Before Covid-19 shunted Brexit into the background the UK government revealed its priorities for a trade deal with the United States. Nick Hughes looks at the detail and the implications for the food sector.
What does the UK want from a US trade deal? In short, a bigger slice of the trade pie. Total trade between the two countries was valued at £220.9bn in the past year, with the US accounting for almost 20% of all UK exports. The government’s analysis shows a free trade deal could increase trade between both countries by £15.3bn, with the opportunity to boost exports of food and agricultural products such as smoked salmon, meat and dairy products seen as a key opportunity. Behind the EU, the US is currently the UK’s second-largest market for food and drink exports, which were worth £2.4bn in 2019.
£15.3bn? That sounds a lot. It may do, but the reality is that even under a scenario whereby tariffs are removed entirely – alongside a 50% reduction in non-tariff measures – the government estimates UK GDP would increase by just 0.16% in the long run as a consequence of a free trade deal.
Why don’t we trade more with the US at the moment? For a number of reasons of which tariffs are just one. Many non-tariff barriers exist, such as the requirement to meet myriad different technical requirements around customs, labelling and testing regimes, which can vary between different US states. But even if you were to remove all of these barriers, simple logistics restricts the size of the trade opportunity where food is concerned, particularly for fresh food, which needs to travel thousands of miles in perfect condition before it reaches the shelves.
How do tariffs currently impact the trade in food? The US levies £451m in tariffs on UK exports each year, some of the highest of which are on food products such as cheese. These products are referred to as “import sensitive” because granting market access to other countries poses a risk to domestic producers. It was recently announced that British food exports to the US fell by a quarter in November 2019 compared with the previous year following the introduction of a new 25% tariff regime for the EU that was linked to a row over subsidies to aerospace giant Airbus. Scotch whisky, cheddar cheese, biscuits and smoked salmon are among the products affected.
And what about tariffs on food coming the other way? Tariffs for processed foods are on average higher for products coming into the UK from the US than for those going the opposite way. Tariffs on agricultural products are seen as providing protection for UK farmers who would struggle to otherwise compete on price with mass-produced US commodities.
And then there is the thorny issue of standards? Indeed. Much of the discourse around a US-UK trade deal has focused on the relatively low production standards permitted in the US, which farmers and campaigners fear could result in “chlorine-washed chicken” and “hormone beef” being allowed into the UK market. Respondents to a public consultation on trade negotiations with the US identified maintaining the UK’s current food and product standards as a high priority.
What is the UK government’s position? It says that any agreement will ensure high standards and protections for consumers and workers, and will not compromise on the UK’s high environmental protection, animal welfare and food standards. Campaigners, however, have challenged the government to make its pledge legally binding by inserting a clause in the Environment Bill that recently had its second reading in parliament.
Are there any other concerns from a food and environment perspective? Plenty, but two of the main ones are around UK Geographical Indications (GIs) and biodiversity. On GIs, certain heritage products such as Melton Mowbray pork pies and Cornish pasties can only carry the description if they are produced in that specific region. Many consultation respondents called for the effective protection of UK GIs in a future deal, fearing that the US will push to have them removed, thereby freeing up exporters to produce cheaper versions.
And on biodiversity? Although the UK government has said it wants provisions that support its net zero ambition, its own modelling estimates that an increase in the output of the energy and agricultural sectors following a deal could negatively impact biodiversity through climate change, nutrient loading, and pollution and ecosystem changes.
And the good news? The government says potential benefits of a free trade deal include better jobs, higher wages, more choice and lower prices for all parts of the UK. The proof, however, will be in the (Yorkshire) pudding.