Wednesday, 17 February 2021

Questions (9, 10)

Paul McAuliffe

Question:

9. Deputy Paul McAuliffe asked the Tánaiste and Minister for Enterprise, Trade and Employment if a derogation for flour coming from the UK to Ireland can be issued for a company (details supplied). [7925/21]

View answer

Patrick Costello

Question:

10. Deputy Patrick Costello asked the Tánaiste and Minister for Enterprise, Trade and Employment his views on the post-Brexit reality of the application of the rules of origin laws that sees Irish bread producers facing higher production costs than their UK counterparts due to having to import flour that is not being milled domestically; and if he will make a statement on the matter. [7976/21]

View answer

Written answers (Question to Enterprise)

I propose to take Questions Nos. 9 and 10 together.

I am acutely aware of the issues that have arisen for the bakery sector as identified by the Deputies. I fully understand that despite making preparations in advance for Brexit, agreeing the full terms of the TCA so close to 1 January 2021 did not allow many sectors, including the bakery sector, to prepare for the implications arising under the specific Rules of Origin provisions of the Agreement. This has led, in this case, to the imposition of tariffs on imports of particular flour from the UK given the level of non-UK/non-EU wheat input contained in that particular flour.

At its simplest, the Rules of Origin are the premise upon which any Free Trade Agreement (FTA) seeks to confer the preferential tariff rates - zero in the case of the TCA - on the members of the Free Trade Area encompassed by the FTA, namely the UK and EU-27 in this instance. Moreover, it is usual that Product Specific Rules of Origin will set out how much, if any, non-originating or Third Country inputs that is permitted before exceeding the relevant thresholds to enjoy the tariff preferences/benefits of the FTA. In this case, an upper limit of 15% Third Country wheat input to UK exports of flour to the EU is allowable under the TCA and currently, the UK flour being imported by the sector contains 45% Canadian wheat which puts it outside of the scope for benefiting from the preferential tariff rates. Pre-Brexit, the trade agreement between the EU and Canada addressed this issue but the UK is no longer a beneficiary of CETA and there is no three-way Free Trade Agreement between Canada, the UK and the EU. Therefore, supply chain changes would be needed to fully benefit from the terms of the TCA.

Furthermore, my Department and I are fully conscious of the potential employment and cost implications arising for the sector as the industry representatives have made clear, as well as possible price implications for consumers. I also recognise the competitive disadvantage that the sector faces in retaining UK market share when faced with competitors that are not affected by the tariffs given how the Irish sector's supply chains have been constructed over many years.

Officials in my Department and right across Government continue to work intensively to work through possible technical solutions to address issues arising for the sector from the conclusion of the TCA. In the case of the tariffs on flour, my officials have examined the issue with colleagues in Revenue to explore what technical solutions may be available within the terms of the TCA, including that of using Inward Processing relief. Such Inward Processing solutions can assist companies in terms of retaining UK market share, but I appreciate that it does not provide a complete solution for the issues presenting on the domestic market. In that latter regard, I recently wrote to the Commission Executive Vice President and Trade Commissioner Valdis Dombrovskis on the issue and raised the matter with him when we spoke last week. I highlighted for the Commission the extent of the sector’s reliance on the UK, with over 80% of the flour imported from the UK, a factor that is compounded by the lack of indigenous milling capacity on the island of Ireland. Furthermore, given that the conclusion of the TCA in late December did not allow time for the sector to make the necessary adjustments in its supply chains, I have asked the Commission Services to examine the issue to consider any flexibilities that can be applied and I await the Commission's considered response.