The
complexity of the political and economic reality cannot be captured in full - there
are many elements that cannot be factored in the study, like the impact of
Brexit on the availability of foreign labour, the price of UK land or on the
£/€ exchange rate.
Despite
these uncertainties, the NFU is confident that the scenarios presented offer a good
representation of the spectrum of policy options a UK government might consider
in the event of leaving the EU.
Last year the NFU presented a report examining the UK’s current relationship with the EU and it highlighted that while some of the positives and negatives of EU membership for British agriculture are known, there is no clarity on what a vote to leave the EU would mean. In particular, what trading arrangements would we have outside the EU and what would a British agricultural policy look like?
Last year the NFU presented a report examining the UK’s current relationship with the EU and it highlighted that while some of the positives and negatives of EU membership for British agriculture are known, there is no clarity on what a vote to leave the EU would mean. In particular, what trading arrangements would we have outside the EU and what would a British agricultural policy look like?
So the NFU
commissioned a world leading agricultural research institute from the Netherlands, the LEI Wageningen UR, to assess the possible effects of a number
of different trade and agricultural support policies which would, in theory, be
open to the UK government in the event of a Brexit.
The findings in respect of
those scenarios are presented in a summary report and can be read in full on
the NFU’s website. It has also been widely commented on in the media and I include links from Farming UK and the Guardian as examples.
The study gives an
indication of what may happen based on three scenario whilst accepting that there are limitations to what can be quantified. For example:-
doesn’t consider what the impact would be if the UK government decided to cut the level of regulation faced by our industry;
or
what
would happen to the demand for British produce if some food manufacturers
decided to relocate somewhere else in the EU in order to remain in the single
market.
The report indicates that
some of the scenarios appear to suggest that there could be serious risks to
farm income from leaving the EU, while others suggest there could be a more
favourable outcome.
It comes down to a matter of judgement as to which of the scenarios appears the most likely.
It comes down to a matter of judgement as to which of the scenarios appears the most likely.
This in turn will depend on
the policy position adopted by the UK government when outside the EU.
In the past successive
British governments have been strong advocates of open and free trade. It has
called for tariff protection across all farm sectors to be reduced and it has
called for the abolition of direct support payments made through the CAP. While
a member of the EU, the UK has not been able to realise those goals fully,
nevertheless it has taken direct action to reduce the level of farm payments
available to farmers.
An important point made is
that:
As
yet, those who are advocating for us to leave the EU have not made it clear
whether these policies would change in the event of a Brexit.
This study provides an
insight into the potential effects of two key issues for farm businesses after the UK has left the EU:
UK’s
international trading relationship (and its impact on the domestic market) and
the level
of domestic support for farmers.
Two of the three trade
scenarios modelled, namely the Free
Trade Agreement between the EU and UK (FTA) and the World Trade Organisation
(WTO) both have a kind of anti-trade bias. In other words, British
agricultural policy would in effect become more protectionist than it has been
under the present CAP.
Under both trade scenarios,
UK farm gate prices are expected to increase. This is mainly because imports
would become more expensive, driven by trade facilitation costs, loss of
benefits from cheaper imports under the EU’s preferential trade arrangements
and in the case of the WTO default scenario, higher tariffs with the EU. Higher
prices would stimulate domestic production, but on the other hand they would
reduce domestic use. The net result of this would be an improvement in the UK’s
trade balance mainly due to declining imports.
The questions to be asked
about these two scenarios are political rather than economic. A more protectionist
policy would be a reverse of the policies that successive British governments
have pursued for the last 40 years; it would go against a world-wide trend to
more open agricultural trade and would be in contradiction to the stated aims
of many of those who advocate that the UK should leave the EU.
The
UK Trade Liberalisation scenario would appear to be more in
line with the established British government policy and with the views of many
of those who advocate leaving the EU. This scenario has a significant negative impact on
farm gate prices for a number of products, but mainly for meat and some dairy
products. The result would be less meat and milk production, decreasing the
UK’s self-sufficiency levels in those products, and creating a knock-on effect
on demand for feed. Lower tariffs would offset the higher trade facilitation
costs faced by importers and could therefore be appealing to the government.
The results of each scenario show that the biggest driver of UK farm income
change is the level of public support payments available. The positive price
impacts on farm incomes seen through both the FTA and WTO default scenarios
would be offset by reductions in direct support.
A reduction of direct support, or a complete
elimination of it, would exacerbate the negative impact effects seen under the
UK Trade Liberalisation scenario. The cattle and sheep sectors are particularly
dependent on direct support payments, but so too are mixed farms and field
crops. Consequently, the combination of a more liberal trade policy and a
reduction or elimination of direct support would make many British farms less
viable.
My verdict:
As I have posted several times before the prospect of leaving the EU is far too much of a gamble to take, it is full of uncertainties and crucially those who advocate leaving the EU have provided no information or clear commitments whatsoever on alternative policies to the CAP, international trade and farming regulation.
The risks involved in losing access to European markets is too great, the Common Agricultural Policy is critical to Welsh agriculture, especially in the current commodity price crisis and the EU Rural Development Programme helps Welsh farming improve its competitiveness and profitability.