Potential impact of Brexit on the Sheep Industry Dr Kevin Hanrahan, Trevor Donnellan and Fiona Thorne Teagasc

Brexit Disclaimer Please note this document is part of ongoing Brexit analysis and scenario planning for input into larger Government deliberative processes. Unless explicitly referenced by Government decision, any proposal contained in this document does not represent Government policy and should not be represented as such. Irish Grassland Association Sheep Conference and Farm Walk, Mullingar May 2017

Brexit and the Irish Sheep Industry Brexit timeline 4 channels through which we see Brexit affecting Irish agriculture What makes the Sheep industry peculiar? Brexit outcome uncertainty Tariffs and Tariff Rate Quotas (TRQ) Conclusions ??? Irish Grassland Association Sheep Conference and Farm Walk, Mullingar May 2017

Commission’s Brexit timeline Teagasc Presentation Footer

4 Brexit Channels Immediate impact via exchange rate Impact of Brexit on EU budget and CAP Impact of future UK Ag policy on UK self-sufficiency Future tariff & non-tariff barriers to trade Irish Grassland Association Sheep Conference and Farm Walk, Mullingar May 2017

Where are we now? Where are we going? Tariff and non-tariff barriers to trade between IE and UK are non-existent Regulatory frameworks the same No customs procedures apply to trade No tariffs levied on trade With Brexit Regulatory frameworks will diverge => extra costs UK move outside of Customs Union => extra costs UK exit from EU could => Tariffs => extra costs Dr Kevin Hanrahan

Single Market, FTA and WTO rules What does “WTO rules” mean? Principally about tariff barriers to trade this is (relatively) clear: UK inherits EU schedule and if no FTA faces EU common external tariff Also about agreed limits on export subsidies, trade distorting domestic supports, TRQ Much less clear WTO Rules Single Market

Single Market, FTA and WTO rules Where we will land between the current Single Market rules and WTO rules is the known unknown Landing will be determined by Brexit negotiations process Primarily about politics not economics The nearer we get to where we are now the better However, impossible to see how where end up can be equivalent to where we are now Dr Kevin Hanrahan

What makes Sheep industry peculiar? UK is a significant exporter of sheep meat & largest EU producer Ireland and UK are competitors on continental EU markets EU is a major importer with most imports under preferential terms (TRQ) from NZ and Australia Brexit might provide opportunities Irish Grassland Association Sheep Conference and Farm Walk, Mullingar May 2017

What sort of tariffs might be faced by UK exports to EU? Irish Grassland Association Sheep Conference and Farm Walk, Mullingar May 2017

Preliminary Static Analysis: Impacts on family farm income Irish Grassland Association Sheep Conference and Farm Walk, Mullingar May 2017

Conclusions The clock is running: Article 50 has been triggered Trade talks only begin once “sufficient progress” made on the “divorce” Whatever the outcome it will be inferior to current situation Negotiations will be about getting as soft a Brexit as possible = keeping preferential access to UK market. Possible upside for lamb prices depends Future trade agreement How TRQ are allocated between UK and EU Upside for lamb will be offset by downsides from EU budget and negative impact on other agricultural output prices Teagasc Presentation Footer