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What might UK potato trade look like post-Brexit?

Publication Date: 
16 September 2016

Arthur Marshall, Analyst, arthur.marshall@ahdb.org.uk, 02476 478 956

To date there have been no official announcements on a future UK trade policy but we can examine the situation as its stands.  By looking at trade flows between the UK, the EU and its other major global trading partners we may consider how trading relationships could change after the UK leaves the EU. In addition, we explore the major global trade flows, in order to identify areas of potential market growth for UK exports, as well as areas that may be vulnerable to increased competition in a post Brexit trading environment.

Current situation – exports

Currently trade patterns for potato exports are quite different between seed potatoes, fresh potatoes and processed potatoes. Seed potatoes account for a large proportion of potato exports, mostly going to non-EU countries such as Egypt and Morocco. UK fresh exports are primarily to well-established markets such as Ireland and the Canary Islands. However, fresh potatoes are a relatively inefficient and expensive commodity to transport long distances, and so exports are a minor part of total potato production – though they can be a key part of individual businesses. Among processed products, the most noticeable growth for UK exports is in crisps. These have been growing, and growing faster than other EU countries’ crisp exports, against a backdrop of strong and consistent EU demand growth over the past 20 years.

Current situation – imports

Frozen processed potatoes account for by far the largest proportion of UK imports. In 2013, and each year since, more was imported than produced in the UK. Fresh potatoes are mostly imported by the UK industry to meet consumer demand for new season potatoes throughout the year or to fill gaps in supply, usually later in the season. Seed imports into the UK are minor compared to domestic production, but tend to fulfil demand for new (usually processing) varieties, often bred in the Netherlands. Seed breeding takes place in both Scotland and the Netherlands, leading to an amount of trade both ways.

Opportunities

Growth in exports is likely to continue to focus on products with a higher value and/or where we have a competitive advantage. Onto both EU and non-EU markets, the UK’s main opportunities exist for seed potatoes and crisps, and growing the access of these to non-EU markets post-Brexit.

If the UK were to impose import tariffs from the EU, there would be little benefit gained for seed and fresh imports as these imports fulfil specific needs the UK is less able to meet. However for processed products, there could be some benefits from imposing tariffs on EU product as a large amount of the imported product undercuts the average price of UK production. Meaning these products are more competitive in a larger segment of the UK market than domestically produced frozen products.

UK exports of processed products, such as crisps, could be increased if the UK gains more flexibility to negotiate on trade deals. Exports to non-EU countries are still only a small part of the UK crisp export mix. However, over the past few years, driven principally by individual brands, markets have been growing.

Threats

If no trade deal has been agreed with the EU when the UK leaves, UK potatoes and potato products being exported to EU countries would be subject to tariffs. There is also a risk from greater non-tariff barriers into EU countries too. For example, in the absence of an agreement, the EU or UK could impose additional phytosanitary controls on fresh and seed trade. This could make it much more difficult for UK exports to enter EU countries; at the very least, making the certification process longer, would increase the cost of doing business for export companies.

There are also a number of existing trade agreements between the EU and third countries that directly benefit the UK potato sector. The EU has agreements in place with many countries around the Mediterranean, which are important UK seed export destinations, such as Egypt and Morocco. In addition, Israel is (in some seasons) the principal non-EU source of fresh imports into the UK, providing new season potatoes at a time when UK old season stocks start to decline and before new crop is ready.

Concluding comments

While this summarises some of the key areas to look out for with relation to the potatoes industry, it is still unknown how the UK government intend to proceed with trade negotiations going forward. There are likely to be both gains and losses to be made from any trade deal. AHDB will keep levy payers up to date when information becomes clearer on how the GB potatoes industry may be impacted.

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