Key issues facing the agri-food industry on the Island of Ireland
Kerry Curran & Aidan Gough – InterTradeIreland
Agri-food is a £1.7 billion industry in Northern Ireland and is the region’s largest manufacturing sector. While agriculture and fishing products from Northern Ireland are exported to over 70 countries, its largest market is by far its nearest neighbour, Ireland. Forty-three per cent of Northern Ireland’s agricultural sector exports travel south to Ireland, in many cases through supply chains that have developed over many decades. The agriculture and food processing sectors in Northern Ireland are a significant element of the economy, collectively accounting for around 70,000 local jobs, which equates to almost 1 in 10 of all those in work in Northern Ireland.
Likewise, the agricultural sector in Ireland plays an important role in the economy. It accounts for some eight per cent of Ireland’s GDP and employs almost 160,000 people. Irish agricultural produce is exported to 170 countries around the world, but Northern Ireland remains a key trading partner in agricultural goods and is a critical part of this supply chain.
Just how interdependent are agri-food supply chains on the island?
Cross-border trade in agri-food products makes up more than one-third of all goods moving from Ireland to Northern Ireland, and almost a half of all goods moving from Northern Ireland to Ireland. In total forty per cent of goods crossing the border are categorised as food and drink.
Sophisticated all-island supply chains, which see goods move back and forward across the border as part of the production process, before final sale to a third party, operated seamlessly whilst both jurisdictions remained in the EU single market. Importantly, the island of Ireland is considered by the UK and the European Union to be a single epidemiological unit for the purposes of animal health and welfare, reinforcing the integrity of the food produced across both territories. It is the norm for agricultural goods at different stages of production to cross the land border for processing and sale. For example, annually:
Over 400,000 pigs are exported from Ireland for processing in Northern Ireland;
Almost 400,000 lambs are exported from Northern Ireland to Ireland for processing; and
Over 800 million litres of milk are exported from Northern Ireland to be processed and then exported from the Republic of Ireland.
Agriculture is a strategically important industry for both economies and the current competitiveness of the industry relies on the economies of scale that have developed between the two economies.
All fixed by the Northern Ireland Protocol surely?
In a word, no. If the sector had a Facebook relationship status, it would read ‘It’s complicated’.
Changing market access rules, as a result of Brexit, both north-south and east-west, have the potential to cause continued disruption to established supply chains, and place additional cost burden on Northern Irish firms. The Northern Ireland Protocol ensures that Northern Irish food producers continue to meet EU standards and can move goods unhindered into the EU market. However, as noted above, Ireland exports food products to more than 170 different countries worldwide, with a significant proportion of that trade going through EU Free Trade Agreements (FTAs) to which Northern Ireland no longer has access. An example is the milk trade from Northern Ireland to Ireland. This makes up a large proportion of agricultural trade, with Northern Irish milk currently processed in Ireland, powdered as a component in baby formula, and traded with China through its FTA with the EU. The Northern Ireland Protocol does not include guarantees that will allow for the continued unhindered flow of these goods.
In addition, many food supply chains on the island also include ingredients from Great Britain. If a Free Trade Agreement between the EU and the UK is not reached the administrative and duty costs associated with these east–west supply chains may make them unviable. Any divergence of food standards in the future may also mean that Northern Ireland food producers need to make a stark choice between their British and Irish markets.
A global pandemic with local impact
The Covid-19 pandemic has hit all sectors on the island of Ireland. Monthly data on export trade from Ireland to Northern Ireland from January to August 2020 shows overall exports are down five percent on the same trading period in 2019. Trade in agricultural food products however is only down one percent over the period, highlighting the inherent integration and importance of the sector on the island. It is likely that the pandemic, while having an overall impact on the performance of the economy will impact less on the well-established food supply chains on the island.
Change is inevitable however…
Brexit and the Covid-19 pandemic are just two of the concerns that the sector is facing at present.
The rise in automation in the sector globally raises issues of competitiveness. This traditionally labour-intensive sector is being challenged to adapt rapidly, which requires investment and innovation in order to increase productivity and competitiveness.
The agriculture sector in Northern Ireland, so integrated with its southern counterpart, will also have to adjust to changing immigration policies, which will impact on the ability of the sector to attract and to afford labour at crucial points in the farming and processing calendar. With Ireland not facing such limitations this creates a direct disadvantage to food produces north of the UK’s only land border with the EU.
Automation will be one of the tools that will doubtless be deployed to address labour supply issues, but the changes will take time to develop and implement, at a time when the economy still faces uncertainty. The very nature and USP of many of the food and farming products also means that in many cases automation will not be the answer, with food producers across the island leaning into the quality of the food produced, and the hands-on approach of producers as the main differentiator in a busy global market.
The future of farming in Northern Ireland
Prior to the Northern Ireland Protocol the sector was identified as one of the most vulnerable to market access changes. The Protocol however has not been the silver bullet that has addressed the challenges that lie ahead. Northern Irish food supplies are already integrated across both the EU and the UK, making untangling them a potentially costly affair as can be seen by the need for Export Health Certificates on the movement of many agricultural and horticultural goods between Britain and Northern Ireland, post Brexit. With further challenges on the horizon in terms of new technology and access to affordable labour, Northern Ireland farmers and food producers are facing challenges on multiple fronts.
And yet, looking forward, the agri-food sector has been identified by policy-makers as a key future driver for the economic development of Northern Ireland, with a vision of, ‘Growing a sustainable, profitable and integrated agri-food supply chain, focused on delivering the needs of the market’. If this is to be achieved, future policy must consider both the highly integrated all-island nature of farming, and also address the reality that the island as a whole has strong historical agricultural ties with the rest of the UK.
The recent pandemic has shown us how important it is to nurture and maintain these strategically important supply channels. How these trade routes are protected, in light of market access changes and with the risk of regulatory divergence ahead, will be a challenge that will require a collaborative and committed approach from all involved.