Irish Examiner - Farming
Coveney warns of Rules of Origin food issues but threat to price of bread downplayed
Fears that Brexit would push up the price of bread in Ireland have receded.
Analysis of the complex Brexit rules has indicated it would be an issue only if the UK and EU wheat crops are so poor that more than 15% of Canadian wheat would have to be included in flour sent from Great Britain to Northern Ireland, and then exported south across the border for bread making.
That is the source for most of the flour for baking bread in Ireland. The equivalent of 210,000 tonnes of milling wheat is imported into the Republic as flour each year, mostly from two mills in Belfast, and originally from across the Irish Sea, in Great Britain.
While the EU/UK Trade and Cooperation Agreement (TCA), and the accompanying Northern Ireland protocol, allow tariff-free trade between the EU and UK, this is under the condition that Rules of Origin criteria are met.
Exports from the UK to the EU are tariff-free, but only if 15% or less of the wheat from which the flour is made is not of UK or EU origin.
Over 15%, the complex Rules of Origin in the TCA kick in. If flour destined for export from Belfast south across the border exceeds the 15%, the EU tariff of €172 per tonne applies to these flour exports, unless it can be proved that the flour is not at risk of entering the Republic of Ireland.
The UK flour milling industry has been advised by the Agriculture and Horticulture Development Board (AHDB) that traders examine their eligibility under the TCA, before exporting.
But Rules of Origin have had only limited effect on the UK milling sector so far, since the UK left the EU customs union on January 1, according to the AHDB, which says the sharp rise in wheat prices has been more of an issue (wheat export prices rose 20% in the past year, and ex-farm prices in the UK rose about 60% in the past 18 months).
With only 7-8% of wheat milled by UK millers coming from outside the UK or EU (but this amount will vary for individual milling businesses), the 15% threshold to meet Rules of Origin criteria for flour exports is unlikely to cause widespread issues, said the AHDB.
In the past 10 seasons, the proportion of imported wheat milled into flour in the UK has averaged around 16%. Smaller UK wheat crops, or poorer grain quality, trigger higher imports (some British millers fear that the UK wheat crop will decline).
The imported wheat comes mainly from Canada, France and Germany. Canadian wheat blends well with wheat and has higher protein levels and very strong gluten.
Only 5% on average of the flour produced in Great Britain is exported, if flour sent to Northern Ireland is included. Nevertheless, a no-deal Brexit would have seriously damaged the UK’S flour milling sector, because tariffs of up to 50% would have ruled out exports to the EU.
The UK Flour Millers organisation had warned a no-deal Brexit would have meant job losses and threatened the closure of some mills.
Ireland had stockpiled flour and sourced alternative supplies from Europe in case an agreement wasn’t reached — which some industry sources said would have added as much as 15c to the price of a loaf here in Ireland.
Looking ahead, sourcing alternative flour supplies from Europe is not an attractive option, because of the much higher transport costs it would bring.
And continental flour specifications are less suituk able for Ireland, if Brexit makes flour from the UK too expensive.
“There are genuine problems with flour, cars, and a number of products, mainly linked to Rules of Origin issues,” said Foreign Affairs and Defence Minister Simon Coveney.
“The answer in that regard is to alter supply chains, which is what has already happened”, he told senators in a recent debate on the withdrawal of the UK from the EU.
He revealed that corn flakes sold in Ireland are produced in Spain, by and large. “They go to a redistribution centre in the UK, and are re-distributed into the UK and Ireland supply chain from there. However, because they are repackaged and re-boxed there, a tariff applies. Retailers are looking at redesigning their supply chains in order to be able to source products in a way that does not involve tariffs.”
“There is more that we can do, but the UK government has to be willing to work with us. For example, if we could conclude a sanitary and phytosanitary agreement between the EU and the UK, it would significantly impact, in a positive way, in the context of reducing checks on live animals and food products, because we could see alignment around sanitary and food safety standards and issues pertaining to live animals, etc.
“We know we could do that, but the British government has decided that it does not want to do it, because it does not want alignment with the EU.“