UK vote has set the bomb ticking for Irish farmers
Ireland must wake up to how Brexit can damage largest indigenous industry
UK post-Brexit trade deals could leave Irish exports fighting with competitors from South America, New Zealand and the US – ones which will enjoy preferential access without the costs of complying with EU regulations. Photograph: Jeff J Mitchell/Getty Images
Ireland’s farmers have long feared the implications of European Union trade deals with the World Trade Organisation, the United States and South American, including the agricultural superpowers of Brazil and Argentina.
Given Ireland’s dependence on agricultural exports, however, the consequences of the United Kingdom’s departure from the EU could deliver a more devastating blow than all three combined. This is not an exaggeration. Sterling’s volatility has dominated debate but Ireland must wake up quickly to the impact Brexit could have on agriculture, our largest indigenous industry, one that employs over 200,000.
Food and drink sales to the UK are worth over €4 billion annually – half of all beef exports, two-thirds of cheese and a third of drink. Even a slight disruption to trade flows, markets or competition could leave Ireland exposed.
Unfortunately Brexit creates the ideal circumstances for all three: increased Border controls with import tariffs, a possible UK recession or preferential trade deals with non-EU countries. Without doubt the latter is the most concerning. Given that cheap food has long been the UK’s ambition, there is a real risk that it will “look west” to bridge the gap between domestic production and demand.
Unfortunately the gaze will extend beyond Ireland’s shores. Instead the UK may display intense interest in forming partnerships with the South American Mercosur trading bloc and/or the US. Beef has been taken off the table in EU-Mercosur talks, but it will be centre-stage when the UK talks to Mercosur or the US. British politicians will not sacrifice access to the Brazilian, Argentinean or US financial services markets to protect British or Irish farmers.
Cheap food also spells trouble for British and Northern Irish farmers who depend on support payments even if sterling’s volatility delivers short-term Brexit- provoked rises.
The prices made at market makes up a relatively small share of farmers’ income. Instead, incomes are underpinned by direct payments from the Common Agricultural Policy (CAP). The point was driven home by the European Commissioner for Agriculture, Phil Hogan, in the North before the referendum when he pointed out that the North had got £2.5 billion from it in the last decade, equal to 87 per cent of farm incomes.
Before voting, farmers were assured that a UK outside of the EU would continue to support them. If so, it will require Westminster to change its traditional attitudes. In recent CAP reforms, the UK led the charge for budget cuts. Because cheap imports are favoured over local production, it should therefore come as no surprise that pre-referendum pledges to support agriculture are already being rowed back upon.
Since Thursday’s vote, much of the Irish debate has centred on securing preferential access to the UK market. While likely to be challenged, even if this were to happen it would be no silver bullet for the industry here.
UK post-Brexit trade deals could leave Irish exports fighting with competitors from South America, New Zealand and the US – ones which will enjoy preferential access without the costs of complying with EU regulations.
For example, should the UK lift the ban on growth hormones or allow the US to sell hormone-treated beef, the EU ban on such practices would place Ireland at an immediate disadvantage of €150-€250 per finished animal.
So how should Ireland respond? Politically, the potential impact of Brexit on rural Ireland needs to be put centre-stage. Few have probably grasped the enormity of what lies ahead, instead focusing on the day-to-day market prices.
This has to change – and it has to be change quickly. The clock is now ticking. There could be as little as two years on the clock. Ireland needs to play tough with the rest of the EU. Since Thursday, senior Fine Gael figures have mounted red-line defences about corporation tax. Farmers will expect a similar defence to be mounted on their behalf.
Ireland’s entry to the UK must be safeguarded while the EU must commit support to help to shift exports away from the UK to other markets, including market supports if prices collapse after a UK-Mercosur trade deal.
Furthermore, the Irish Government must do everything possible to encourage Irish agri-food sales elsewhere. The opening of the US and Chinese markets have been subjected to great political fanfare. Brazilian beef is flooding into China, but Ireland remains on the sidelines. Only a trickle of Irish beef has made its way through US regulations. Serious political work now needs to go into developing both markets.
Meanwhile, Ireland should not lose sight of the need to build ever-stronger relationships with the British consumer. Bord Bia has always treated the UK as a safe haven where exports remained largely steady. However, this is clearly no longer the case and our marketing strategy must change to reflect this.
Our inability to form a strong Irish food brand in Britain could prove costly in what will become a much more challenging environment.
Meanwhile, British farmers must be convinced that they are better off if imported product is sourced from a near-neighbour facing similar costs rather than have their markets flooded with cheap imports from elsewhere.This may become an easier sell when British farmers realise the gamble they have taken.
For Irish farmers, Brexit presents one of the biggest threats in a generation to the future prosperity of the industry and rural Ireland. Hopefully, common sense will prevail, but Ireland has to deal with a ticking time bomb.
Winston Churchill once wisely said:, “To build may have to be the slow laborious task of years. To destroy can be the thoughtless act of a single day.” Justin McCarthy is editor of the Irish Farmers’ Journal