Alex Waugh, director general of the National Association of British and Irish Flour Millers (Nabim), on the risk of EU Rules of Origin bringing an increase in the cost of exporting baked goods
Most will be relieved that the UK and EU27 have reached a deal on transition arrangements, which means, in essence, it is business as usual until the end of 2020. This gives more time to sort out the future relationship between the UK and the EU.
Both sides seem committed to a preferential trade agreement (i.e. no tariffs) on goods, including flour and bakery products. All being well, that should mean that the very significant exports from the UK to the EU – worth over £500m a year in terms of bread, pastries, pizzas and biscuits – can be maintained and continue to grow. However, like all trade deals, this one will have terms and conditions – the small print.
These include Rules of Origin, which define whether products are considered to come from either the UK or the EU. In the food sector, these can be quite restrictive. Typically, the EU has been very sensitive to products using grain, meat, sugar or dairy as an ingredient, worried that its trading partner might be used as a back door for other countries to undercut the EU market.
For example, in other deals, the EU has considered the use of even a small proportion of grain from a ‘third country’ is sufficient to mean that the foodstuffs made from it fall outside the agreement and are subject to tariffs ranging from 15% to 50% of the value of the product. And many of the agricultural goods considered sensitive by the EU are key ingredients in bakery products.
Recognising the potential for discussions to go awry on this point, Nabim and the Food & Drink Federation commissioned a report to examine the implications for UK food producers and to offer advice to government and negotiators on both sides on how problems could be avoided.
Using specific examples, including wholemeal bread and pizza, this paper (available at www.nabim.org.uk) offers eight ways in which the UK-EU deal could be crafted to ensure that existing trade patterns are not disrupted, so that businesses can continue to supply their customers with the high-quality foods they require, whether sold in the UK, the Republic of Ireland or other European countries.
If we fail to secure the right rules as part of a preferential trade deal with the EU, millers and bakers will be among those who suffer a ‘hidden hard Brexit’, with a rise in exporting costs, re-engineered supply chains or exclusion from the market. We hope this report, which has been well received in London and Brussels, will help achieve a much better outcome.