Port of Dover

Trade negotiations between the UK and EU are ramping up, and the UK is eyeing up potential suitors for future deals. Meanwhile face time with staff at the World Trade Organisation’s (WTO) headquarters is in high demand. Delegations from industry and government are descending on Geneva on fact-finding missions to comprehend the complex legalities and practicalities that the UK’s re-established independence will involve.

Agriculture and horticulture feature prominently on the trade agenda. But from a grower’s perspective, which aspects of the negotiations are relevant? And what are the issues at the forefront of food producers’ minds?

Let’s start with what we know about trade in our industry. The UK imports 67 per cent of all its fresh produce, almost six million tonnes, from over 95 countries, with a third coming from the EU. Fruit and vegetables form the highest-value category of imports for unprocessed food, worth over £5 billion and rising. Of the products we import, bananas account for over one million tonnes, followed by apples, tomatoes, citrus, onions, peppers and grapes.

Non-food imports are also significant, with over £600m worth of cut flowers alone. Some 78 per cent of ornamental imports hail from The Netherlands, mainly cut roses and carnations, with Colombia and Kenya supplying much of the rest.

The trade we have with the EU is nothing short of vital for ensuring that we all, as consumers, continue to enjoy a consistent and reliable supply of the fruit, flower and vegetable products we want to buy, and at a price not inflated by import tariffs.

It’s plain to see why the UK wants to develop a ‘special’ trading relationship with the EU, one where we can still enjoy free and easy trade. Equally vital to sustaining our year-round supply of produce and plants is the UK government securing special trading agreements with the third countries from which we currently import.

Here are the questions and concerns I’m hearing most from growers:

Will I be able to import from overseas with as much ease as I do now?

For growers that may have an operation overseas, provide year-round category management to a retailer, or have a packhouse that relies on imports for year-round throughput, any changes to trade within the EU, or disruption to the supply of goods from third countries, could drastically affect the availability and cost of fruit and vegetables.

Being part of the EU customs union has meant goods from the EU can be imported with no customs barriers. If the Chequers Plan wins out, and a ‘Facilitated Customs Arrangement’ (FCA) is established, removing the need to introduce new checks and controls between the UK and the EU, we could expect things to carry on much as they do now. This is the much sought-after ‘frictionless solution’.

The ability of the UK government to replicate the existing EU Free Trade Agreements, such as the West Africa agreement, is also a critical part of achieving a seamless transition.

The UK government has committed to replicate all the existing FTAs the EU has in place, but there are still question marks over whether it is in the UK government’s gift to inherit such agreements, especially as an independent member of the WTO.

We need to include the ability to import plant material within this too. The soft-fruit sector alone estimates 100m berry plants are imported from the EU every season, and the top-fruit sector estimates 600,000 apple and pear trees are imported each year.

On the export side, UK seed potatoes will not be marketable in the EU without an agreement on trade. Defra and the Scottish government are currently seeking views from growers to consider how to mitigate this risk if no deal became a reality.

How are customs checks going to be conducted if we are out of the customs union?

If the aforementioned FCA is unsuccessful, there’s potential for a whole heap of trouble at the border.

Portsmouth, Southampton, Dover and Tilbury ports – all entry points for huge quantities of horticultural goods – do not have the staff, IT systems or physical infrastructure to meet the increased demand that checking EU and non-EU imports would bring.

Any delays could choke the UK’s ports and threaten the availability of some food products. UK business would face new paperwork requirements, making trade more complicated and less efficient.

One suggestion that’s emanated from the bowels of government is that, in the face of a no-deal situation, the UK would simply allow goods into the country with little or no checks, although Defra secretary Michael Gove was reportedly dismissive of this idea at the Royal Welsh Show. While frictionless, this approach raises food safety and biosecurity concerns, as well as questions over how customs charges would be processed.

It’s one that continues to be hotly debated, but I at least took comfort from the evidence that the Food Standards Agency and Defra Plant Health team gave at a recent House of Lords Committee evidence session. The message was loud and clear: the UK will keep step, or make stronger, its rigorous approach to plant and food safety after we leave the EU. After all, pests and diseases don’t respect borders.

Will we be flooded with cheap imports?

That depends. If we leave the EU without a comprehensive trade deal, or any trade deal for that matter, the UK would revert to trading with the EU on the same basis as other WTO members.

That means the UK government will have to decide what, if any, tariffs it applies on imports, including those from the EU. Anything the UK exports will be subject to EU tariffs too.

We’ve established that exports of UK horticultural products are minimal, valued at just £250m for fresh fruit, vegetables and ornamentals combined – a mere fraction of the import value of over £6 billion. So, it’s the deal on imports that matters most to the horticulture sector.

