Business Talks: Why Chicken, Cheese, and Cod are a Difficult Menu

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WTO tariffs on average dairy products above 35%

Coronavirus allowed, there will be fireworks and parties to mark the arrival of 2021.

But as the clock strikes midnight, it will also mark the end of the Brexit transition period. Business relationships going on for years will turn into smoke.

Civil servants are running against the clock to change these relationships and are even more luminous and upbeat with modern “Global Britain”.

This week trade negotiators will hold talks with three of Britain’s key allies – the United States, Japan and the European Union (EU). If they fail, businesses and households may pay a high – and very undesirable – price.

What is the UK trying to do?

It has been called “cherry-picking” by Brussels. But the UK government sees its negotiations there as an attempt to change its existing relationship with the European Union that improves its needs, while trying to avoid imposing tariffs where there is currently none.

With the US, it is designing an arrangement from scratch. And in the case of Japan, it is merely mimicking a deal that that country already has with the European Union – some additional extras, such as agreements on digital trade.

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Trade talks with Japan stumbled on cheese exports

What are the sticking points?

Trade deals aim to increase the choice of options available from other countries – and lower prices. But it has to be balanced by protecting the needs of businesses at home. And this is the tricky bit.

While the UK has managed to replicate the EU deal with Japan in a big way, the cheese issue such as Stilton has caused stink.

Britain wants better access for its cheese farmers; Japan is not keen. Is it really worth the struggle, given that Japan only buys about £ 2m of British cheese? Well, it is not about the current picture, but the development potential.

Ditto the US and its chickens. America has made no secret of the fact that it wants its farmers to have a large presence on British plates. This is currently up for discussion, and may be the reason for the auction.

But what is not being negotiated is the lowering of standards at US levels – such as the conditions in which chicken can be raised, because they are rotten in chlorine. This responsibility lies with the UK Food Standards Agency.

And in Brussels there is a demand for more fishing rights in waters around Britain that are difficult to swallow. Fishing makes up less than 0.2% of the UK economy – but, again, it is about potential profit.

And it’s about keeping voters happy: Business deals are political because they are economic. Negotiating even small-fry matters means that it takes years to get out of business deals.

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How many possibilities?

The ambitions that were Japan, Britain’s first major trophy in the Brexit era, could be seized by the end of July. And this is with a partner who has just 2% of British exports. We are moving closer to the finish line, but this is not good for conversations elsewhere.

Meanwhile, an agreement with the US, which buys about a fifth of British exports, has faded ahead of the November election. Officials are now quietly anticipating an agreement by next spring.

For the European Union, the continued deadlock where the deal was once aimed at October, the possibility of a no (trade) deal has increased sharply.

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What if there is no deal?

If no agreement is reached by the end of the year, imports from those countries will face similar duties and rules with which Britain has no agreement with any other nation. They will have a new UK Global Tariff.

Crucially, this would mean that more than half of the good imports from the European Union would currently face additional tariffs compared with none.

The biggest increase will be in the price of cars, and foods such as lamb and beef, where tariffs are being upheld to protect British producers. The British Retail Consortium has warned of a price increase on staples from olive oil to cucumbers.

Under a previous no-deal scheme, the Office for Budget Responsibility may have raised the total cost of tariffs to billions – and with lower tariffs than it envisaged.

Those costs will be borne by businesses and families, the ability to squeeze budgets and create jobs when the economy needs it least. And before taking into account that businesses have the ability to delay planning costs and limits.