October 22, 2015
Although the Common Agricultural Policy (CAP) is often cited as a major disadvantage for Britain in the EU, there has been no serious attempt to explain what an alternative, independent British agricultural policy would look like if the UK left the EU following a referendum. We need to explore two scenarios: a) Brexit that keeps us in the European Economic Area (EEA), including the single market for agricultural goods; and b) Brexit that leaves us on our own, not remaining part of the single market.
Agricultural support and trade in Europe
Norway, Liechtenstein, Iceland (members of the EEA) and Switzerland (member of the European Free Trade Area (EFTA)) all have domestic farm support and import protection at a much higher level than the EU. For that reason, agricultural lobbies in these countries have always been strong opponents of EU membership. Based on OECD figures, the production and trade effects of their support systems are at least three times as distorting – and possibly even more – than that of agricultural support in the EU.
Currently the UK exports more than £10 billion worth of food, feed and non-alcoholic drink to the rest of the EU each year. For some agricultural sectors, this export market is critical: more than one third of the total lamb production in the UK, for instance. Yet imports from the EU in this sector far outstrip our exports, as they have for many years. Indeed, the difference is now nearly double the size it was in 2000, despite the significant depreciation of sterling during that period.
If the UK leaves the EU but remains part of the Single Market
First, the UK would have to observe the regulations of the market without having been party to deciding them: no seat at the Council table, no MEPs in the European Parliament and no British Commissioner to sensitise the Commission to UK requirements.
Second, as a member of the EEA we would have to respect the rule on free movement of labour, which would be helpful to British agriculture and horticulture, which rely heavily on migrant labour. 55 Third, the UK would have to apply the EU’s Common Customs Tariff on imports from third countries, which would prevent the UK attracting, for example, cheaper meat from South America and undercutting the EU market. Fourth, like other members of the EEA and EFTA, the UK would have to pay for the privilege of access to the Single Market. HM Treasury calculates the sum could be 641 million euros, considerably less than our current contribution to the EU budget.
This scenario raises a number of difficult questions:
a) Would the UK have to follow CAP regulations to the letter, or simply their intention, and who would judge that?
b) Would the Treasury redirect the financial gain made by paying less to the EU to supporting domestic agriculture?
c) As the retail cost of food would not fall – since we could not import cheaper food from elsewhere because the UK would have to observe the Common Customs Tariff – would government be able to sell this move to the electorate as a benefit?
If the UK is outside the EU and outside the Single Market
Although it could be attractive to be outside a system that often imposes red tape on farming activities, even outside the EU there will be a need for sensible national regulations concerning issues such as food safety, environmental protection, animal welfare, health and safety and so on.
The effect of cheaper imports (if we were outside the Common Customs Tariff) is lower farm-gate prices. Too radical a move in that direction would drive many farmers out of business.
World Trade Organization rules would apply to our foreign trade, and the UK government would then only be able to restrict imports on grounds of food safety, not on environmental or animal welfare grounds. Eggs from battery hens and pig meat from stalled sows, for instance, could not be banned.
In order not to devastate the UK farming sector on Brexit, if it were expected to compete against lowpriced imports, the government would have to divert to domestic agriculture some of the budgetary savings created by no longer paying our contribution to Brussels. While the net savings for the Treasury are large enough to pay for UK agricultural support, successive British governments – left and right – have argued for the abolition of direct payments, only paying for the provision of ‘public goods’ such as environmental protection.
For farmers, it is not the quantity of support that is critical, but that there should be equality of treatment with our competitors. Concerns about distortion of competition which would occur if levels of support were different across a land border – such as between Ireland and Northern Ireland, for instance – are real.
If the government wants to engineer lower food prices for consumers, someone has to pay for it – either the EU budget, the UK taxpayer or the farming community – and further burdens on farmers will drive many out of business.
The first scenario – the EEA solution – farmers could somewhat reluctantly live with, as long as we retain access to the Single Market for agricultural goods. The downside is that we would have to follow common rules made without our being at the table to help decide them, and from a Eurosceptic point of view, it would hardly deliver any of the goals that they might expect from Brexit.
The second scenario – Brexit without access to the Single Market – would deliver more to the antiEuropeans, but it would bring huge risks to UK farmers. Lower farm-gate prices, loss of our major export market, no support and little or no protection from imports produced to lower than British standards is not a future that farmers would welcome.
A third option could be to maintain our current position in the EU and press for continuation of reforms to the CAP. An alliance of progressively minded member states pressing for more reforms could be the best solution.
Deputy Director General, National Farmers’ Unioncapontheground