CONSERVATIVE MEP FOR SCOTLAND

What does Brexit mean for European farmers

Examining the prospects for a mid-term review of the CAP and my early thoughts on what Brexit means for European farmers.

12.09.2016.

It is my pleasure to welcome you here to the ECR’s Working Group on the Rural Economy. My name is Ian Duncan, and I represent Scotland in the European Parliament. It has been my honour to chair this body for the last two years. So far we have inquired into digital connectivity in rural areas, islands & peripheral communities, growing the rural economy and of course several sessions on the Common Agricultural Policy. Today we return to that topic, examining the prospects for a mid-term review of the CAP.

We are joined by a panel well qualified to explore the issue:

Professor Alan Matthews - Professor Emeritus of European Agricultural Policy, Trinity College Dublin.  Prof Matthews’ research interests cover the areas of agricultural policy and modelling, applied trade policy and WTO rules affecting agriculture and food security.

Giuseppe Ferro - Agronomist. Mr Ferro served as Agriculture Service Manager and later as Director of Policies for Rural Development in the Puglia region of Italy.

Andrew McCornick – Vice President, National Farmers’ Union of Scotland.  Mr McCornick farms a 230+ ha unit with 160 suckler cows and 600 breeding ewes with a small herd of pedigree Charolais cattle.

I chose this topic for discussion back in May. We have all passed a lot of water since then… and casting an eye toward the future has become an even greater challenge. Before we begin the discussion of the mid-term review of the CAP let me set out some early thoughts on brexit and what it means for European farmers.

What happens to the cash cow?

Farming still accounts for 40% of the EU budget, some €45bn in total. The share has been (very) gradually falling and will reach 37.8% by the end of the current budget period (2014-2020). Talks on the next budget (Multi-Annual Financial Framework (MAFF) in the jargon) are due to start towards the end of the year. The mood music in Brussels amongst the net contributing member states[1] has been for further reduction in farm monies.

The real budget judder will be the end of the UK’s financial contribution. The UK is currently the third largest contributor to the EU budget, coughing up €18.2bn, of which €3.2bn is CAP contribution. Now it isn’t clear what the future (financial) relationship will be between the UK and the EU but the worst-case scenario for the EU is a farm budget cut of over 7%, even before the EU budget negotiations begin. Are the seven net contributors willing to up their budget contributions. I wouldn’t bank on it.

To market, to market…

The EU is the UK’s single biggest market for farm produce, worth around €16bn a year, about 60% of total agricultural exports. The UK is also the biggest buyer of EU farm produce, importing €40bn worth in 2014. Last year Scotland exported 183million bottles of whisky to France alone. Any brexit settlement has to come to terms with this simple reality or famers on both sides of the Channel will be the losers.

There are a number of scenarios for UK trade post brexit: the ‘Norwegian model’ in which the UK pays for access to the single market, but this would require acceptance of free movement of people; a negotiated Free Trade agreement (although this could take time; witness the US TTIP debacle); or, reversion to World Trade Organisation (WTO) rules, with the reintroduction of tariffs on certain products, which would see prices rise.

Who else wants our stuff?

I have spent the last few years wading through e-mails from folks who believe that the adoption of TTIP will herald the ‘end of days’. For those of you not in the know TTIP is the Trans-Atlantic Trade and Investment Partnership between the EU and the US - a trade deal whose aim is the elimination of tariff and non-tariff barriers.  As a supporter of free trade I have defended these negotiations. (You can find my efforts here).

However, the deal has been listing, holed below the water line, for some time. EU Agriculture Commission Phil Hogan put it bluntly; in all his talks with the US on the farming chapter, the Americans had not moved a single inch, at which point he would hold up his meaty fingers to demonstrate the distance. The Germans declared the deal dead only last week.

Brokering a common position within the EU has been a challenge, like capturing a cloud in a sack. Each member state wants something different. Earlier this year France, the most free-trade-sceptical of the EU28, threatened to pull out altogether.

Outside of the EU, the UK will be free to negotiate its own trade deals. There seems little doubt that trying to find common ground between two states is significantly easier than trying to find it between 28 +1. The UK alone is still a significant market, with well established legal protections, sophisticated & demanding consumers, and well established brands, from Scottish salmon and Aberdeen Angus beef to whisky of all hues and an emerging gin bonanza.

After the setback on TTIP, the EU must conclude its free trade agreement with Canada (CETA, in the jargon) otherwise its reputation as a liberal trading bloc will be in tatters. The omens are not good. Several Member States are decidedly lukewarm. Brexit will mean that the EU has lost its staunchest advocate for global trade, since it is the UK which is in the vanguard of all free trade talks within the EU.

Who will pick the berries?

When my family farmed raspberries and strawberries in Perthshire, the fruit was picked by Scots. Back in the day towns would stagger their ‘trade fortnight’ summer holidays, so the berries were picked first by folks from Glasgow, then Dundee, then Perth, and so on.  Today the berries are picked, almost exclusively, by EU seasonal migrants.  As with berries, so with other crops. Farm labour speaks with a different accent today than it did when I was a boy.

The UK once operated a bespoke Seasonal Agricultural Workers Scheme and almost certainly would need to do so again. Exactly how it would work post-brexit reamins to be seen. Free movement will be one of the thornier issues in the coming negotiations, perhaps the thorniest of all. British farmers are going to have to speak with one voice if they are to lobby successfully for workable resolution to the seasonal labour question.

Against that background further reform of the Common Agricultural Policy will unfold.

New Cork in old bottles

Phil Hogan was back in his homeland, twenty years after Franz Fischler proposed the reform that would ultimately lead to the Cork Declaration on Rural Development.

Hogan launched a ten-point plan called, ‘A Better Life in Rural Areas,’ covering rural value chains, viability & vitality of rural areas, greater regionalisation of environmental policy, and further commitments to climate action. Two interesting elements that will have significant ramifications going forward: (i) Rural-proofing all future EU policies; and (ii) a hint that the two pillar structure which supports agricultural spending may be on borrowed time.

There seems little doubt to me that Hogan will shake up the EU farming world. His challenge just got all the greater.

 

[1] In 2015 Germany, United Kingdom, France, the Netherlands, Italy, Denmark, Finland and Cyprus were net contributors to the EU budget.