CONSERVATIVE MEP FOR SCOTLAND

EU Referendum: Farming

The purpose of this paper is to consider whether membership of the EU provides an advantage to the UK in terms of farming and the rural environment.

01.06.2016.

The purpose of this paper is to consider whether membership of the EU provides an advantage to the UK in terms of farming and the rural environment.

I am the chairman of the ECR’s Rural Economy Working Group.

Farming in the EU

Farming and the wider rural economy are managed under the EU’s Common Agricultural Policy (CAP)[1]. Initially designed to safeguard agricultural production and maintain farm incomes, it achieved notoriety by creating butter mountains, wine lakes, and other such delicious landscape metaphors, whilst entrenching a complex subsidy structure that has distorted markets at home and abroad.

Today the CAP constitutes 43% of the EU budget with an annual spend of €59bn per year.  The UK receives circa €4bn per year and Scotland just over €1bn. France, which has been the single largest recipient of farm funding since the inception of the CAP, receives over €10.5bn a year[2]. This despite accession of the former soviet bloc nations whose farms are in greater need of modernisation funding[3].

Evolution of the CAP

Since its introduction in 1962, the CAP has undergone several reforms, the most significant of which came in 1992, when EU Agriculture Commissioner Ray MacSharry of Ireland instituted the reforms that bear his name[4]. The reforms began the shift in the CAP from product support through guaranteed prices to producer support through a guaranteed income (pillar one). These reforms succeeded in addressing issues of overproduction. The Agenda 2000 reforms sought to further increase competitiveness, increase environmental awareness and introduced a second ‘pillar’ of support for rural development (rather than production). The Single Payment Scheme was introduced in 2003.

Current CAP and challenges

The ambition of the current CAP is to ensure farm income without over-production, whilst ensuring good husbandry and development of the wider rural environment. Farm payments will move towards ‘flat rate’ payments from 2019 thereby ending the final link with production.  However a number of challenges remain:

Greening. A third of farm payments now depend upon adoption of a suite of ‘green’ measures[5]. However, several of the measures have proved unwieldy or unworkable, with the farming unions of the UK flagging up several serious deficiencies[6].

Active v. Slipper Farmers. Coupling farm support to the land rather than to the person who works the land has created ‘slipper farmers’. A land owner may claim the subsidy while the tenant farmer, who works the land receives no farm support payments at all. The closure of this loophole remains an outstanding priority.

Complexity of farm payment procedure. For years, farmers have lamented the complexity of the farm payment procedure, notably inspection & auditing issues as well as the frequency and scale of fines. The EU claim[7] it is taking steps to simplify the CAP but there is still a long way to go.

A mid-term CAP review is widely expected. Agriculture Commissioner Phil Hogan has indicated that he would like to see serious change in the greening requirements and a strengthening of subsidiarity[8]. The current CAP will run until 2020. Thereafter further change can be anticipated. Importantly discussion on the funding for the next CAP from 2020 will begin in this year with concrete proposals on the table expected by 2018[9]. Commissioner Hogan has made clear that the funding arrangements can be guaranteed until 2020, but no further. It remains to be seen whether the CAP will secure comparable funding in the future given the pressures on the EU budget.

Democratic decision making

The Parliament is often held up as the ‘democratic’ institution of the EU. It is after all the only directly elected of the EU institutions. Whilst this is true there are often factors that undermine the role of the Parliament. For example, last month, the Parliament voted to extend the authorisation of Glyphosate, an important weed killer used by farmers across Europe[10].

However, the final decision on the authorisation rests with a Commission Committee (upon which member states are represented). The politicisation of the issue has meant that the Commission could not be certain of securing a positive endorsement of the extension and so withdrew the vote[11]. The consequence of this is clear, if there is no vote in this committee, or if the vote is not positive, then glyphosate will be taken off the shelves. It is this kind of opaque decision making procedures that gives the EU a bad name. I will be doing all I can to ensure an extension to the license whilst this issue is resolved, but at heart, it is a bad way to make policy.

