In a deal that has been long-awaited, the UK and India are on the verge of a free-trade agreement, potentially worth £1 billion ($1.2 billion). However, for a specific segment of the UK economy, the outcome could spell uncertainty and even economic strain.
British rice millers, including prominent names like Tilda Ltd. and Veetee Rice, have flourished for decades by importing low-tariff unmilled brown rice from countries such as India and Pakistan. They then process and “polish” these grains into the white rice beloved by UK consumers.
But as India seeks to reduce tariffs on white rice, and with little feedback from British trade officials, concerns are mounting within the industry. The fear is that any changes to tariffs could significantly impact the way these rice millers operate and potentially lead to a loss of jobs.
Tariffs: A Pivotal Issue
The crux of the matter lies in the tariffs on milled (white) rice. According to Alex Waugh, the outgoing director of The Rice Association, “It is crucial that existing tariffs on milled (white) rice are maintained.” Speaking at a private event attended by industry leaders and government officials, he emphasized that any concessions in this area would jeopardize the industry’s foundation and future investments.
The UK Department for Business and Trade, however, reassured that officials are working on an “ambitious trade deal” that must be fair and in the best interests of the UK.
UK-India Trade Talks: A Complex Journey
Negotiations for a UK-India trade agreement commenced in January last year and are now in their 13th round. The goal has been to forge a significant deal between the UK and India, taking advantage of shared history and language.
However, the negotiations have encountered numerous challenges, including discussions on visas for Indian workers and students, and market access for UK products such as whisky and premium cars.
With the hope that UK-India trade talks can be concluded this year, British rice millers find themselves in a state of limbo due to a lack of information from British officials.
The Tariff Conundrum
The question of tariffs on rice remains a contentious issue and is yet to be fully addressed, according to sources close to the UK dialogue. This lack of resolution highlights the complexity of formulating post-Brexit trade deals with various countries, as exemplified by the recent deal with Australia that stirred controversy among British farmers.
The Economics of Rice Imports
The UK currently imports substantial quantities of brown rice from India, amounting to around 150,000 metric tons, which is a quarter of its total rice imports. The existing import tariffs make this cost-effective. For instance, the levy on brown basmati rice is £25 per tonne or zero if it’s classified as a special variety. This is significantly lower than the £121 per tonne levy on white basmati rice.
Implications for the UK
Waugh argues that lowering tariffs would not significantly benefit India. UK mills generally offer a better price for brown rice from India compared to domestic players. British buyers, in a bid to ensure pesticide compliance and promote sustainability, prefer to source rice from international suppliers.
On the other hand, the quantities of milled rice that Indian millers would export to the UK are not substantial enough to have a major impact on their profits.
The Bigger Picture
The issue isn’t limited to economics. UK businesses have a strong track record of compliance with food safety regulations, a vital consideration given the relatively low level of checks on imported products at the border.
As negotiations have progressed, executives in the UK rice industry have reported perplexing interactions with Indian officials, highlighting the sensitivity and complexity of trade negotiations. While the fate of British rice millers remains uncertain, it’s clear that the UK’s path toward post-Brexit trade deals is marked by intricate challenges and careful negotiations. The outcome may impact not only the rice industry but also set a precedent for future trade negotiations on various fronts.