Alison Bryce: Premium products face no-deal threat
Alison Bryce considers the uncertainty for the Scottish food and drink industry in the event of a no-deal Brexit.
Over the last 47 years, the UK’s laws, regulations and processes have become inextricably linked with the European Union. There are a number of factors to consider in the inevitable untangle post-Brexit. In particular, Scottish producers are at risk of losing their European Protected Geographical Indication (PGI) status for food and drinks products in the event of a no-deal Brexit.
PGIs recognise the quality of local ingredients, as well as the methods and traditions used in producing food in certain geographical areas. These factors lead to an impression of quality, heritage and tradition being associated with certain product names, which, in turn, allows the products to achieve higher returns and a strong brand identity. PGIs allow producers to charge a premium price and maintain competitive advantage. This is because PGIs essentially guarantee authenticity and quality. Common European examples include Champagne and Prosciutto di Parma.
Food and drink is one of the fastest-growing sectors in the Scottish economy, with plans to increase turnover to £30 billion a year by 2030 in a successful partnership with the Scottish government. There are a number of Scottish products that enjoy PGI status, including Scotch Whisky, Stornoway Black Pudding, Scotch Beef and Orkney Scottish Island Cheddar.
The PGI scheme is controlled by European Union and World Trade Organisation rules, with no equivalent operating in the UK. This poses a substantial threat to products that have gained PGI status. With no equal provisions, how will producers ensure their products remain recognised after Brexit?
New UK PGI scheme
The UK government has proposed that all PGIs under the current EU scheme will be subsequently protected under a new UK equivalent. The transition period remains in force until 31 December 2020. Thereafter, the UK scheme will come into force, regardless of a no-deal scenario. It will be managed by the Department for Environment, Food and Rural Affairs (DEFRA) and is anticipated to mirror the one currently operated by the EU.
Changes include the creation and use of new, specific UK PGI logos. The PGI logo is essential and acts as a clear indication to consumers that a product has been granted PGI status. Producers will be able to use both UK and EU logos on their packaging, ensuring minimal disruption to stakeholders. However, this new labelling requirement will come at a cost to Scottish producers, and the UK has proposed a three-year adoption period to cushion the blow.
The UK government published guidance in February 2019 to reassure producers that their PGIs already registered under the EU scheme will be protected, in both the UK and the EU, after the transition period. Currently, this is still the case, but there is much uncertainty surrounding their status if the UK does not strike a deal by the end of December 2020.
The UK signed the Withdrawal Agreement, which governs the UK’s exit from the EU, on 24 January 2020. However, there remains uncertainty as to whether a deal can be struck in time. If there is no trade agreement, producers, other than those in the UK, may need to re-apply to the new UK scheme to ensure that their product retains PGI status. It may also be the case that the EU no longer recognises UK PGIs as they are no longer part of the EU system, and UK producers may also need to re-apply to the EU scheme. The Scottish government has raised concerns over the unsettling position that is causing Scottish producers real uncertainty. Currently, there is no guarantee that protection will be reciprocal between the UK and the EU, and any such protection for Scottish producers may be withdrawn overnight in a no-deal scenario. Additionally, the UK may choose to weaken or alter its PGI system in trading deals struck with countries that view it as a threat to trade (for example, the United States).
In the meantime, the reciprocity of PGI protection remains unclear in the event of a no-deal. The Withdrawal Agreement provides protection “unless and until” a new deal can be negotiated. Until then, producers will understandably be worried. Scottish food producers need certainty to prevent any dilution of protection under the new PGI scheme and to bolster the food and drink industry in Scotland to deliver the growth trajectory it seeks.
Alison Bryce is a partner at Dentons. This article first appeared in The Scotsman.