Another example of the EU’s contradictory approach to agriculture is its approach to Genetically Modified Organisms (GMOs).  Last year, two votes on this issue were staged in the Parliament. The first, at the beginning of 2015, resulted in the Parliament voting by 480 votes to 159 to grant Member States the freedom to ban the cultivation of GM crops across their territory.  In the second, in October 2015, the Parliament voted by 577 votes to 75, to ban Member States from restricting the import and use of all GM food or animal feedstuff into and within their own territory.

The first vote endorsed the rights of Member States (in the absence of any scientific evidence), to ban the cultivation of GM crops within their territory. The second forbade Member States from banning the import of GM animal feedstuff into their territory. Same Parliament; seemingly quite different views on GM.

The Scottish Government welcomed the first vote, and promptly banned GM crops, despite the fact that with the Roslin Institute, Scotland is at the forefront of GM technology. The Scottish Government declared GM crops to anathema to Scotland’s ‘clean and green’ image. However, when it came to GM feedstuff, the Scottish Government position was quite different. Understandably perhaps given the fact that over 80% of animal feed fed to Scottish livestock is from GM sources.

I would argue that science should be at the heart of decision making. The compromise agreed by the European Parliament, that no evidence is required to institute a ban, is bad policy making. However, bringing farm policy management back into the hands of the Scottish Government (given it is a fully devolved matter) is also questionable. The Scottish Government has entirely abandoned any pretence at science-led policy making when it comes to farming in general and GMO issues in particular.

The Single Market

The EU presently accounts for 73% of all UK agri-food exports. For Scotland (excluding trade within the UK) the figure is 70.2%. Scotland’s next most important market is the USA, which accounts for 7%. Anything which impacts upon the ability of farmers to trade into the EU is bad for farmers. The key questions posed by NFU Scotland are simple: ‘Would Scotland be able to continue to trade tariff-free with Europe or would our lamb, beef and other key farm exports face a tariff barrier? Would access to important overseas markets remain or would the UK have to re-negotiate?’ [12]

Whilst there is little doubt that UK farmers and continental consumers would suffer as a result of any trade barriers, the exact post-Brexit arrangements remain unclear, and would depend upon swift and sure negotiations. It is worth noting that, for example, Norway has tariff-free trade with the EU through its membership of the European Economic Area[13]. However, membership of the EEA demands that the states abide by EU law and permit free movement of people[14].

Trade beyond the single market

The EU has signed 32 trade agreements with countries across the globe and another 15 agreements are either provisionally applied or finalised and awaiting implementation.[15] These deals open up much of the world to British and Scottish agriculture- tariff free. In fact, if the EU was to complete all its current free trade talks tomorrow, it could add €275 to the EU economy.[16]

A number of free trade agreements are pending including agreements with Canada (CETA) and the USA (TTIP). The impact on Scottish farming would be significant. The Scotch Whisky Industry (by far the biggest purchaser of Scottish barley) have said, “TTIP therefore matters to Scotch...the removal of remaining border fees on whisky would save around £4 million a year.  Even more significant is the chance to secure improved regulatory coherence, setting globally relevant rules for labelling, certification and testing of spirit drinks.”

However these two trade agreements in particular are not without their critics[17] with claims that the agreements would lead to an ‘industrial model of food and farming, threatening the survival of small family farms, local food initiatives, standards for healthy and safe food, the environment and public health.’[18]

However, the prospect of closing these two deals seems remote, particularly with a US election pending, and the fact that not a single negotiating chapter has been closed. It is also worth noting that the EU is poor at enforcing its current trade agreements. Last year, the Commission investigated only 10% of the complaints regarding breeches of free trade[19].

Whether the UK outwith the EU would have greater success in negotiating trade deals is unclear. There is little doubt that bilateral negotiation is more straightforward than multi-national negotiation with 28 member states. This should be set against the recognition that the EU is a more tempting market place with its 500m citizens than would be the UK with its 65m.

