Brexit offers a huge opportunity to rewrite the rulesby Tim Josling / November 16, 2016 / Leave a comment
There are few groups for whom the Brexit vote has created greater uncertainty than farmers. They can now expect an extended debate over the future of UK agricultural policy and the associated food and environmental regulations, so the sooner the government can decide its strategy the easier it will be for farmers to plan their future.
What options exist for such a renationalised farm and food strategy? The choice is basically between two alternatives:
• Preserve as much of the existing Common Agricultural Policy and European Union food policy as UK interests permit. This would involve two key decisions: to keep the current border regime (tariffs and import inspection services); and to continue the internal policies, particularly the “single farm” payments that today flow from the EU budget to UK farmers.
• Opt for radical change by lowering or eliminating border protection on imported farm and food products. Over time, this would allow payments to farmers to be reduced so that their incomes would depend on their ability to compete with overseas suppliers.
The first of these options would involve the least disruption to the farm sector and would minimise the need for new legislation, as many current regulations and directives could be translated into domestic law. It would allow the UK to continue to meet EU standards for imports, and even to participate alongside the EU in trade discussions with other countries. The extent to which trade with the EU would be affected would depend on the outcome of negotiations on trade barriers between the UK and the EU. A “soft” Brexit with the continuation of free trade in goods would greatly ease this option. The UK would have regained control of trade and regulatory decisions but would still have to satisfy EU regulations on exports to the EU.
One problem with this option is that it places the full financial burden on the UK Treasury of keeping up Common Agricultural Policy payments. Those payments are less than the net current transfer to the EU, so there would appear to be some savings, although funding these payments may not be politically acceptable in the long term. The most likely way to justify continued payments to farmers would be to encourage them to provide “public goods” in rural areas.
“One by-product of this option, therefore, could be to encourage a more liberal regime for agricultural trade within the EU itself”
Moreover, the UK would continue to be saddled with a tariff policy on farm products that is arguably more protectionist than is in the UK’s interest as a trading country. Though high tariffs give a country a bargaining chip that it can use to exchange for better access to other markets, the value of such a chip lies in its being used.
This points to the main advantage of the second option for a New Agricultural Policy. A clean break from EU regulations would repatriate decisions on agricultural trade. Even with the reforms of the past two decades, EU agriculture still operates inside a cocoon in a world of more open trade. A farm policy that was as open to imports as the manufacturing sector would put the UK among those that have chosen to exploit the full potential for more liberal trade in farm products.
Temporary assistance could of course be provided for those parts of the agricultural sector that have difficulty adjusting, but the focus should be on promoting adjustment rather than disguising the need for it through state support.
From this open-trade position, the strength and resilience of UK agriculture would be tested although the competitiveness of the food sector would be enhanced. If tariffs against UK exports to the EU were to return (a “hard” Brexit) this option would offset some of the impact of the loss of markets for British farm and food products, as Free Trade Agreements with like-minded countries became possible. But if free trade in farm goods with the EU were to continue, then the UK’s open system would pose a challenge to the EU because the protection of Continental agriculture could be eroded by the possibility of free trade across the Channel. Even with strict rules of origin, the EU would not be able to offset this trade deflection. One by-product of this option, therefore, could be to encourage a more liberal regime for agricultural trade within the EU itself.
The articulation of this new approach by the UK government would be a challenge, but the Brexit vote offers a chance to establish a New Agricultural Policy that speaks directly to British economic, political and social objectives. It would be unfortunate if this opportunity were lost.
On the 17th of January 2017, Prospect hosted a roundtable discussion with the contributors to: Brexit Britain: the trade challenge. This report is designed to act as a guide for parliamentarians, officials and businesses with a stake in the UK’s changing relationship with the world following Brexit. The discussion was chaired by Tom Clark, Editor of Prospect. Participants included Tasmina Ahmed-Sheikh MP, Miriam González and Vicky Pryce.
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