Hard Brexit Could Mean Full Tariffs Applied To Both Dairy Exports From EU Into UK, Exports From UK To EU

The United Kingdom’s House of Commons this week rejected Prime Minister Theresa May’s withdrawal agreement with the European Union, which some observers said makes a so-called hard Brexit more likely.

The risk of a “disorderly withdrawal” of the UK from the EU increased with the vote, European Commission President Jean-Claude Juncker said.
The European Dairy Association (EDA) urged decision-makers both in the UK and the EU to act responsibly. An increasingly likely “no deal” Brexit scenario would bring a completely new scale of a milk crisis.

Alexander Anton, the EDA’s secretary general, has called for a relationship between the EU and the UK that remains as close as possible to the status quo after Brexit and throughout a transition period. This would secure the free movement of milk and dairy products between the EU and UK with no tariffs or quotas from either side for milk and dairy products, and limit non-tariff barriers to trade as much as possible.

The UK’s exit from the EU without a deal “will inevitably lead to significant trade disruption and a lose-lose situation for the entire agri-food chain,” FoodDrinkEurope, CELCAA and Copa-Cogeca said in a joint statement.

The UK is scheduled to take its leave from the EU at midnight on Mar. 29, 2019, according to Eucolait (European Association of Dairy Trade). With the rejection of the withdrawal agreement by the UK and the repeated EU statements by the EU saying that the withdrawal agreement is its best and final offer, an orderly Brexit now seems “increasingly unlikely.”

This leaves two main options on the table, Eucolait noted: a disorderly withdrawal (hard Brexit) on Mar. 29, or a prolongation of the two-year negotiating period. The latter option would require a unanimous decision by the European Council. If the negotiation period is prolonged, the UK will remain a full member of the EU during that time, Eucolait said.

In the event that the withdrawal agreement will still be approved, there will be no changes in trade conditions during a transitional period.

Assuming there is neither prolongation of the negotiations, nor adoption of the withdrawal agreement, the UK will exit the EU on Mar. 29 without any deal. In the event of this hard Brexit, “we will face a cliff-edge scenario whereby from one day to the next, the rules of trade and movement between the EU and the UK will have changed entirely,” Eucolait said.

Should there be a hard Brexit, one of the likely outcomes is that full tariffs will be applied to both exports from the EU into the UK and exports from the UK into the EU, Eucolait noted.

With respect to the tariff schedule of the UK post-Brexit, the UK has unilaterally taken the decision to copy and paste the EU’s external tariffs (i.e., the MFN tariffs applied to imports from third countries).

The EU has already indicated that in the event of a hard Brexit, the full MFN duties will apply to imports from the UK. This is logical, Eucolait said, as the EU would not want to open the door to dairy imports from WTO countries simply because the UK is leaving.

For most product lines, including all the main dairy products and ingr

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