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The EU-UK Trade and Cooperation Agreement (BREXIT) is now in effect. It is too early to measure the impact on the tea industry, but several short-term aspects are troubling. Photo by Adobe iStock.
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The EU-UK Trade and Cooperation Agreement (BREXIT) is now in effect. It is too early to measure the impact on the tea industry, but several short-term aspects are troubling. Photo by Adobe iStock.
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The EU-UK Trade and Cooperation Agreement (BREXIT) is now in effect. It is too early to measure the impact on the tea industry, but several short-term aspects are troubling. Photo by Adobe iStock.
The EU-UK Trade and Cooperation Agreement is now fully in effect (May 1, 2021). The direct economic effects of Brexit have yet to happen, as the country remained inside the EU’s economic orbit until the end of 2020, so few people have noticed any difference, writes the Wall Street Journal. The immediate impact of the 1,000-page document on the tea industry revealed some troubling but mainly short-term aspects.
Britain imports virtually all the tea marketed there and re-exports about 17%, much of it to the EU. In recent months British expatriates say they can no longer find PG Tips and Yorkshire on grocery shelves in Spain, France, and Germany. At the British Store in Belgium, store manager Ryan Pearce said 90% of his stock is depleted as deliveries are delayed by Brexit red tape and reams of new paperwork. The Road Haulage Association reported a 68% drop in exports from Britain to the EU in January.
Many of the 500,000 Britons who own second homes in the EU are considering selling due to residency rules. The estimated 350,000 British ex-pats living in Spain, for example, can now spend only 90 days of any 180 days in residence without a visa. A 90-day visa costs US$425 (€350) per person.
Like everyone else buying large quantities, UK importers shipping tea from China experienced container rates that have quadrupled since the first of the year. Blenders and tea packers are also contending with a wave of EU import controls on food products. Packaging and bottles are in short supply.
More troubling is the decision by major tea suppliers to bypass the UK. Kenya, which shipped 4,313 metric tons to the UK in January, now sends more of its tea to Poland and northern European ports near Amsterdam, Rotterdam, and Hamburg, cities with many large-scale tea blenders packers. Once a captive of Britain’s tea multi-nationals, Kenya shipped more than a thousand metric tons to Poland in January 2021. According to the UN Comtrade database on international trade, Kenya exported $110 million to Germany in 2019, about 8% of Kenya’s total exports. Kenya’s combined tea and coffee exports to the UK totaled $124 million that same year.
Tariffs and Tea
As the current economic downturn and lockdowns depress sales on the continent, many popular British tea brands look elsewhere like New Zealand, where free trade agreements exist.
The new EU-UK Trade Agreement avoids tariffs—at least on those goods originating or defined as having been substantially transformed in the other’s territory. Tea in bulk is exempt, and processed tea shipped to the EU after “transformation” crosses the border without duties, but importers pay a 2% duty for green tea from outside the UK. In Northern Ireland, importers pay a 3.2% third-country duty.
In December, Kenya and the UK signed a trade agreement replicating the EU market partnership, which waives duties and quotas on importing goods from the East African Community (EAC) trade bloc.
There is no escaping the fact that strict new rules on composite food products will add extra layers of bureaucracy on food exports to the EU, writes Arne Milken, founder of Customs Manager, a UK consultancy. Shelf-stable teas (except refrigerated kombucha) are considered low risk and do not require an export health certificate (EHC).
Food prices remain stable with Unilever, Nestlé reporting strong earnings on increased at-home consumption of tea and coffee. Northern Ireland saw a 2.4% decline in tea prices while coffee rose 0.3%. Overall, year on year, there was a 1.7% increase in the cost of everyday goods, according to the Ulster Fry Index. Tomatoes are up 15%, eggs down by 7%, according to the index. The UK Office of National Statistics reports a modest increase in core inflation to 1.1% from 0.9%.
While it is too soon to assess the full impact, UK residents remain skeptical. In November, a YouGov poll showed that 51% of people think it was a wrong decision and 38% a right one, the largest gap since 2016, according to the Wall Street Journal.
As 2021 progresses, Brexit fears, along with the disruptions brought by the pandemic and the economic thrashing England suffered in 2020, are abating. One tea to have perished amid the turmoil was the briefly popular English Brexit Tea's Harmony blend, “a tea to calm down and relax.” There were apparently few takers of late, and the 75g folding box was discontinued on Amazon.UK.