There has been a flurry of activity on Brexit in recent days around a series of what are billed as major speeches. Yet despite diplomatic language, there are no signs of the EU and UK being on a path that will accommodate each other’s interests.

A hot debate rages around the Irish border, yet trade on the island of Ireland is of relatively minor importance as far as farmers are concerned.

It does matter for those who send their milk or sheep south for processing or pig farmers and those who send their cattle north for either finishing or to the factory. However, it is the trade with Britain that really counts for farmers on both sides of the border.

In her speech yesterday, UK Prime Minister Theresa May did indicate for the first time that Brexit wouldn’t be plain sailing and correctly identified the big issues. She also indicated a number of areas where the UK would align with the EU and explained that she wanted an associate-type membership of major institutions around aviation and medicines.

On the issues of customs, she is open to a partnership and mutual cooperation but emphasised that she will not be part of a customs union.

Impact on farmers

It is this latter point that is crucial for Irish beef farmers in particular and to a slightly lesser extent their counterparts in the North and Britain. We have frequently analysed how a default to WTO trading terms would price Irish beef and cheese out of the UK market as they carry tariffs that would double the cost for some products.

That scenario would create at least a short-term opportunity for UK producers to sell in an undersupplied market.

However, it is clear that the UK has no ambition to drive food prices up to levels comparable with Switzerland and Norway, two wealthy countries that consume more agri-food products than they produce. They protect their internal production with generous subsidy and very high tariff walls.

As access to cheaper food is one of the ambitions and campaign lines of those in the UK advocating leaving the EU, it appears that the UK is determined to open its market to free trade with more than its previous EU colleagues.

Likely UK trade deals

In a previous high-profile speech over a year ago, the British Prime Minister ticked of a series of countries she had in mind for trade deals once outside the EU. These included the USA, India, Brazil, Australia and New Zealand, all of which are among the top agri-food-exporting countries in the world.

If, as she said again yesterday, the UK will leave any customs arrangement that doesn’t allow them do their own thing in trade discussions, then Irish and UK farmers will be exposed to competition from these countries.

Offensive and defensive trade interests

The ongoing negotiations between the EU and Mercosur as well as last year’s EU-Japan deal are good examples of the likely outworking of a future UK trade negotiation.

In all trade negotiations there are what are described as offensive and defensive interests. Offensive interests are the products a country or region wants to sell to whoever is the on the other side of the negotiation, whereas defensive interests are products that they will have to accept in return that would impact on their own production.

Using beef as an example, in discussions between the EU and Japan, it was an offensive interest for the EU because the EU is an exporter, while Japan isn’t self-sufficient in beef though it is protective of its farmers and therefore it was a defensive interest for it.

The opposite is the case with the Mercosur negotiation. In this case, beef is a defensive interest for the EU but a huge offensive interest for Mercosur. EU beef producers are horrified at the thought of conceding access for 100,000t of beef while that amount is just half of what Mercosur wants.

UK interests

In a post-Brexit scenario with the UK outside the EU customs umbrella, its target countries for a trade deal all have offensive interests when it comes to agricultural products, particularly beef and sheep, while the UK has no real defensive interest as it is a net importer.

It is very logical that the UK would quickly trade access for agri products in return for its offensive interests in manufacturing and financial services.

One area that remains somewhat grey is the stated commitment by the UK to retain or enhance EU standards for production, welfare and the environment. In theory, if the UK insisted on these, basically no country in the world would qualify to supply as the EU is the global benchmark in each of these categories.

However, in practice the EU has accepted imports from around the world so it is foreseeable that the UK would do the same.

The UK is an extremely lucrative beef market that annually imports over 350,000t. With prices just above €2/kg in South America and €3/kg in Australia, tariff-free access to the UK would make it an exceptionally attractive market for these countries.

In the process, even with continued tariff-free access, Irish beef would immediately come under pressure with these alternative suppliers setting a base price. The UK red tractor branded product has historically commanded a premium over Irish but if Irish was replaced as the imported product of choice by a much cheaper South American or Australian offering, then the UK premium would be on top of a much lower base.

Consequences for farmers

This is why as the editor of the Irish Farmers Journal Justin McCarthy has emphasised in an editorial piece that Ireland has to prepare for the worst in terms of markets for our beef in particular.

While the UK making trade deals damages all sectors of agriculture, none is as exposed to the UK as beef. Irish dairy and pigmeat have full access to global markets and are extremely competitive in these.

Sheepmeat, for which the UK is also a major market for Irish producers at present, will experience a completely new dynamic if the UK is outside the customs union. The UK is a huge exporter of sheepmeat to the EU, particularly France and Belgium. If this is blocked by a WTO tariff, then there will be a further deficit in the EU market for sheepmeat that would help to replace the UK market for Irish farmers.

The Brexit debate has long since ceased being about economics and is now very much political between the EU process and principle meeting the UK wish for autonomy and independence.

A free trade agreement can be concluded which will suit many industries in the UK and EU but not farmers, particularly beef producers in Ireland and to a lesser extent those in the UK whose sheep farmers will also take a hit.