The Brexit trade deal was supposed to remove the threat of new tariffs on established trade. Try telling that to Ireland’s bakers.
They face a potential 50 percent hike in the cost of their key ingredient, flour, because of their dependence on British imports — and the fact that much of Britain’s flour relies on North American wheat.
Rules of origin standards within the trade pact stipulate that flour imported from Britain must contain no more than 15 percent of wheat grown from outside the U.K. or EU. Otherwise, such flour faces the full World Trade Organization tariff, equivalent to €172 per ton.
The trouble is, most British flour is made partly using North American wheat, particularly from Canada, and is often above the 15 percent threshold. Ireland, with no major mills of its own, imports four-fifths of its flour from Britain.
Seeking to delay the financial blow, Ireland’s bakers stockpiled British flour ahead of the January 1 introduction of new post-Brexit trade rules. But most of that supply had a short shelf life and has already been used, meaning tariff charges are starting to hit.
Food Drink Ireland, the trade body representing Ireland’s food manufacturers, warned Monday that bread prices in the country will quickly spike unless the EU and U.K. agree to ease the 15 percent cap on “foreign†wheat use.
“To avoid distortion of trade and negative impacts on Irish consumers, we are seeking a derogation for the Irish bakery sector from this specific ‘rule of origin,’†said Food Drink Ireland Director Paul Kelly.
He estimated that flour costs in Ireland would rise 50 percent and raise bread prices by 9 percent, or 15 cents a loaf.
Ireland once milled much of its own flour but over the past few decades has switched to more cost-efficient U.K. suppliers with better economies of scale. Ireland now typically imports around 4,000 tons of British-milled flour each week.
“There are no industrial milling options available in Ireland,†Kelly said.
Reflecting that dependence, the National Association of British & Irish Millers — a name in existence long before Ireland won independence from Britain a century ago – last month dropped the word “Irish†and rebranded as UK Flour Millers.
It’s unlikely that much-needed flour will drop below the 15 percent rules of origin benchmark anytime soon. UK Flour Millers says Britain produces 15 million tons of wheat annually, milled at dozens of locations, but some is not good enough for bread production.
“Canadian wheat is generally imported for bread-making purposes, because it has excellent characteristics and gluten strength which work well in a blend with U.K. wheats,†the group explains in its Q&A on the industry.
Ireland is the only EU member that imports significant volumes of U.K. flour. Some Irish bakers are seeking to avoid the new tariffs by building new supply chains with millers in France and Germany.
However, French flour is typically “softer,†with less gluten and protein, making it unsuitable for traditional Irish breads. The longer German supply chain, meanwhile, makes it a more expensive alternative to British flour.
This insight is from POLITICO‘s Brexit Files newsletter, a daily afternoon digest of the best coverage and analysis of Britain’s decision to leave the EU available to Brexit Transition Pro subscribers. To request a trial, email [email protected].
