The recent BBC Newsnight programme reported that a no-deal Brexit may result in the culling of around 45,000 dairy cattle in Northern Ireland as a result of the tariffs and non-tariff barriers that would come into play for Northern Irish milk exports and the resulting market impact.
While this report has since been denied by the UK department of agriculture (DEFRA), who stated that “a widespread cull of livestock is absolutely not something that the government anticipates nor is planning for in the event of a no-deal”, with the increasing risk of a no-deal Brexit occurring in just two months’ time (31 October 2019), it is vitally important that the risks for the all-Ireland dairy economy are understood and, as far as is possible, prepared for.
800 million litres of Northern Irish milk (36% of the total production in Northern Ireland) is exported to and processed in the Republic of Ireland annually, accounting for approximately 11% of the total Irish production pool. Currently this milk is collected directly from farms in Northern Ireland and delivered to processing facilities in the south.
In the event the UK leave the EU without a deal, there will be immediate barriers for this supply line. The first barrier relates to the import of unpasteurised milk, which under EU regulation requires the “establishment of origin” to be approved and authorised for export into the EU. Relating this to current supply lines would require the 1000+ dairy farms in Northern Ireland to be individually authorised, an unfeasible feat.
In addition to this authorisation, an export license and health certificate would be required for each consignment, or in this case milk collection crossing the border. Again, a tough administrative requirement to meet for each individual farm. In addition to meeting these new regulatory conditions, milk exports would be subject to a significant tariff of €21.8/100kg.
These tariffs however could be deferred in the case of “inward processing” for certain supply lines. Inward processing rules apply to goods which are imported for processing purposes and are then re-exported outside the EU within a certain time frame. The procedure is designed to be quite flexible, as businesses do not need to decide in advance whether to sell the finished products within the Union or outside. This is therefore a credible option for many Irish dairy co-operatives with a Northern Irish milk supply, as they can remain flexible to respond to market developments but also avoid weighty duties by focusing the supply on third country markets.
However, it is important to note that exporting products originating on an all-Ireland basis will become far more complex after Brexit. The EU has 750 market access and trade agreements, covering 168 non-EU countries. Northern Irish goods would no longer have the benefits of those agreements and therefore products such as such as butter, cheese and milk powder produced using Northern Irish milk, could be subject to tariffs and additional customs checks in third countries. Certain countries or customers could also, for regulatory purposes, stipulate that it will only take EU sourced milk, preventing access to markets altogether.
With these stark implications for milk imports from Northern Ireland, it is undeniable that there will be a significant market and price impact for Northern Irish dairy farmers, if the UK leaves the EU without a transitional or trade agreement in place.
All efforts must now be made by the Irish Government and Northern Irish officials firstly to agree a deal with the UK, but then also to prepare for a no deal outcome and to work together with the EU and UK to find an alternative solution to a hard border with Northern Ireland, which would alleviate some of this complex administration and regulatory burden and facilitate the continuation of the all-Ireland dairy economy.
Alison Graham – European Affairs Executive
3 Apr 2020