With the switch of the presidency in the US, international trade laws are set to change. The most recent being the increased tariff on import of bread products in Brexit and increased costs. These taxes on flour imports are predicted to raise the price of bread in the area by as much as 9%.
The IBEC group has spoken out about concerns in the food and drink sector, speaking to the impact of these new regulations and the origin of said laws. Vital points they bring up include how the deal in the EU-UK Trade and Cooperation Agreement (TCA) that included this rising tariff for flour products will require a derogation for the Irish bakery sector in order to help with these tariffs. When tariffs like these occur, many buyers typically stockpile products to avoid the extra costs, but the shelf life of flour is generally low, lasting around 2 weeks. Meaning that any price fluctuations and their effects on the market will be seen in a very short amount of time.
The impact of the tariff is likely to be passed on for the consumers to bear. While pricing for products is determined individually by companies, the increased costs of raw materials will likely have to be a worry that consumers bite off. The rules in the TCA specifically state that the wheat used should be of UK or EU origin, which creates an issue for the Irish baking industry as there is a high shortage of industrial milling in Ireland. In fact, Ireland purchases flour from millers in Britain with a high proportion of third-country wheat, which is mostly from Canada or the US. Ireland is not seen to be self-sufficient in producing flour and will most industrially produce bread will be unable to meet these TCA rules.
The IBEC states that nearly 80% of the flour used in the baking sector is imported, mostly from Britain, which means the percentage of wheat is higher than the TCA rules. Overall, the tariffs are said to have a significant negative impact on both sales of products, as well as the competitiveness of Irish-based bakeries both domestically and with their exported goods. Many of these companies are seeking a derogation for the Irish bakery sector from this specific rule of the origin of the wheat in order to relieve some of the tariff pricing from their products.
Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers.
