4 May 2017 Insight

Brexit sector focus: agriculture

Farming is big business in terms of the EU’s budget, and will be big on Brexit negotiators’ agendas, too

Britain’s vote to leave the European Union has raised many complex questions for agriculture and farming. And they’re not small questions - 39 per cent of the EU’s budget is spent on the Common Agricultural Policy (known as the CAP), and issues range from foreign labour and the free movement of people to trade arrangements, the UK’s relationship with the Republic of Ireland, the UK’s position in the World Trade Organisation and even future science budgets.

The trading relationship with the EU in farmed goods is vital to industry. The UK is a net importer of agri-food products, with levels of imports nearly double exports. Around three-quarters of UK agri-food exports are to the EU27, including some 30 per cent of all domestic lamb farming.

“The period so far has been a honeymoon,” says Lucia Zitti, a Brexit specialist at the National Farmers Union (NFU). “We have seen the beneficial effect of the lower pound, and we are still a member of the EU so we have access to the single market and a continuance of the income support coming from the CAP budget. But now our members are thinking about the future, and there is stress over the uncertainty.”

Agricultural trade

The NFU’s official policy is for a deal that allows free access as far as possible, with no tariffs to trade in agricultural products between the UK and the EU. “But even as free a trade agreement as possible would not equate to what we have now,” explains Zitti. “Regulations will diverge, and that will lead to facilitation costs being applied to trade.”

Trade with the rest of the world is another issue. Currently the EU applies a common Customs Union tariff to imports and exports with the rest of the world. The current UK government has made clear its intention to exit that arrangement and create a new regime.

There are tricky details to consider. For example, the EU has an agreement called a Tariff Rate Quota (TRQ) with New Zealand to import 280,000 tonnes of lamb at a preferential rate. What will the UK’s share of this quota be when it leaves? “A sensible way to split the quota could be done based on historical trade flows,” says Zitti. “But New Zealand will have its own view.” These kind of complexities mean the devil really will be in the detail when negotiations on trade begin.

Protecting produce

The EU protects products of a specific geographic origin, such as champagne and Melton Mowbray pork pies. The Country Land and Business Association, which represents owners of land and businesses in rural England, says the continuation of Protected Designation of Origin (PDO) and Protected Geographical Indication (PGI) regulations is one of its “red lines” in the forthcoming negotiations.

Seasonal work

At harvest time the agricultural workforce surges. In the past decade EU citizens have augmented the local UK workforce in growing numbers. “Free movement of EU citizens is a very serious issue,” says the NFU’s Zitti. “We would like a suite of visa or work permit schemes that offer employers flexible solutions for recruiting migrant workers for low-skilled, seasonal work, with minimum burdens to process applications.”

Borders

Transit across the Northern Irish border is an important consideration. A system of tariffs and checks would be unwelcome for farmers on both sides of the border. The Irish Farmers’ Association recently met the European Commission’s chief negotiator for Brexit, Michel Barnier, to ask for a “comprehensive free trade agreement”. Irish Farmers’ Association president Joe Healy said afterwards he felt the talks would be “very difficult”.

Uncertainty

Negotiations are further complicated by potential reforms to the EU’s own agriculture policy. A group of Nordic and Baltic states has tabled a 67-item list demanding changes to the Common Agricultural Policy which they argue is “a highly complex administrative set-up that creates costs and burdens that cannot be motivated by the outcome”.

If the EU makes changes, the UK will need to consider whether to mirror those changes, or risk regulatory divergence.

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