Brussels, 8 April 2019
This morning, I want to give you some details of the contingency planning that we have been doing in relation to the potential impact of Brexit on the EU agri-food sector.
You have been extensively briefed on the preparedness work undertaken by the Commission over the last eighteen months or so and I don’t intend to repeat that ground. In addition to this press conference, you will also have an opportunity for a follow-up technical briefing.
So already, the first Brexit date has passed and we are now just two days away from yet another crucial European Council and, potentially, four days away from the UK’s departure from the EU.
So, we still can’t say when and in what circumstances the UK will leave the EU. That lack of clarity complicates our Brexit contingency planning, not least because the circumstances in which the UK leaves and the consequences of those circumstances will influence significantly the EU’s response.
However, and though it still may not happen, there has been a heightened risk of a ‘no-deal’ Brexit in recent days and recent months and our planning has had to take this into account. Of course, common sense may still prevail and this scenario may yet be averted, bearing in mind the shared commitment to protect the Good Friday Agreement and avoid a hard border on the island of Ireland.
We have planned well for such circumstances and I am confident that we have the wherewithal to respond effectively and comprehensively, when required.
The European Commission has considerable experience in deploying market support measures on occasions of significant market disturbance, especially in the agri-food area. And unfortunately, this is the case because agriculture is exposed to geopolitical and severe climate/weather-related events, which can have a significant impact on markets and farmgate prices.
The initial phase of our planning is focused on ensuring that we have the necessary legal basis for the deployment of appropriate market measures and, having thoroughly reviewed the Common Market Organisation’s provisions of the Common Agricultural Policy, we are confident that we have such a reliable legal basis.
The publication by the United Kingdom of its proposed tariff schedule in recent weeks enabled us to develop our contingency planning also. For the first time, we get some clarity from the United Kingdom about the likely impact of the application of zero duty tariff rate quotas (TRQs) and the imposition of tariffs on a limited range of products. We have, of course, also noted the UK’s intentions in relation to trade on the island of Ireland and the temporary nature of the tariff schedule.
One of the difficulties that we have is that the details that have been provided so far are set out only in what is essentially a concept paper and we still lack clarity and the details of the necessary legislation to see how this regime will operate in practice.
Using the information on its tariff schedule, made available by the UK authorities, the Commission has updated its Market Access Database to include the United Kingdom. This Database provides information on duties and taxes that apply to exports to trade partners such as the USA, China etc. The update is part of our efforts to help EU exporters deal with the new situation with which they may soon be confronted. The Commission is continuing to monitor these developments and will update this information as often as possible and as is required.
However, the published tariff schedule includes relatively high tariffs on a number of animal products, such as beef, poultry, pigmeat and cheese as well as such products as sugar and rice. It is clear that a number of Member States will bear the brunt of these proposed tariffs, because of their exposure already to the UK market for those products.
The EU-27 and the UK are very significant trading partners. The EU-27 enjoys a €25 billion surplus today with the UK in agri-food products, with exports of some €41 billion on an annual basis. This surplus is higher than the current overall EU-28 trade surplus of €21 billion with the rest of the world.
However, one should not underestimate the importance of the EU market for the UK. Given that the EU will treat the UK as any other third country, with the application of tariffs and SPS checks, this presents a significant challenge for UK producers and exporters.
Today, we are talking about a no-deal scenario, in which case what we can say with certainty is that there will be significant disruption to certain agricultural markets.
Confident in that knowledge and if left unchecked, we have to come to the conclusion that the European Commission has a legal obligation to intervene and we will. Early intervention has the benefit of providing not alone support to our farmers, but gives confidence to the market of the Commission’s commitment to the agri-food sector and avoids the development of a potentially much bigger crisis in the longer-term.
In terms of precisely how we might intervene, we have a suite of measures available in our legislation and we are satisfied that we have an appropriately-stocked toolbox from which we will work. This will be discussed by the College on Wednesday.
Without being prescriptive at this stage to the outcome of the College meeting, I anticipate a mix of measures designed to suit particular circumstances and products. A mix of some or all of public intervention, private storage aid, withdrawal schemes and targeted aid will form the package of support.
In addition to these measures, we are also looking at state aid rules, in which case it will be for the Member States to provide support. Just recently, the Commission adopted a new Regulation which has provided for an increase of 66 per cent in the level of de minimis support that can be granted in the agricultural sector through state aid.
There are also opportunities for Member States to propose amendments to their Rural Development Programmes to redirect support to beneficiaries which have been most affected by Brexit, though I acknowledge that the scope here might be limited because many commitments may already have been made.
We have had a number of discussions with Member States and other key stakeholders about the impact of Brexit and the ways in which the Commission can best assist. This engagement is continuing and, apart from the obvious impact of tariffs, we are also looking, with the Member States, to the difficulties that may arise from logistical delays, customs formalities, sanitary and phytosanitary checks etc. These issues have been addressed in previous briefings and press conferences in recent days.
I am also engaged of course fully with the budget Commisioner, Commissioner Oettinger and his services. I am grateful to him, Mr Oettinger, for his understanding of the particular threat posed to the agri-food sector and for his consistent support for this sector in this and in previous crises.
Equally, I understand fully the budgetary constraints within which he has to work, which will of course be made more difficult in the event of a no-deal Brexit.
Much of the food that is exported to the UK is fresh food and, therefore, perishable, with little or no scope for delays at ports. So, just because tariffs may not be applied, we cannot underestimate or indeed assume that such products will not be caught-up in severe logistical disruptions, particularly in the early weeks. In the case of trade to or through the UK, we have noted their stated intention to maintain ‘business as usual’, but the question has to be asked just how can that be achieved ?
I want to conclude by saying that I am confident that our planning is on-track to enable us to respond effectively and quickly to Brexit and, particularly, to a no-deal Brexit. We will continue to refine our contingency plans in the light of the continuing analysis and engagement with the Member States, our engagement with stakeholders and with my colleagues in the Commission but also with the evolving political situation in the United Kingdom.
Compliments of the European Commission