Imports of horticultural produce into the EU, and therefore the UK, are currently subject to import tariffs. In most cases, these are ‘ad valorem’ tariffs (a rate charged according to the value of goods and services, rather than a fixed fee) of below 20 per cent and, for some products, they vary seasonally. Importantly, they seem to get the balance about right.

They don’t present a disincentive to importers, yet they do offer something of a buffer to UK growers from extreme price competition, controlling volumes, and at what time of year from global suppliers.

The bottom line is that if the government chose not to apply tariffs on imports from third countries after Brexit for fear of causing food price rises (which the Department for International Trade has already said it’s considering) it could leave British growers more vulnerable to cheaper imports and competition, and at times of year we aren’t currently.

As ever, the devil is in the detail and it falls to the likes of Defra, NFU and Fresh Produce Consortium to pour over the trading schedules and work out how important these tariffs are, and what levels of protection we may want to retain in the UK. It’s work in progress.

Is this an opportunity for British growers to take back a share of the home market?

It could be for some sectors. If the UK government does slap tariffs on goods coming into the UK, or it becomes more of a headache for countries to send goods here, British produce becomes more competitive overnight. Good, right?

Maybe. If tariffs are applied to imports, the CBI estimates that the cost paid by UK consumers and businesses could reach £13bn (around 0.7 per cent of GDP, with an average tariff rate of almost six per cent). That’s got to hurt.

The CBI is not alone. The House of Lords EU Committee’s report into Brexit and food availability argued a no-deal Brexit would result in an average tariff on food imports of 22 per cent, meaning that prices paid at the tills would rise.

These projections make tariffs an unlikely option for government. But if imported product does cost more it could drive sales of home-grown fruit and vegetables, and, longer term, create scope for British producers to seize a larger share of the home market.

There is a sizeable chunk of imported produce that could be grown domestically – for example, imports make up the majority of supplies for apples (60 per cent), pears (85 per cent) and plums (80 per cent), and over 50 per cent of brassicas and onions.

Let’s not blindly follow Donald Trump’s logic though. He’s accused of taking a very simplistic approach to reducing America’s trade deficit. There is a strong economic argument that if somebody is able to supply something cheaper than you can, let them, leaving you to focus on adding value elsewhere.

Will British production standards be undermined in any new trade deals?

Once the UK is flying solo the government is at liberty to negotiate FTAs with new partners of its choosing, as well as make amendments to any EU agreements we inherit. Just as significant as tariffs are non-tariff barriers – often used to limit trade in horticultural products on the grounds of environmental protection, safety, consumer information and to protect human, animal or plant health. The UK hopes to borrow from the existing EU rulebook to begin with in the form of an epic cut-and-paste exercise. To that end the EU Withdrawal Bill will enshrine EU regulations into UK law, to start with.

The government has said that it won’t accept goods with standards lower than our own in new trade deals, but it’s difficult to guarantee this when trade deals are usually done on a macro-economic level. Agricultural products and market access could be a useful pawn in a bigger game of economic chess.

It’s not often I use the words retailers and safety net in the same sentence, but it’s possible that supermarkets’ own specifications and sourcing policies would offer an additional buffer against lower-standard food imports; they are gatekeepers to supermarket shelves. It’s the non-retail market where goods would most likely penetrate.

Until we actually leave the EU we won’t see the detail of any new deal. That said, the courtship of potential suitors has already begun. The most obvious one is the US, though Trump’s remarks about there being big opportunities for US producers in a UK/US trade deal won’t fill many of us with confidence.

I have a mental image of Jonah and the Whale that I just can’t shake.

THE £5 BILLION TRADE: What fresh produce does the UK import?

The UK imports around 3.7m tonnes of fruit a year, worth over £3bn – largely crops that cannot be competitively or feasibly produced here such as bananas (which made up nearly a third of the total value), citrus fruit and melons.

On the vegetable side the UK imports 2.3mt of tomatoes, sweet peppers, lettuce, cucumbers, cauliflowers, broccoli, cabbages and onions to the tune of £2.1bn. More than 80 per cent of vegetable imports come from the EU, with Spain, the Netherlands and, for some crops, Ireland, the major suppliers.

Outside fresh produce, the UK imports more than £1bn worth of ornamental horticultural produce – mainly cut flowers from Colombia, Kenya and the Netherlands – but also live plants, cuttings and bulbs from the EU.

There are some exceptions on exports. Narcissus bulbs, worth up to £5m annually, are exported predominantly to the US; and UK-produced wine – in a good year the UK can produce between five to eight million bottles and exports to the US, Australia and Japan.