Category: Policy & Business

Mercosur Deal

The EU and the Mecosur group of South American Countries (Brazil, Argentina, Uruguay, and Paraguay) look close to concluding a trade deal.  Negotiations have been underway for two decades, but both sides state that ‘agreement has never been so close’.  Agriculture has, as always, been a stumbling block, especially imports to the EU of beef, sugar, biofuels and poultry.  However, most of the problems appear to have been resolved.  Any agreement would be one of the largest global free trade pacts, and a major boost for the rules-based international trading system at a time of increased protectionism and trade disputes (such as the US-China spat).  Any agreement at a political level will not translate quickly into effects on farm as, firstly, the deal will need to be ratified by EU institutions and, secondly, many of the provisions will be phased-in over a number of years.  With Brexit, the relevance of this to the UK may seem minimal.  However, it potentially makes Mercosur countries stronger competitors in the EU markets we will be looking to develop, and also puts Europe ahead of the UK in developing trade ties with this growing part of the world.  The UK is likely to prioritise replicating any deal the EU does with Mercosur.

Race for Next PM – The Final Two

At one stage, there were thirteen candidates seeking to become the next Prime Minister (and leader of the Conservative party) and, in some ways, the leadership race was akin to the Grand National with a varied range of runners and riders, some of whom had little chance of success.  In recent weeks, this has been whittled down to two candidates – Boris Johnson (previously mayor of London and Foreign Secretary) and Jeremy Hunt (Foreign Secretary).  This article examines the credentials of both, particularly from an agri-food perspective.

Boris Johnson

Whilst being the front-runner from the outset, the former mayor of London does not have much form when it comes to agri-food matters.  One of his few utterances related to complaints about the burden of EU regulations (e.g. on sheep disease) to protect consumers in advance of the referendum.  He also promised farmers that their subsidies would be preserved post-Brexit.

With regards to trade, at a January 2019 conference in Dublin, he was keen to emphasise that the UK still wants to do business with Ireland, noting to the audience that “we buy 78,000t of your cheese every year,” whilst also emphasising that he does not want to see a hard border in Ireland and that other solutions can be found.  Although Mr. Johnson’s preference is for the UK to leave the EU with a deal, he is of the view that it is possible to leave the EU on 31st October without a Deal, claiming that it would be possible to extend existing arrangements for as long as necessary to negotiate a free-trade agreement under GATT: Article XXIV (24).  Most trade policy experts dispute this claim, noting firstly that the application of this Article would require the EU’s agreement (highly unlikely in the event of a No Deal).  In addition, according to paragraph 5, sub-paragraph (c) of Article XXIV, it could only be applied if there was a “plan and schedule” for the formation of a free-trade area or customs union with the EU “within a reasonable length of time.”  By definition, none of this would be in place if there were to be No Deal on 31st October.  Thus leaving the UK Government in the same conundrum as that faced by the May administration.

Jeremy Hunt

Jeremy Hunt does not have much of a track-record with regards to agriculture either.  Before going into politics, Mr Hunt was an entrepreneur in technology marketing consultancy and in online publishing.  In Government, he has held roles as Health Secretary and Foreign Secretary.  Whilst not having much direct involvement in food and farming, he was the driving force behind a plan to halve childhood obesity by 2030 which he sees as a major cost burden to the NHS.  Although his website devotes some attention to the Agriculture Bill, post-Brexit environmental protections, and policy, as well as food safety and food labelling, it is very much a reiteration of the current Government line on these issues.

Whilst siding with Remain in the June 2016 referendum, Mr Hunt was quick to row-in behind the effort to leave the EU by securing a deal which would enable the UK to continue to trade closely with the EU whilst emphasising the Government’s commitments to guarantee workers’ rights, consumer protection and environmental protection.  He has mentioned that if there was no possibility of a Deal with the EU on 31st October that he would leave without a Deal if necessary.  However, he is also open to a short extension if a Deal is within sight.

