Few sectors have more at stake in the fraught trade negotiations between the United Kingdom and the European Union than fisheries.
While the media has mostly been focusing on the highly-politicised issue of access to British fishing grounds for EU vessels after the current transition period expires, Brexit also threatens to have a disruptive impact on EU-UK trade in fisheries products.
If the current negotiations were to collapse with no deal at all, then European fish wholesalers and processors would face a ‘double whammy’ of collapsing supply from the EU’s own vessels who had been denied access to the UK’s expansive waters, as well as significant tariff and non-tariff barriers to imports of UK seafood.
There are plenty of possible scenarios under which such problems could be averted or at least mitigated, but they all depend on a reasonable amount of political goodwill between London and Brussels – a commodity which seems to be in desperately short supply just at the moment.
‘Relative stability’ versus ‘zonal attachment’
Fisheries is a totemic issue for Brexit enthusiasts in the UK, who have long railed over the unfairness – as they see it – of national quota allocations under the Common Fisheries Policy. These are based on historic catch allocations which are now rigidly fixed under the principle of ‘relative stability’.
“For cod stocks in the English Channel, for example, the UK currently has 9% of the quota, while France has 84%,” commented Barrie Deas, chief executive of the UK National Federation of Fishermen’s Organisations. “We want quota shares which reflect more accurately the resources in each fishing zone.”
The European Commission, in a detailed draft proposal, has essentially recommended keeping quota shares unchanged as part of the future EU-UK relationship.
This is anathema to London, which has yet to submit a formal counter-proposal to Brussels, but which supports a shift away from ‘relative stability’ and towards the principle of ‘zonal attachment’.
The latter is a concept already used to share out fishing rights between the EU and Norway. It takes no account of historic fishing patterns, but aims to allocate fish to a coastal state based on a scientific assessment of the zones in which the stock is primarily located.
According to a consultation paper published by the UK Department for the Environment, Food and Rural Affairs in 2018, UK shares of the overall quota for many stocks would be dramatically higher if a zonal attachment approach were to be taken. This naturally explains the EU’s preference for a broadly unchanged state of affairs.
Who stands to lose most from a EU-UK fisheries trade war?
So far, there is no convergence at all between the EU and UK positions – and the risk of the fisheries talks collapsing under the tight timeframe available for the talks is a real and growing one. The two sides have nominally committed to find a resolution on fisheries by July 1 this year, although this seems highly unlikely, with less than two months to go to that deadline.
The EU has threatened to exclude fisheries products from the scope of any zero-tariff trade agreement between the two sides, if in fact any such deal is concluded, in the event that there is no deal on access to resources by the time the current transition period expires.
In theory, the EU27 is in a more perilous position over the prospect of post-Brexit tariffs on fish than it is on some other products.
The UK has a trade surplus in seafood with the rest of the EU, exporting fisheries products worth £1.34 billion in 2018, and importing £1.11 billion worth. Its main export products are salmon and shellfish such as lobsters, while cod, haddock and other ‘finfish’ dominate UK imports.
The imposition of full EU tariffs would undoubtedly damage this trade. The EU’s MFN tariff for fresh cod, for example, is 12%, while smoked salmon – a prized product for discerning EU consumers – attracts a tariff of 13%.
However, the dissuasive impact of a no-deal outcome, from a trade point of view, is questionable.
“The EU needs our fish and shellfish,” said the NFFO’s Barrie Deas. “Tariffs would be unwelcome. But from what I hear, they don’t terrify our side. Consumers in France, Spain and Italy would ultimately have to pay.”
Moreover, such tariffs would be applied, if at all, in the context of a situation whereby most EU vessels had been deprived of access to UK fishing grounds. This would seriously deplete supplies from the EU27 industry, thus probably pushing up prices at wholesale markets.
Autonomous tariff quotas
A further consideration is that the European fish processing industry sources much of its raw material under autonomous tariff quotas opened on a multiannual basis by the European Commission. The current regulation, for example, provides a zero-tariff quota for up to 95,000t of cod for processing between January 2019 and December 2020. This is open to processors in all EU countries – including, at present, the UK.
It is entirely conceivable that the UK may be able to supply large volumes of fisheries products duty-free under an ATQ, even if there were to be no specific EU-UK trade agreement. It is worth noting that EU fisheries ATQs are normally valid for three years, but the current regulation was truncated to two years (2019-2020) specifically with Brexit in mind.
The political economy of the EU-UK fisheries negotiations is of course further complicated by the fact that while access to UK waters is of vital importance for western European coastal states like France, Belgium, the Netherlands, Denmark, Spain and Ireland, it is a much less pressing issue for countries further south and east, who would have nothing directly to gain from a post-Brexit fisheries deal.
New standards related barriers for UK exports
But tariffs only represent part of the picture. As a third country, the UK would need to submit all fisheries products exported to the EU to systematic SPS checks, and this would represent a very significant barrier to the EU market – for fresh fish in particular.
The only countries currently excluded from this requirement are EEA countries – including major fish exporters Norway and Iceland. Given the UK’s refusal to have any institutional links with the EU after the transition period, its hopes of getting special exemption from the EU’s SPS inspection rules look slim. And significantly, this hurdle will continue to face UK fisheries exporters, even if there were to be an agreement on a duty-free FTA.
A phased transition?
Despite the very public deadlock between the two sides over fisheries, there were at least hints of a possible way out from the UK side earlier this week.
Speaking to a House of Lords committee on Tuesday, senior UK cabinet minister Michael Gove said the UK would not seek to create “a cliff edge” for EU fishermen, and that “we don’t want to turn off the light suddenly.” This was seen as a hint that the UK would be prepared to accept a phased transition from the EU’s current access arrangements to the proposed new settlement.
But Barrie Deas’s reaction was one which illustrated the gulf in trust between the two sides.
“There would have to be significant movement. The government would need to convince the industry that this was not a maintenance of the status quo. There has to be signs of a step towards a fairer share-out of quota.”
Deas also pointed out that in the absence of a framework EU-UK agreement, London and Brussels would have no alternative but to sit down towards the end of this year and negotiate an ad hoc agreement on allocating access to stocks for 2021.
The UK side may be hoping that such an outcome would give them leverage to create the precedents for an alternative quota allocation formula. But it would come at a significant cost to the fisheries trade.