Category: Policy & Business

Net Zero Strategy

Ahead of COP 26, the UK has set out how it will deliver on its commitment to reach net zero emissions by 2050.  The Net Zero Strategy:Build Back Greener sets out plans across all sectors of the UK economy and whilst the headline news was the £450m Boiler Upgrade Scheme, within it there are measures which will obviously affect agriculture.

Chapter 3vi- Natural Resources, waste and F-gases is the most significant for farmers, foresters and land managers.  But instead of measures to cut meat and dairy as previously recommended by the Climate Change Committee and the National Food  Strategy, the emphasis appears to be on getting farmers to sign up to the new ELM scheme, improve efficiencies in the sector, restore peatlands and increase the planting of woodlands.

A key commitment is to have 75% of farmers in England engaged in low carbon practices by 2030, rising to 85% by 2035.  The main vehicle for this is seen as Environmental Land Mangement (ELM) with its three components.  Other proposals and policies in the Strategy refer to ‘a range of measures to decarbonise the agriculture’, many of which readers and farmers will be familiar with:

  • Animal Health and Welfare Pathway – to improve the heath and reduce emissions from animals, including action to eliminate bovine viral diarrhoea.
  • Farming Investment Fund – grants to invest in equipment, technology and infrastructure that will improve profitability.
  •  Grants for new slurry stores, equipment and other interventions – delivering reductions in nitrate and ammonia pollutants from slurry
  • Farming Innovation Programme – see earlier article
  • Support for agroforestry.

Perhaps something in the Strategy which has not been discussed as much as those measures above is  the Government working in partnership with the sector to develop new outcome-focused approaches to regulation and enforcement which supports Net Zero.   The Strategy uses the example of feed additives with methane inhibiting properties.  It says the Government is ‘actively investigating the promising role these products may have’ and is ‘assessing whether regulation could ensure maximised take up of such products’.

With regards to manufactured fertiliser, the potential of regulation to reduce and better target use is being explored, including whether new legislative powers are required to improve soil and nutrient management.  The recommendations from the Nutrient Management Expert Group, due to report in 2022, will influence this.

Also perhaps new, is the idea that the Government will ‘continue to review potential carbon pricing strategies for land use sectors, including the potential role for voluntary or compliance carbon markets’, is this suggesting carbon quotas?

Other policy proposals include, at least 35,000 hectares of peatlands in England being restored by 2025 rising to 280,000 hectares by 2050 and a new Biomass Strategy to be published in 2022 to see how best perennial energy crops and short-rotation forestry can be utilised to achieve net zero.

The full publication can be found at  https://www.gov.uk/government/publications/net-zero-strategy

Agricultural Wages Order Wales

The Welsh Government has launched a consultation into amendments to the proposed changes to the pay and conditions of agricultural workers.  The original proposed changes were consulted on in October 2020, but the Agricultural Advisory Panel for Wales has determined amendments should be made to these.  Futhermore, it has decided these amendments are sufficiently different to the ones originally consulted on so that a further consultation is required.  The amendments are to the wording of proposed grades in the new grading structure.  The new wording and the full consultation can be found via https://gov.wales/agricultural-wages-order-2021-2022-html   Responses to the consultation need to be submitted by 19th November 2021.

 

 

 

UK / New Zealand Trade Deal

The UK and New Zealand have announced an agreement in principle on a Free Trade Deal (FTA).  The deal, announced on the 20th October, is similar in nature to the UK-Australia trade deal announced back in June.  Like the Australian FTA, the UK-NZ FTA agreement-in-principle is subject to further negotiations on the legal text.  Whilst there is an eventual aspiration to fully liberalise agri-food trade, there are adjustment periods for several agri-food products which the UK deems to be sensitive.  These include;

