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No-deal tariffs: what they may mean for UK dairy trade
Thursday, 21 March 2019
Please note, on 9 October 2019 the UK Government announced revisions to the no-deal tariff scedule.
By Hannah Clarke
On the 13 March, the UK Government announced what the temporary import tariffs would be for dairy products if the UK leaves the EU with no-deal. Those rates, along with the tariffs the UK would have to pay to export to the EU are summarised in the table below.
UK import tariffs for all dairy products apart from butter and some cheeses will drop to zero. Tariffs will remain on cheese and butter - of €22.1/100kg and €60.5/100kg, respectively - however these rates are much lower than the respective tariffs set by the EU.
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Tariffs are displayed for a selection of the UK's most traded dairy products (imports + exports) in terms of value and volume, based on HMRC data.
The effective ad valorum rate refers to the rate at which the tariffs will be applied, as a percentage of the 3-year (2016-2018) average unit price.
What's the impact of these tariffs on specific exporting groups?
An EU country exporting to the UK
Under the current agreement, dairy products enter the UK from the EU tariff-free, which will continue for many products in a no-deal scenario. EU cheese and butter exporters will face a tariff; but these are small compared to the tariff facing UK exporters.
A non-EU country exporting to the UK
UK import tariffs facing non-EU exporters in a no-deal scenario would be much cheaper (or zero) compared to what they currently pay as EU third-countries. This will possibly make exporting products to the UK more attractive, but also reduce the protection that UK products currently have from the global market.
The UK exporting to the EU
For UK dairy exporters, no-deal will make exporting to the EU more expensive, and in most cases, restrictive. For example, the majority of the UK's raw milk exports go to Ireland for processing, which under a no-deal scenario would incur a tariff of €21.8/100kg. This represents adding 68% to the cost of the milk. This may strain domestic processing capacity if it becomes uneconomical to send product over the border.
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