Brexit offers ‘unique opportunity’ to revitalise UK farming
15th April 2016
The Wageningen report sponsored by the NFU has presented a relatively favourable outcome for UK farmers under two potential trade models that could be adopted following Brexit. Any trade agreement other than a single market imposes import transaction costs, but these will have a largely beneficial effect on UK farm gate prices. The UK is a net importer in nearly all sectors, so the additional import cost has a beneficial effect on farm incomes. There are multiple adjustment uncertainties after such barriers are introduced, such as a decrease in consumption, a switch to alternative products or changing food/feed patterns as, for example, livestock feed becomes more expensive. In reality, many of these scenarios will present change to UK farming but quite possibly opportunities too.
The argument that food price rises are necessarily a bad thing must also be approached with caution. British consumers have never paid so little for their food, yet there is an ongoing stream of criticism in environmental and health circles in particular that food is too cheap. Cheap food encourages over-consumption and wastage. Equally, farmers are suffering from an unequal trading relationship with food retailers, fuelled by competition law rules that only act in the purchasing interests of the consumer. The unequal extraction of value from the system results in a poorly remunerated and consequently unattractive farming profession, which then struggles to recruit the calibre of new entrants needed to drive a progressive and economically beneficial industry. Farm gate price rises may actually bring multiple positives.
Criticism of the third potential model presented in the Wageningen study, that of trade liberalisation, centres on the findings that this will be most disruptive to farm business cash flows. This criticism fails to note what is acknowledged in the report, in the impact that UK trade liberalisation will have on EU exporters. The prohibitive trade barriers around the EU border, for example 42% on dairy, would have the effect of making the EU an uncompetitive exporter to the UK. This would have a revitalising effect on UK fresh produce sectors in particular, and protect UK dairy farmers from cheap Irish milk imports. Globally traded products would more readily access British markets, bringing down prices to consumers, and UK farmers would no doubt adjust to finding the best market scenario to suit their businesses.
The report says more about the models used than the reality of the scenarios that could exist post-Brexit. The presentation of the report has sought to draw conclusions from the models, but the only conclusion that can be drawn is that there is a chronic case of benefit dependency amongst the leadership in the farming industry. Under all three trade scenarios, the traditionally unsupported sector of horticulture thrives. With adequate protections for vulnerable and socially and environmentally beneficial agriculture, perhaps it is time for other sectors to face the same reforms. What we don’t hear is any positivity from the leadership of the industry - the security of Government support for the industry is somehow presented as being out of the control of our industry leaders. This is deeply concerning. If the industry needs taxpayer subsidy to survive, it better start arguing why in order to counter the perfectly rational arguments of many that it does not. We in UKIP and others in the Out campaign believe that agriculture does deserve taxpayers support, for food security, market failure and rural vibrancy reasons amongst many. This message needs to be consistent and considered to be successful.
Is it really any safer to stay within the EU? Proposed EU trade deals with north and south America in TTIP and Mercosur are likely to have significant impacts on many vulnerable farming sectors, particularly beef and sugar. Anti-corporate sentiment is likely to drive a restriction or a complete ban on the use of Glyphosate. An ongoing Luddite approach to essential biotechnology and precision plant breeding is certain, as the application of the 'precautionary principle' that shackles the whole industry to the paranoia of the few. Looking further ahead, it is unknown what the next round of CAP reform in 2020 will bring, but the co-decision legislative procedure is likely to result in legislation as poorly drafted as the current regime. It is also likely to shift support further towards environmental payments and away from perceived negative 'industrial' forms of farming. A compulsory cap on payments and a tighter definition of 'active farmer' are on the cards. The CAP budget will need to incorporate additional eastern European accession states and also Turkey. Universal broadband and online reporting creates direct accountability to Brussels, bypassing variable and inefficient national paying agencies. Punitive fines imposed on national governments by Brussels bureaucrats continue to create a culture of kowtowing compliance, stifling innovation in localism and service delivery.
Bringing agriculture back under UK control offers the best opportunity we have in a generation to make sense of these variables. Free from the EU and the protectionist shackles of the Common Agricultural Policy , the UK can seek to incentivise the types of farming that benefit both health and the environment, bringing overall benefit to society at large. This type of cohesive food policy could not be achieved for many years at EU level, due to the vested interests of the agricultural lobby in France and Germany in particular, and not without ceding control of the National Health Service to Brussels as well.
Uncertainty in the post-Brexit food world can be countered by a clear objective to achieve a progressive and responsible trade policy with all trading partners, incentivising beneficial domestic production and recognising our position in a global food market. Short term volatility is no doubt to be expected and farmers are coping admirably with extreme market volatility already for reasons entirely unrelated to Brexit. We can ride out the short term bumps through conventional farm support, and nobody in the Out campaign is arguing for anything but ongoing support for British farmers. However, Brexit brings the unique opportunity to re-define the British system of food production so that it benefits health, the environment and society at large. It should not be disregarded in a hurry.