EU Referendum

EU Referendum: missing the mark on FUD


Spread far and wide is David Cameron's latest attempt at FUD, this one aimed specifically at farmers, telling us that Brexit could cost livestock producers as much as £330 million on lamb and beef exports alone.

The Prime Minister delivered this little nugget as he visited a farm in north Wales, prior to addressing the Welsh Conservative conference. The pitch is that more than 90 percent of UK lamb and beef exports - worth around £605 million - currently go to the EU.

On this basis, he says, if farmers had to rely on WTO rules rather than EU membership to secure trade access to the EU, they could be faced with tariffs costing £240 million a year for beef and £90 million for lamb, he said.

"British farmers and food producers rely on the single market", he claimed. "It gives them access to 500 million consumers, to whom they can sell their goods on an open, unrestricted basis. No tariffs, no barriers, no bogus health and safety rules designed to keep our products out".

And, like all "good" FUD, this has a basis in fact. Currently, beef imported from third countries into the EU, including the UK, does attract basic tariffs, with beef ranging from 12.8 percent plus, between €176.80 and €265.20 /100 kg.

Given that we were unwise enough to leave the EU without a trade deal, our exporters would have to be paying these rates to for the privilege of selling product to the remainder of the EU. However, nothing is ever quite as it seems. Overall, the UK is only 72 percent self sufficient in meat – about 76 percent in beef and veal. We import more than we export.

Now, if the EU imposed tariffs on us, we could impose similar amount on their product, which would mean that EU-sourced beef would not be competitive with home produced meats. Producers currently exporting to the EU would have an expanded opportunity on the domestic market, and one doubly attractive as it would be without the currency risk.

Even that, though, is not the whole extent of it. With current third country suppliers, the EU has a low tariff quota regime, brokered under the aegis of WTO rules, known as the Hilton quota. It was so named after being negotiated in the Hilton Hotels in Tokyo as part of the GATT agreements in 1979.

This allows for a quota of 58,100 tonnes of high-quality fresh, chilled and frozen beef from Argentina, Brazil, Uruguay, Paraguay, USA, Canada, Australia and New Zealand – at a lower fixed tariff rate of 20 percent. But, since reports indicate that much of this quota goes unused, this is something that the UK could relatively easily tap into.

Of more interest, though, is the duty-free beef quota Duty-Free Beef Quota (otherwise known as the Duty-Free Tariff Rate Quota – TRQ), which currently stands at 48,000 tons, taken up on a first come, first served basis. Although the UK would not automatically have access to this scheme, it does set a precedent for duty-free access to the EU market that the UK could invoke during Article 50 negotiations.

But therein lies our strongest suit. The willingness – some might say desperation - of the EU to do trade deals means that its own traditional beef markets are under threat. At the moment the Canadian deal, so loved by Boris Johnson, is causing alarm in Irish circles and the prospect of TTIP, opening European markets to US-produced beef, represents an even bigger threat.

Putting this together, it turns out that the one way of protecting UK livestock producers from cheap US beef is to leave the EU, opting out of TTIP (something that will keep Labour supporters happy) and imposing tariffs on EU goods.

On the other hand, we also have the option of a free market solution. Currently, we are only 55 percent self-sufficient in pig meat (which includes bacon and other cured products). The main imports come from Denmark and Holland, with additional supplies sourced from Germany, Ireland, France, Spain, Belgium and Poland.

The UK, therefore, has considerable leverage over a wide range of EU suppliers. In return for quota and tariff-free access to our pig meat market, it would be relatively simple to do a deal on beef – and also broker access to the valuable lamb market.

Mr Cameron's FUD is precisely that. The chances of the livestock industry being adversely affected by Brexit are slight and, in all probability, less than the effects of wider market access if we stay in the EU.