  • Beef: access would be limited by tariff rate quota (TRQ) in the first 10 years. This would commence with access to a duty-free transitional quota of 12,000 tonnes in year 1, rising in equal instalments to 38,820 tonnes in year 10.  Any beef imports above the annual TRQ allowance would be subject to the UK Global Tariff (UKGT).  In the subsequent 5 years (year 11-15 after entry into force) a product-specific safeguard will be applied on any beef imports exceeding a further volume threshold rising in equal instalments to 60,000 tonnes.  All tariffs would be eliminated from year 16 onwards. 
  • Lamb: access would operate in a similar manner to beef although tariff-free TRQ access would be managed in a series of step-changes as opposed to annual incremental increases.  In years 1-5, an additional 35,000 tonnes per year could be imported tariff-free.  This, of course, is in addition to the 114,000 tonnes of the WTO TRQ that New Zealand has historically had available.  During years 5-15, the tariff-free access will increase to 50,000 tonnes per annum followed by unlimited access in year 16.  Importantly, trade via the FTA TRQ can only commence once utilisation of the WTO TRQ has reached 90%.  Any imports exceeding the FTA TRQ will be subject to the UKGT tariff rate. 
  • Dairy: similar structures will also operate for dairy products with unlimited access being phased in over 5 years.
    • Butter: initial duty-free TRQ of 7,000 tonnes rising to 15,000 tonnes in year 5.
    • Cheese: there will be an initial duty-free TRQ of 24,000 tonnes in year 1, increasing incrementally to 48,000 tonnes in year 5.
  • Fresh Apples: given the seasonal nature of production in both countries, tariffs on imports into the UK from 1st January to 31st July would be eliminated as soon as the deal comes into force.  Imports during August to December will be liberalised over 3 years.  During this time, there will be a tariff-free TRQ of 20,000 tonnes per year.  All fresh apple imports from NZ would then be tariff-free and quota-free from year 4 onwards. 

Elsewhere, the deal is ambitious with respect to trade facilitation and the minimising of customs procedures in particular.  There are ambitions to promote e-certification where possible.  Whilst Rules of Origin (RoO) for agri-food remain quite standard (i.e. a threshold of 15% of products traded can be non-originating from the country of origin (i.e. UK or NZ) in order to gain tariff-free access, the RoO for automotive vehicles (25% originating materials as opposed to the standard 55% threshold) will become much more liberalised.  This is seen as a big gain for the UK, given the extent of its integration with EU supply-chains.  The agreement also seeks to reduce barriers in the Sanitary and Phytosanitary (SPS) area.  Both countries are to recognise equivalence where both countries have similar standards. 

Overall, it is evident that the market access offered to NZ suppliers is significant and that agri-food has been used by UK negotiators as a means to open up access in other areas (e.g. automotive and services).  It can also be seen that the Australian FTA announced has become an important precedent for future trade deals.  Taking both the NZ and Australian trade deals together, significant competitive pressure will be exerted on domestic British producers and traditional suppliers from the EU, particularly Ireland.  Looking at beef for example, in year 1 both countries could theoretically export 47,000 tonnes of beef to the UK, rising to 148,820 tonnes in year 10.  By year 15, their tariff-free access will have reached 230,000 tonnes, significantly surpassing recent year’s imports from Ireland into GB (just over 200,0000 tonnes).

That said, it must be acknowledged that both Australia and NZ are heavily focused on the Asia-Pacific market in recent years and imports of NZ lamb have been nowhere near their TRQ allowances of late.  Things could of course change in the future, particularly given the geopolitical tensions between Australia and China.  The UK will be seen by Antipodean suppliers as a high value and dependable market.  British agriculture needs to prepare for this increased competitive pressure which is likely to become more pronounced as future trade deals (e.g. an updated FTA with Canada) are agreed.  More information on the UK-NZ FTA is available via: https://www.gov.uk/government/publications/uk-new-zealand-free-trade-agreement-negotiations-agreement-in-principle/uk-new-zealand-fta-negotiations-agreement-in-principle

New Trade and Agriculture Commission

On 21st October, the Government announced a new Trade and Agriculture Commission (TAC) as part of its response to the previous TAC’s report recommendations in March (click here for summary). It will be chaired by Lorand Bartels, an International Law Professor. The other members of the new TAC are;

  • Robert Anderson
  • Gracia Marin Duran
  • Catherine McBride
  • Jim Moseley
  • Cedric Porter
  • Meurig Raymond
  • Kate Rowell
  • Shanker Singham
  • Sir Lockwood Smith
  • Andrew Swift
  • Nick Von Westenholz

Three of the members (Shanker Singham, Sir Lockwood Smith and Nick Von Westenholz) sat on the previous TAC.  The new TAC’s role will be to inform Parliament about the implications of each Free Trade Agreement (FTA) on UK laws (i.e. environmental protection, animal welfare and food standards) and for the wider agri-food industry.  It will also provide input into a Government report to be provided to Parliament ahead of the ratification of each trade deal.

In addition to the new Commission, the Government also announced a new cohort of international ‘agri-food attachés’ who will work around the world to promote UK food and drink export opportunities and provide market intelligence and technical expertise.  It also announced that there will be a new Food and Drink Export Council to work in collaboration with industry and the devolved governments to promote exports from all parts of the UK.

The Government claims in its response that it reconfirms the maintenance of the UK’s high standards as a red line in all trade negotiations, particularly in terms of environmental protection, animal welfare and food standards.  Any deal we sign with other countries will include protections for the agriculture industry, and we have a range of tools to defend British farming against any unfair trading practices.