Although Mr Hunt claims to have a good rapport with EU leaders such as Merkel and Macron, he did attract the ire of Donald Tusk in October 2018 for comparing the EU with the Soviet Union.  However, Mr Hunt’s track-record for controversy is much less than that of Mr Johnson and he is also seen as much less of a charismatic figure.  Based on the voting to date, it appears to be an uphill task for Mr Hunt to become the next Prime Minister.  His main hope might be for Boris Johnson to discredit himself with a major gaffe during the head-to-head contest over the next few weeks.  He may also need to create a “stop Boris” alliance within the party, potentially giving key roles to the likes of Michael Gove, Sajid Javid, Rory Stewart and Amber Rudd in a bid to appeal to all sections of the Conservative party to re-unite after the ructions of Brexit.  That said, it looks most likely that it will be Boris as PM after 22nd July. Whilst the Brexit journey has been eventful thus far, it looks set to go into overdrive in the Autumn.

For the farming sector, it is a case of wait-and-see what might happen.  Although Mr Gove is now out of the running to be PM, the possibility of a new Defra Secretary after a cabinet reshuffle has heightened.  A Hunt administration is likely to mean more of the same in terms of the direction of agricultural policy.  As for a Boris-led administration, who knows?  Whilst farming might be lower down his policy agenda, trade is likely to be centre-stage and this could have significant long-term implications for the competitiveness of UK agri-food. 

Brexit – North-South Cooperation Areas

On 20th June, details were released of an exercise which outlined the scale of the areas of north-south cooperation on the island of Ireland which could be affected by Brexit.  This exercise informed the UK-EU negotiations which led to the emergence of the Irish backstop.  It shows that there are 142 areas of cross-border cooperation encompassing healthcare, policing, the environment and, of course, agri-food.

Nearly 30 of these areas of cooperation (20%) have direct linkages to agriculture whilst a further 17 are linked to water, waste and the environment.  Areas relating to agriculture and food include;

  • Food safety: linked with the application of EU Regulation 178/2002 on General Food Law.
  • Trade: appears in various guises, whether related to North-South trade promotion (via InterTradeIreland) or the management of cross-border trade with respect to the joint management of customs, transit of goods, mutual recognition of authorised economic operators (AEOs) etc. It also includes collaboration on promoting dairy trade.
  • Common Agricultural Policy: discussion around policy choices and implementation issues which are faced by both jurisdictions on the island of Ireland. It does not involve policy formulation.
  • Rural Development: EU LEADER cooperation including the facilitation of application for funding for collaboration projects including landscape management.
  • Plant health and associated regulatory checks for quarantine pests: a working sub-group oversees cooperation on plant health, pesticide and bee health issues and joint actions delivered through a joint work programme. This area has linkages to external border controls (documentary checks, identity checks etc.) relating to external trade in these products.
  • Collaboration on regulatory checks on live animals and products of animal origin: cooperation encompasses information exchange on consignment movements and trade as well as discussions on topics of mutual interest including the registration of traders and the use of the Trade Control and Expert System (TRACES) which controls the import and export of live animals and animal products in the EU. This area is seen as crucial towards avoiding a hard border. 
  • Animal health, welfare and disease control: includes collaboration initiatives on Tuberculosis (TB) and Brucellosis, veterinary medicines regulation and trade as well as animal transport.
  • Equine industry collaboration: covering cross-border movements and strategy development for the Irish equine sector.
  • Academic partnerships in agri-food: encompasses a variety of partnerships to promote cross-border initiatives including access to research funding as well as programmes to provide a range of higher and further education courses in agriculture.
  • Farm Safety: initiatives to jointly manage issues across the island.

Overall, the information released by the EU Commission and DExEU reveal the extent to which north-south collaboration has evolved over the past 21 years since the Good Friday Agreement.  Tellingly, many of the 142 collaboration areas go well beyond the technical and fiscal aspects of customs and single market regulation and it is implied that technology alone will not be able to solve all of the challenges posed by the Irish backstop trilemma.  Undoubtedly, the continued operation of the Common Travel Area facilitating the free movement of people across the island of Ireland and the UK will be a crucial component of tackling the issue.  However, there are many unanswered questions in other areas, particularly the regulation of agri-food trade which the UK Government will need to address.

