the protection is not dependent on the UK agreeing to continue protection for EU GIs in the UK.137
68.This argument that UK GI’s would continue to receive EU protection without the UK reciprocating was criticised by the Scottish Government, who said it did not consider political reality:
While it is correct for the UK Government to say that there is currently no process for the EU to remove the UK GIs, if that asymmetry continued it would be very likely that the European Union would move to remove the UK GIs.138
69.On the status of GIs in future trade negotiations, the Government has said it is committed to “celebrating the success of UK products and driving further market access to make sure they are enjoyed around the world” but did not go as far as saying their inclusion would be a red line.139 This may be related to the Government’s intention to negotiate new trade agreements with countries, such as the United States and Australia that are opposed to the EU model of GIs.140
70.Geographical indications have been crucial in protecting the provenance of many iconic Scottish products, and we are pleased that the UK Government has acted on our recommendation and established a domestic register. While we are reassured that the Government is committed to continued recognition of UK products, the Government must provide more clarity on how it will ensure the future protection of Scottish GIs in the EU given that this may be revoked by the EU if a reciprocal arrangement is not reached. We also repeat our call for GI protection to be a red line in future UK trade negotiations.
110 Ibid
111 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019
112 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 10
113 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 40
114 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 84
115 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 46
116 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 70
117 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019 para 88 and 95.
118 Quotas are limits on the amount of a product that can be imported. A tariff rate quota imposes a tariff (tax) on any good imported above the quota, rather than preventing further imports.
119 House of Commons Library, Brexit: trade tariffs if there is no deal, Briefing Paper Number 8518, 13 March 2019.
120 NFU Scotland, “Tariff Reduction Proposals Undermine UK Food Security”, 2019
121 NFU Scotland, “Tariff Reduction Proposals Undermine UK Food Security”, 2019
122 Q 333
125 AHDB, No deal tariff announcement, 13 March 2019
127 Trade inquiry Q150 and Exiting the European Union Committee, EU Exit Analysis: Cross Whitehall Briefing, 2018
129 Q 599
130 Q588
131 Q590
132 The full list of Scottish Geographical Indications is- Native Shetland Wool, Shetland Lamb, Orkney beef, Orkney Lamb, Bonchester Cheese, Traditional Ayrshire Dunlop, Orkney Scottish Island Cheddar, Stornoway Black Pudding, Scottish Wild Salmon, Scotch Whisky, Scottish Farmed Salmon, Scotch Lamb, Scotch Beef, Arbroath Smokies and Teviotdale Cheese.
133 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 85–86
134 Parliament Statutory Instrument tracker, The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019
135 Parliament Statutory Instrument tracker, The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019
136 Scottish Affairs Committee, Government response to Scotland, Trade and Brexit report, 2019
137 Scottish Affairs Committee, Government response to Scotland, Trade and Brexit report, 2019
138 Scottish Affairs Committee, Q495 Scotland, Trade and Brexit inquiry, 2018
139 Scottish Affairs Committee, Government response to Scotland, Trade and Brexit report, 2019
140 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 93–94 Scottish Affairs Committee, Scotland, Trade and Brexit, Seventh Report of the Session 2017–19, HC 903, 10 March 2019, para 93
Published: 31 July 2019