Whilst the Government might claim that the new TAC is strengthened, it took several months for its response to the first TAC’s report to be published.  In the meantime, two free trade agreements-in-principle have been reached with Australia and New Zealand.  This has raised questions about how much influence the new TAC will have in practice.  In any case, the true litmus test will be the extent to which the UK Government and Parliament takes on board the new TAC’s recommendations when ratifying FTAs with other countries.  Many in the industry are skeptical on this.  Further information on the Government’s response to the previous Trade and Agriculture Commission’s report is accessible via;

https://www.gov.uk/government/publications/government-response-to-the-final-trade-and-agriculture-commission-report/government-response-to-the-final-trade-and-agriculture-commission-report

Early Welsh BPS Payments

The Welsh Government paid the vast majority of farmers an advance of 70% on their 2021 BPS payments on the 15th October.  Around 97% of claimants received the advance.  The balancing payments will be sent from the 15th December.

SFI Pilot

Defra received 938 applications for the SFI Pilot.  Whilst this is down on the 2,000 farmers who expressed an interest, Defra is pleased with the overall numbers which apparently provide a good spread of farm types, sizes and locations.  Applications will be contacted over the next few weeks once their agreements are ‘live’ on the RPA portal.  They will then have 15 days to accept them or request amendments.  Agreements will start from the 1st November (apart from those with land coming out of Stewardship, which will be 1st January).  Payments are being done on a quarterly basis so the first agreements will see initial payments in February.

CO2 (and Fertiliser)

It is reported that the fertiliser producer, CF Industries, will continue to operate its plants in the UK after buyers of carbon dioxide (CO2) agreed to pay higher prices.  The deal operates until January.  This means that ammonium nitrate manufacture will continue for at least the next couple of months (ironically as a by-product of Co2 production).  Although this eases some of the concerns about availability, fertiliser prices are likely to be high given gas prices.

Agricultural R & D

Defra invited the first applications under a new agricultural Research and Development grant this month.  This is all part of the Government’s Farming Innovation Programme.  There will be three ‘funds’ under this heading;

  • Research and Development Partnerships Fund: the first to launch; more details on this given below
  • Farming Futures Research and Development Fund:  aiming to bring agri-food businesses and researchers together to address strategic challenges in he sector.  This will open early next year.
  • Projects to Accelerate Adoption Fund:  based on getting smaller projects that are nearer to commercialisation through to market.  Should be available later in 2022.

More details on the Research and Development Partnership Fund is available from a new website (https://farminginnovation.ukri.org/).  The project is being run in conjunction with UK Research and Innovation (UKRI).  It has four components that are summarised in the table below;

The grant is in the form of a competition so only the best projects will be funded.  There will be further rounds in the future.

Gene Editing Allowed

The Government will ease the rules on gene editing technology in England.  Defra’s response to a consultation exercise (see https://www.gov.uk/government/consultations/genetic-technologies-regulation) sets out how it plans to regulate the technology.

Firstly, this will involve amending legislation by the end of the year to simplify the rules on field-scale research trials (essentially, there will only be a requirement to notify Defra).  The rules on trials involving animals will not change.  Secondly, primary legislation will be enacted to change the definition of a Genetically Modified Organism (GMO).  Gene edited crops and animals will be taken out of the definition as the changes introduced by the technique are equivalent to those hat could have been achieved by conventional techniques.  Only organisms  where genes have been transferred between species (transgenic) will be deemed GMOs.  When this legislative change might happen is unknown.  When it occurs, it should simplify the process of getting gene edited products onto market.  However, Defra highlights that any product would still need to prove it was safe for human consumption and didn’t pose a threat to the environment.  Labelling rules for gene edited products would still need to be decided.

These plans only cover England.  The regulation of GM is a devolved matter and Scotland, Wales and N. Ireland will set their own rules.  There may be divergence between what each nation decides.

NI Protocol Proposals

Proposals to simplify the operation of the Northern Ireland Protocol would see checks on consumer goods arriving from Great Britain drop by an estimated 80% as well as a greater role for NI institutions in the operation of the Protocol.

The plans come from the European Commission and aim to address the difficulties that Northern Ireland has been experiencing as a result of the NI Protocol.  This is the arrangement put in place via the UK-EU Withdrawal Agreement to avert a hard border on the island of Ireland.  However, by keeping NI in the Single Market for goods it meant the introduction of customs and regulatory checks on products entering NI from GB.  This has angered Unionists who see a threat to the integrity of the UK and has also caused practical problems in the supply of goods – especially foodstuffs.