To this end, DExEU have also announced the establishment of a Technical Alternative Arrangements Advisory Group to explore alternatives to replace the Irish backstop by the end of 2020. The group will be co-chaired by the Brexit Secretary, Steve Barclay, and Jesse Norman (Financial Secretary to the Treasury) and includes several Northern Ireland-based members (e.g. Declan Billington, Michael Bell and Dr. Katy Hayward) who have been to the forefront of tackling Brexit challenges, particularly from an agri-food perspective. Having such Northern Irish involvement should hopefully lead to more realistic proposals on how to obviate the need for a Backstop in comparison with previous initiatives which have repeatedly come up short in terms of understanding and addressing the complexities involved.

Agri-Environment Payments

Defra has announced outstanding agri-environment payments will be made by the end of July.  Our article of 18th June explained a number of claimants had still not received their 2017 Environmental Stewardship payment and very few had received any payments for their 2018 claim, with a similar story for Countryside Stewardship agreement holders.  But Defra has now announced those who have not received a full payment for either 2017 or 2018 will receive a payment in July, funded by the Treasury whilst their claim is still being processed.  Once completed, the Treasury will be refunded back from the CAP budget.  The payment will be 100% of the estimated claim.

This situation is reported to affect about 22,500 eligible claimants, totaling £115m.  Pressure has been mounting on Defra and the RPA from the farming industry over delays in agri-environmental scheme payments and the announcement comes just as the NFU was instructing its solicitors to assist members in pursuing debt claims against the paying agency.

Net Zero UK Carbon

In one of her final acts as Prime Minister, Theresa May has set down an ambitious new climate change target for the UK.  The goal is for the country to produce  zero net carbon emissions by 2050.  The new, legally binding target, will be enacted through a Statutory Instrument amending the Climate Change Act – meaning the change does not require a vote in Parliament.  Currently, under the Climate Change Act, the UK is targeting an 80% reduction in emissions by 2050 against a 1990 baseline.  The announcement means the UK is the first country in the G7 group of industrialised nations to legislate for net zero emissions – although some countries have gone for dates earlier than 2050 – for example Norway (2030) and Finland (2035).

Reaching the target does not require the UK to cease all Greenhouse Gas (GHG) emissions – some sectors will be very hard to ‘decarbonise’ completely.  Net zero requires any residual emissions to be offset by taking carbon out of the atmosphere – for example by tree planting.  This leads on to farming’s role in meeting the zero target.  Currently, according to Defra, agricultural GHG emissions are 10% of total UK emissions (and a rough calculation is that 60% of these come from livestock in some form).  The NFU has set out a target that agriculture should have net zero emissions by 2040.  Whilst technology and efficiency will go some way, it seems unlikely that these targets can be met without a change (perhaps a substantial one) in peoples’ diets.  This is usually summarised as less meat and dairy products and more plant-based food (such a change on a global scale is set out in this report – https://eatforum.org/eat-lancet-commission/eat-lancet-commission-summary-report/).  Such a shift would have big implications for UK farming over the long-term.

Fertiliser Prices

Prices for nitrogen fertiliser have opened the new season around £30 per tonne higher than in 2018.  Ammonium nitrate for June/July is in the £250-£260 range.  Last year it was between £220 and £230 (in 2017, the figure was £180 – so a 40% increase in two years).  The high world price of fertiliser (especially urea) and an unfavourable exchange rate are being blamed for the increase.  These early-season prices tend to be the lowest of the year in order to generate business during a slack period for demand.  Prices often then climb through the autumn and into the spring.  However, this pattern is not guaranteed with the fertiliser market subject to volatility just like other commodity markets.

Environmental Scheme Payments Update

Environmental Stewardship (ES) and Countryside Stewardship (CS) payment delays continue.  Some claimants have still not received their 2017 ES payments.  The main reasons for the delays is due to the inspections carried out that year and also the large scale mapping update.  Many will recall the Proactive Land Change Detection (PLCD) exercise caused many problems and delays with Basic Payment claims in 2018, but it seems this is still having a knock-on-effect to ES payments.  Bridging payments were made last autumn for ES 2017 claims.  RPA has said it is on track to make final payments to 95% by 31st July 2019.  This will still leave in the region of 1,250 claimants having still not received their final 2017 payment.  The RPA is not giving any timescale for when this will be completed.

