UK farming faces less-than-rosy future in post-Brexit era
10 February 2017. By Simon Taylor.
The UK government sees Brexit as an opportunity to deliver a "world-leading food and farming industry" freed of the red tape of the EU's Common Agricultural Policy and able to strike trade deals with the rest of the world. The quote comes from the government's white paper on Brexit.
Yet, as with so many Brexit issues, the reality looks far less rosy than the government suggests.
The British government has identified countries lining up to secure trade deals once the UK has left the EU. The list includes Australia, New Zealand, South Africa and the US, and new countries are joining the list.
Under EU law, the UK cannot strike its own trade deals until it leaves the bloc, because trade policy is an exclusive competence of the union. To keep busy until the exit negotiations are concluded, the Department for International Trade, a new body created after the referendum, is setting up working groups to prepare for the post-Brexit period.
But even then, the quest for new trade opportunities outside the EU faces obstacles. The UK needs to know what its own tariff and quota arrangements are before it can negotiate trade deals with third countries. Only then can it offer to lower duties or increase import quotas as part of a trade deal with partners.
The UK must achieve two things before it can enter into meaningful trade talks with non-EU countries. It must complete negotiations on Brexit terms so it knows its terms of trade with the EU, and it needs to establish its own tariff levels and quotas at the World Trade Organization, known as schedules.
Joe MacMahon, a professor of commercial law at University College in Dublin, told a committee of UK lawmakers investigating the effect of Brexit on the UK farm industry that "at some point you have to think what your concessions are going to be, so you need to know what your tariffs are going to be."
Julian Braithwaite, the UK's ambassador in Geneva who is responsible for the WTO, said in January that Britain would seek to duplicate its current schedules as a member of the EU as far as possible to ensure a smooth transition to WTO membership in its own right after leaving the bloc.
The challenge comes in how to allocate the UK's share of the EU's current import and export quotas at the WTO.
The UK is expected to match the EU's current offer on tariffs on goods it imports, though it may wish to lower them in future trade negotiations. The tricky part is dividing up what are known as tariff rate quotas, or TRQs. These are rights for third countries to export farm products to the EU subject to a particular quota. They apply mainly to agricultural goods, which receive special treatment in international trade deals to protect the livelihoods of farmers from the full force of global competition.
TRQs exist for products such as beef and lamb as well as a large number of other nonprocessed products. Many TRQs were approved to reflect historical trading relationships like the UK's large meat imports from former colonies Australia and New Zealand. Most of the lamb imported into the EU under a TRQ, for example, goes to Britain because of past trading relations — even though the UK is self-sufficient in lamb. This makes it harder to find an equitable way to divide up the TRQ between the EU and the UK.
Alan Matthews, emeritus professor of European agricultural policy at Trinity College in Dublin, told lawmakers that the UK's WTO partners would try to use the opportunity afforded by the country setting new schedules to improve access to Britain's valuable market for farm produce.
The UK is a net importer of farm produce and food with an annual deficit of 17 billion pounds ($21.3 billion). At the very least, WTO members would complain if they felt that the division of TRQs left them with less access to the EU and the UK markets combined after Brexit.
WTO members must sign off on the UK's new schedules before Prime Minister Theresa May's government can start meaningful negotiations on new trade deals with non-EU countries.
Countries including Australia and New Zealand will push hard for improved access for their farm goods as part of any trade deal with the UK. Increased imports will boost pressure on the UK farming industry, which has faced a crisis in the milk sector for several years.
The UK's future access to the EU market in terms of tariffs and quotas will depend on the trade deal the two sides negotiate. As McMahon explained to UK lawmakers, the EU's deals with third countries never offer full free trade for farm goods because of community preference — that is, favoring EU produce.
What about the scope for technological innovation for UK farmers to boost competitiveness? British farmers have complained that being part of the EU has prevented them from using certain technologies, such as genetically modified crop varieties that are widely used in the US, Canada and South America. In theory, using GM seeds would enable farmers to improve yields by reducing crop losses caused by pests.
To know how the future would look, UK farmers simply have to ask their counterparts in the US, Canada and South America about the challenges of selling GM crops to the EU. Modified crops are effectively shut out of Europe because many of the varieties approved for cultivation outside the EU haven't been approved for consumption as animal feed in the bloc. UK farmers would have to guarantee that their crops were GM-free to sell them to the EU — as US, Canadian and South American exporters do now.
The level of support through direct payments will also affect the UK's agriculture industry in the post-Brexit era. The EU now spends 58 billion euros ($62 billion) a year on the Common Agricultural Policy. May's government has promised to continue paying the country's farmers until 2020 the amounts that they would have received if Britain were still a member of the bloc.
UK farmers got 3.1 billion pounds in direct payments and had access to 5.2 billion pounds in rural development funding in 2015.
What happens after 2020 is uncertain. But it is clear that UK farmers will continue to compete with French and German farmers, who will still receive high levels of subsidy — accounting in some cases for half of their annual income.
To sum up, the UK's farming sector faces restricted access to the EU's market, pressure from its trading partners to open its markets further to imported farm goods and limited scope for using new technologies that the EU hasn't approved. Add in the prospect of labor shortages caused by British restrictions on migration from EU member countries, and it doesn't quite sound like the future evoked by a "world-leading food and farming industry."
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