Free movement of workers

Scottish agriculture depends upon both permanent and seasonal workers from outwith the UK. It is estimated that there are 288,000 migrant workers within Scotland[20]. At harvest time this can rise by up to 20%[21]. NFU and NFU Scotland have warned that without such workers the farming sector could grind to a halt. Such is their concern that both bodies have called for the re-introduction of the seasonal agricultural workers scheme (SAWS), abolished in 2013, which helped EU workers find seasonal jobs on UK farms.

It is clear that British farms are heavily dependent upon seasonal workers from outwith the UK. How they would be replaced remains unclear.

The Verdict

Scottish farmers receive over €1 billion in EU farm subsidies each year. Such funding is vital to Scotland’s rural economy. As a net contributor to the EU, such payments could be made from the UK exchequer. However, farmers would rightly want to see a strong guarantee that such payments would be made. It is also worth noting that EU funds are guaranteed only until 2020. Thereafter they will be subject to renegotiation as part of the general review of the EU budget. It remains to be seen whether there will be a downward pressure on the agricultural share.

The CAP is a complex and a bureaucratic policy. Scottish farmers are regularly frustrated by the realities of working within the policy. EU Agricultural Commissioner has declared his intention to simplify the policy. Change would be welcomed. Would a Scottish farming policy (consequent upon devolution) be so complicated, so bureaucratic?  Could an EU policy embrace subsidiarily?

The EU single market accounts for 70% of all Scotland’s trade (beyond the UK). Protecting access to the EU’s market is therefore essential. Whilst states outwith the EU have gained access to the Single Market, such arrangements must necessarily be concluded before Scotland exited the EU. The UK was once a member of the EEA; presumably it could rejoin. Unknown, certainly undeclared thus far, is the cost.

Free movement of workers, whilst controversial elsewhere, is essential to farm production. Thus far no alternative has been offered to replace those seasonal migrants from the rest of the EU. No doubt alternatives could be found, but to date none have been offered.

The approaching test: can the CAP be reformed to reduce its bureaucracy and complexity, whilst maintaining its value? There is no doubt that the current Commissioner is committed to simplifying the policy.  However, it remains to be seen whether the policy will secure comparable financial commitment in the coming financial period.

 

 

[1] http://ec.europa.eu/agriculture/cap-overview/2014_en.pdf

[2] http://www.bbc.com/news/world-europe-11216061

[3] http://www.fwi.co.uk/machinery/farming-in-the-ex-eastern-bloc-bulgaria-and-romania.htm

[4] http://ec.europa.eu/agriculture/cap-history/1992-reform/index_en.htm

[5] "Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1234/ 2007 as regards the regime of the single payment scheme and support to vine-growers". European Commission. 12 October 2011

[6] http://www.nfus.org.uk/node/15466

[7] http://www.consilium.europa.eu/en/policies/cap-simplification/

[8] See Above

[9] http://cap2020.ieep.eu/2014/11/10/some-thoughts-on-the-cap-post-2020

[10] http://www.europarl.europa.eu/news/en/news-room/20160407IPR21781/Glyphosate-authorise-for-just-seven-years-and-professional-uses-only-urge-MEPs

[11] http://www.reuters.com/article/us-health-eu-glyphosate-idUSKCN0YA1M1

[12] https://www.fginsight.com/news/farmers-better-off-in-eu---nfu-scotland-10175

[13] http://www.eu-norway.org/eeaforside/#.V0wHJr-Njw0

[14] http://ec.europa.eu/trade/policy/countries-and-regions/countries/norway/

[15]http://exporthelp.europa.eu/thdapp/display.htm?page=cd%2fcd_FreeTradeAgreements.html&docType=main&languageId=en

[16] http://ec.europa.eu/trade/policy/countries-and-regions/agreements/

[17] NFUS, NFU, Compassion in World Farming, World Wildlife Fund

[18] http://farmsnotfactories.org/stop-ttip/

[19] http://europeanreform.org/index.php/site/article/eu-commission-failing-to-properly-enforce-trade-agreements

[20] http://www.migrationobservatory.ox.ac.uk/briefings/migrants-scottish-labour-market

[21] ibid.