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UK food industry calls for tailored rules of origin ahead of trade talks with EU

Any new United Kingdom free trade agreements which offers zero tariffs on trade will be “worthless” in the absence of adequate rules of origin which take account of sector-specific needs, the UK government has been warned.

In a policy paper published this week, the UK Food and Drink Federation – the body which represents British agri-food manufacturers and traders – makes clear that ‘off-the-shelf’ rules of origin solutions, such as those found in the EU-Canada free trade agreement, would leave a significant number of UK food products excluded from tariff concessions.

The FDF paper also pleads with the government not to agree to measures which create unnecessary non-tariff barriers to trade, as well as advocating an “agile” process of “real-time” consultation with industry to ensure that any new trade deals deliver genuine economic benefits.

Negotiating objectives for future UK FTAs are due to be published by the UK government shortly after Brexit is finalised at the end of this week. Tariff- and quota-free trade is viewed by both the UK and EU sides as being a desired outcome from the EU-UK talks, but UK ministers have been sending mixed signals as to whether regulatory divergence from EU rules will be pursued as a matter of course – or only where a strong case exists for doing so.

RoO must be ‘tailored to industry’s needs’

Among the FDF’s main concerns, however, is the question of rules of origin.

“The UK food and drink sector is unusual in its tendency to use a mixture of imported and home-produced ingredients in manufactured foods,” it notes.

“Therefore, in all negotiations, and especially the one with the EU, the UK should seek accommodating Rules of Origin that are tailored to meet the needs of our industry.”

A paper previously published by the FDF, in 2018, illustrated the specific challenges which the UK processed food sector faces, using the example of a UK-manufactured chocolate bar with cocoa imported from West Africa, refined sugar processed in the UK from non-European raw cane, and dairy ingredients sourced from the EU.

FDF points out that such a product may not qualify as a ‘UK-made’ product – and hence be eligible for the tariff concessions available under a UK-EU FTA – unless the relevant rules of origin were sympathetically designed.

Importantly, the FDF warned that such a product might not qualify for zero tariffs under rules of origin similar to those which were agreed in the 2017 EU-Canada FTA – which is often held up by the EU as being a ‘model’ trade agreement – or under the pan-Euro-Mediterranean (PEM) Convention, which governs rules of origin for trade between the EU, EFTA, Turkey and Mediterranean basin countries.

This is important given the European Commission’s general preference for tried-and-trusted ‘pre-packaged’ solutions in FTAs, rather than individually-elaborated deals.

“Product specific detail is crucial, but as a minimum any transformation which brings about a change in chapter heading should be sufficient to confirm UK origin,” FDF suggests.

SPS rules: don’t create barriers with our largest market

Meanwhile, FDF also has concerns over the vexed question of non-tariff barriers to trade as a result of differing food safety or quality standards. Here, the UK government is clearly torn between the options of remaining closely aligned with EU regulations, or facilitating trade deals with the US and other partners by taking alternative regulatory approaches on questions like GM foods and hormone-treated meat.

The federation offers the government a clear hint as to how it thinks the issue should be resolved, calling for “a clear approach to balancing the potential of new trade agreements with the possibility of new tariff or non-tariff barriers in trade with the EU, which is by an overwhelming margin both our largest market and our largest supplier.”

The paper adds: “The UK’s negotiating objective should be to minimise the impact on our exports of any non-tariff barriers arising from regulatory difference with all countries (e.g. SPS checks). Addressing these issues is central to the success of any FTA for the food and drink sector.”

Plea for ‘real-time’ consultations with industry

In common with other UK business lobby groups, the FDF has been critical of the UK government for the inadequacy, thus far, of its consultation processes on trade questions – and it makes a clear plea for this to be addressed as the negotiations finally get under way.

“The food and drink sector has the expertise and is ready to help establish effective two-way mechanisms of consultation and engagement between Government and industry,” the paper says.

“This is a pre-requisite to steer successful negotiations and identify where new market access opportunities can achieve the greatest gains, including outside of formal preferential trade negotiations. These processes must be transparent, agile and able to move quickly (i.e. in real time).”

The federation cites a number of examples of good practice from around the world for the London government to emulate, such as the case of Mexico during the NAFTA negotiations – during which business representatives were “in the room next door” for consultation.

It also praises New Zealand’s ‘Trade For All’ agenda as an ideal template for “setting out a national trade strategy, taking account of devolved interests, that delivers in terms of jobs and growth in all regions and communities to preserve the UK’s single market, underpinned by suitably robust mechanisms of trade defence.”

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