The ES computer system will not allow 2018 payments to be made until a claimant’s 2017 payment has been completed.  This, together with the fact that the majority of resources have been concentrated on completing 2017 payments, means very few 2018 payments have been made.  Under normal circumstances, those claiming 2018 ES revenue payments should have received an advanced payment (75%) last autumn and the final payment this spring.  To date there have not been any bridging payments made for outstanding 2018 payments and no timescale given by the RPA when it expects any payments to be made.

With regards to 2018 Country Stewardship payments, those who had not received an advance payment by 31st March 2019 (supposed to have been made in autumn 2018) should have received a bridging payment in early April.  Once again the RPA has said it is on track to have made 95% of 2018 CS final payments by 31st July 2019, this will leave just over 400 agreement holders with their final payment still outstanding.

2019 advance payments (75%) should be made this autumn, but with the CS claim submission process not working correctly, some had to make their claims on blank forms meaning additional manual inputting work for the RPA, which doesn’t bode well for payments being made on time.

One of the issues with agri-environmental scheme payments is they are based on income foregone, meaning the claimant will be out of pocket and for some this may be many thousands of pounds and can hit cashflow.  In many cases, anecdotal evidence shows payments are so far behind and so fragmented agreement holders have lost track of what they should receive, have received and what is still due.  In addition, inspection results take so long to come through that, if there is a problem, it can be very difficult to challenge because it may be over a year since the issue was found.

Wild Bird Licences

Following the sudden withdrawal of the General Licences for controlling wild birds back in April, Natural England (NE) and Defra have now issued new ones.  As from 14th June, six new General Licences are now available, NE issued three licences back in late April to:

But following a recent call for evidence, Defra has now issued 3 more general licences to :

The new Defra licences increase the number of bird species which can be shot compared to the NE ones and also the range of circumstances under which this is allowed.  Under GL36, the licence most  applicable to farmers, 10 species are now allowed to be shot, these include carrion crow, jackdaw, magpie, feral pigeon, rook, woodpigeon, Canada goose, Egyptian goose, monk parakeet and ring-necked parakeet.  This compares to 13 species under the original General Licences which were suddenly revoked.

Before using the new licence, ‘reasonable endeavours must have been made to achieve the purpose in question using lawful methods not covered by this licence’ and  ‘must continue to be made’.

If circumstances are not covered by the General Licence, individual licences will need to be applied for.  All details can be found on Defra’s website at https://www.gov.uk/government/collections/bird-licences

However, this does not seem to be the end of the saga, as Wild Justice (the campaign group responsible for the original withdrawal) has already started a fresh challenge to Natural England’s new licences (GL26, GL28 & GL31).  It is not happy with the way NE assesses whether all suitable non-lethal methods of control have been exhausted before shooting is allowed.  The campaign group says NE is still leaving it up to the individual to decide, whereas, by law, NE itself should be satisfied.  It is likely that a similar challenge will be also be launched against the new Defra licenses as the wording (‘reasonable endeavours’) is similar.

Labour Land Report

An independent report commissioned for the Labour Party makes some radical suggestions for policy on land use and ownership.  With George Monbiot as editor, the general thrust of the report can probably be guessed.  Whilst not adopted as official Labour Party policy, many of the ideas may find their way into government, should be party come to power.  The full report can be found at – https://landforthemany.uk/.  Some of the key recommendations include; greater transparency on who owns land, land transactions and support payments; an explicit goal to reduce house price inflation; restrictions on the private rented sector including security of tenure and caps on rent levels; reform of the tax regime to include a replacement for the Council Tax, a review of the tax exemptions on farmland and the abolition of Inheritance tax to be replaced by a lifetime gifts tax; reforms to the Planning regime including the possible extension of planning control to farming changes; a Community right-to-buy, a boost to County farms, and the creation of the right-to-roam.

Agriculture in the UK

Defra has published the latest version of its compendium of farming statistics – ‘Agriculture in the UK’.  The 2018 edition can be found via – https://www.gov.uk/government/collections/agriculture-in-the-united-kingdom