The Commission has published four ‘non-papers’ suggesting further flexibilities on key areas, as outlined below. These proposals are applicable to GB-NI trade only and don’t affect the significant trade friction on GB-EU trade. For agri-food, the proposals on SPS are the most important.

  • Food, Animal and Plant Health (Sanitary and Phytosanitary (SPS) regulations): proposes the following;
    1. ‘Simplified access’ (simplified certification and reduction of physical checks) for GB-NI movements of a significant range of retail goods (destined solely for sale to end consumers in NI retail shops).
      • Simplified certification: means that if a truck load of agri-food goods destined for an NI retail distribution centre contained 100 products subject to SPS regulations (but are not prohibited/restricted), just one simplified official certificate would be required stating that the goods meet EU standards, as opposed to the default of 100 health certificates. 
      • Reduced checks: documentary checks would remain compulsory and would be carried out remotely (electronically).  Identity and physical checks would need to be performed at Border Control Posts but could be reduced substantially with a focus on risk-based management principles.  The Commission claims that regulatory checks could reduce by approximately 80% although it is unclear how such an estimate was reached. 
      • Exemptions for ‘identity products’: such as Cumberland sausages and other chilled meats brought in from GB for final consumption in NI, provided such products remain aligned with the EU’s standards.
    2. Conditions for simplified access include;
      • Labelling: products packed for consumers need to be labelled accordingly and should be only permitted for sale in the UK.
      • Goods sold to other operators (e.g. farmers or food processors) would be excluded from these arrangements.
      • Origin: simplified access would only be applicable to goods originating in the UK as defined by the UK-EU Trade and Cooperation Agreement (TCA).
      • Monitoring: these facilitations would only be available to “authorised traders” and the EU would need to have access to NI databases for verification purposes and to monitor trade flows.
    3. Safeguards include a review clause as well as the following mechanisms;
      • Compliance verification mechanism: via audits and on-site inspections of traders by the EU Commission and Union representatives in NI.
      • Unilateral measures by the EU: to suspend or revoke facilitations in the case of the UK failing to react to or to remedy an identified problem.
      • Rapid reaction mechanism: to identified problems in relation to individual products or traders.
  • Customs: the EU proposals are aimed at dramatically reducing customs formalities and costs for goods deemed “not at risk of being subsequently moved into the (European) Union”.  These are essentially goods for final consumption in Northern Ireland, effectively creating an “express lane” upon arrival in NI for such goods.  Whilst further detail will be required on how these reduced formalities would operate in practice, the EU is again seeking access to ‘real-time’ data to ensure that the Single Market is protected. 
  • Medicines: focuses on ensuring undisrupted medical supplies from GB to NI for the benefit of patients in NI.  Whilst of limited relevance to agriculture, the EU is ready to continue discussions with the UK to help to ensure continuity of veterinary medicines supply to in Northern Ireland. 
  • Engagement with NI Stakeholders: sets out proposals for how NI stakeholders, including business groups and Assembly members, can play a more active role in how the Protocol is implemented to ensure greater transparency.  This would be done via the Joint Committee and Specialised Committee overseeing the Protocol’s implementation (e.g. on SPS rules) as well as via the EU-UK Parliamentary Partnership Assembly.  

Taken together, the Commission believes that these proposals represent a different model for implementing the NI Protocol, facilitating the highest degree of frictionless trade between Great Britain and Northern Ireland, whilst continuing to protect the Single Market.   The proposals do not propose any amendments to the role of the European Court of Justice (ECJ) which the EU sees as fundamental to the functioning of the Single Market and Northern Ireland’s unique position.  The UK Government is likely to take issue with this, as it sees the ECJ’s continued involvement in UK matters as a ‘red-line’.  However, one does have to question how important the ECJ’s role is in practical terms for most businesses and consumers?  In any case, there might be scope for an arrangement similar to the EU-Switzerland relationship where the ECJ has a more ‘arms length’ oversight of Swiss law. 

The EU Commission’s proposals represent a significant shift in position and whilst more detail is needed on the specifics, they provide a firm basis for substantive negotiations to address the key Protocol difficulties.  Attention now shifts towards how the UK Government will respond.  Initial indications are positive.  Further turbulence is expected in the coming weeks as both sides negotiate.  If implemented with careful consideration of both communities, the Protocol has the potential to offer Northern Ireland ‘the best of both worlds’ in terms of being an integral part of the UK and enjoying frictionless access to the EU Single Market for goods.  It could, therefore, be a major driver of economic growth across NI and within the agri-food sector in particular. 

Further detail on the EU Commission’s proposals is accessible via; https://ec.europa.eu/info/strategy/relations-non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-agreement/protocol-ireland-and-northern-ireland_en#october-2021-package