Mr. Paul Kelly:

On consumer prices, both the flour issue and the distribution hubs issue, as it is sometimes referred to in the context of rules of origin, have the potential to seriously impact consumer pricing.

That tariff will have to be absorbed at various points along the supply chain from the producer the whole way to the consumer. How that will ultimately pan out will be a matter for producers and retailers in terms of the extent to which they can absorb or pass on that cost.

The alternatives being proposed, such as reconfiguring supply chains, distribution centres and all the rest, can be done. All of these problems can be solved provided enough money is thrown at them. The concern is that food, ultimately, is a staple. It hits the pocket of the consumer quite quickly if costs are imposed in the system. It is largely a low-margin business. There is not much room for manoeuvre at various points along the supply chain from farmer to food company or even retailers. They all tend to work off relatively tight margins. We will see some degree of reconfiguration of supply chains over time. One of the things that companies are looking for is time. If things have to change, how will they change and be paid for? That takes time.

In respect of the imposition of tariffs, they examined things like inward and outward processing relief. They had to make major changes to comply with EU food law. Many companies which import from the UK and Ireland are required to have an EU address on the food package. A lot of them had UK addresses. All of that had to be changed. That takes many months because packaging, stock and so on had to be changed. Companies worked on this for a long time but were very much blindsided by a number of the rules of origin issues. Ultimately, there will be an impact on the consumer unless some leeway is given.

The bottom line for us in respect of the lack of milling capacity in Ireland or the distribution issue is that we are a small island with a relatively small market of 5 to 7 million people in total, off another island and continental Europe. We are geographically distant and numerically quite small. They are the realities that need to be taken account of when considering things like supply chains. That is why the supply chains which have evolved largely use distribution hubs in the middle of England, and why over the years there has been consolidation in the milling sector and a number of mills in Ireland have closed.

There may well be an opportunity for a new mill in Ireland, but it is worth bearing in mind that the particular flour types which are required to produce the bread that consumers want in Ireland will still require a lot of flour to be imported from outside of Ireland because it will need to have a higher protein content. That is a point of consideration to bear in mind.

One major issue is the impact on Union citizens and businesses. We face the crazy situation with regard to bread that a UK bakery could produce it using the same flour we discussed over the past two minutes and sell it in Ireland without attracting a tariff, whereas an Irish bakery will have to import flour on which a tariff will apply and will be at a competitive disadvantage as a result. Similarly, a French yoghurt producer which brings a load of yoghurt into a distribution hub in Britain, breaks it down and builds it back up again as an order and then sends it to Ireland will face a tariff, whereas a UK yoghurt producer selling into Ireland will not face a tariff. Union citizens and producers are being disadvantaged.

On export credit insurance, there is currently a state aid derogation which has been extended a number of times. It is one of the state aid measures the Commission introduced in response to the pandemic. It brought in the export credit insurance derogation because, as it stated very plainly, there is not sufficient private market capacity.

The state has to step in. In most European countries the state has stepped in and provided state backed export credit insurance. Ireland is an outlier at this stage, which is extremely disappointing. It is particularly disappointing for agrifood and drink because we account for the majority of the indigenous manufactured exports. Therefore, we will be the biggest users of export credit insurance.

The problem is that if we are competing for business in, for example, Germany with a Dutch or Danish food company, such companies will have a competitive advantage because they have access to state backed export credit insurance in their countries. We do not, and this will be taken into account in terms of how we pitch for business.