Written evidence submitted by NFU Cymru (BAT0018)
Dear Stephen
Welsh Affairs Committee – Brexit, trade and agriculture
You wrote to me a few days ago seeking clarification on some information contained within the study produced by LEI Wageningen UR on behalf of the NFU of England and Wales, and referenced at the evidence session with the Welsh Affairs Committee in December 2017.
Specifically, you queried Figure 6.3 within the report which illustrated that in the event of WTO rate tariffs being imposed on sheep meat exports from the UK, the income of sheep farmers, would overall, increase marginally if 100% of existing levels of direct payments were also maintained.
I have spoken with colleagues on the NFUs Brexit and economics teams, and I am pleased to be able to offer you the following commentary on this point.
- Paragraph 4.2.1 of the study explains that under a WTO-default position, the UK leaves the EU, and falls back to the WTO default position, meaning that the UK imports and exports fall under the WTOs non-discrimination Most Favoured Nation rules.
- Under this scenario the EU applies its Common Customs Tariff (that is the most favoured nation applied rates as agreed in WTO agreements) to UK imports, and the UK applies the same rates set by the EU’s Common Customs Tariff to EU and third country imports.
- The calculation underpinning Figure 6.3 is predicated on an assumption that UK imports are no longer subject to the EU’s tariff rates quota concessions regime, the price level for products which historically benefitted from such a regime (e.g. New Zealand lamb) is likely to increase as it will no longer be importable at zero duty through the EU’s tariff rate quota (section 4.3 of the report provides further information about how tariff rate quotas work)
- Since the report was prepared some two years ago, positions have developed and evolved, and in light of these developments we no longer think it would be appropriate to premise such a model on the assumption that leaving the EU will mean an end to New Zealand tariff rate quotas for the UK, and we know that we are likely to inherit a share of the tariff rate quota, something which is likely to have an impact on domestic prices and income
- Whilst the modelling work is correct, the assumption that upon Brexit that we would not inherit an allocation of current TRQs no longer appears to be as robust as it once was.