Watching the outcome of a G7 summit isn’t normally a priority for Irish farmers but in the world of global politics these are not normal times. The decision by the US to go ahead with a 25% tariff on steel and 10% on aluminium imports from Mexico, Canada and, significantly, from the EU has potential repercussions for other products including dairy and pigmeat. The EU is retaliating with proposed tariffs on a range of products including cranberry juice, peanut butter, motorcycles and denim.

Why it matters

Where agriculture could get involved is if the dairy spat between the US and Canada were to escalate. Despite the protestations of Prime Minister Trudeau, Canada has a particularly protected dairy market. The EU found this out with the CETA trade discussions and even after agreement was concluded, access to Canadian dairy markets remained problematical, with Canada seeking to control a large portion of EU exports through approved Canadian importers.

The Canadians have their own issues with the EU as well, particularly on access to the EU beef market for which they have a 45,000t quota. They are struggling to get interest among their farmers for producing to EU rules on non-use of hormones or use of acid in the carcase washing process.

For Canadian farmers and the processing industry, this means that pursuing approval to export to the EU isn’t worthwhile, particularly as they have huge access to other international markets especially in Asia.

Canadian dairy protection

Now that access to Canadian dairy markets has come to the attention of the US president and his stated ambition to protect US dairy farmers, we are left to wonder if agriculture is the next stop for a range of import tariffs.

The US is one of the largest beef importers in the world, as well as exporter, given its demand for burger meat alongside its surplus of steak meat. Its major trading partners for beef are Australia followed by Canada and Mexico who are already in the president’s line of fire.

If the president were to target Canada, Mexico and the EU on agricultural produce in the way that he has on steel and aluminium, then Ireland becomes exposed with our dairy and pigmeat exports to the US. Irish beef sales to the US have been small so far though the first quarter of this year had 510t of beef sales from Ireland to the US, the highest since business recommenced in 2015.

Brexit angle

The confrontation that has emerged between the US and the other G7 members will have been noted by the UK in particular as it takes a series of key votes in Parliament this week. The US is identified as one of the most plausible trade deals the UK could make after leaving the EU. That will not be as straightforward as it may seem.

When the EU and US were in negotiations about a trade deal up until the middle of 2016, negotiations had reached stalemate, largely because of the EU production standards.

It has already been communicated to the UK by the US trade secretary that they should move away from having their standards aligned with the EU if they wanted to negotiate a trade deal with the US. The UK minister with responsibility for agriculture, Michael Gove, has dismissed this idea suggesting that a future UK Government would be more likely to raise standards than lower them.

Firm stand by EU

While the UK wrestles internally with what it wants in a future trade deal with the EU, it is clear from comments made by the EU lead negotiator Michel Barnier that the EU is unwilling to show much flexibility. Clearly, it is determined that the UK will not have the best of both worlds, so that means much difficult negotiation lies ahead with no guarantee of a satisfactory outcome.

A collapse in negotiations and a hard Brexit can no longer be dismissed as too ridiculous to happen. It is difficult getting to a UK definitive position and even then it is more difficult envisaging the EU accommodating that. It is increasingly likely that the end game will be the EU presenting the UK with a take-it-or-leave-it option later in the year and neither is good for future trading relations. If it leaves, it means trading under WTO rules; if it accepts it grudgingly, the relationship will continue to be fraught.

Irish farmer position

Meanwhile, Irish farmers are left in limbo. We can explore new markets all we like and diversify as much as possible – that is simply good business sense even if Brexit never existed. The reality is that we cannot substitute half of our present markets across all commodities with new markets. It will be a case of buying our way into existing EU and international markets, devaluing the price for Irish and EU farmers alike.

Brexit is the unwinding of a 30-year-old trading relationship and to counteract its effects, Ireland and the rest of the EU need to have contingency plans in place using support mechanisms that were last used 30 years ago. That means intervention buying of commodities and reintroduction of market support mechanisms such as export refunds and private aid storage.

Such measures would not be popular with the WTO but it would have to live with it in the short-term at least. After all, it has to live with the US president imposing tariffs at a whim, so it cannot be unreasonable with the EU tackling a problem that was not of its creation.