Tag: Policy

CBAM and Fertiliser Prices

One of the elements of the Budget which initially flew under the radar was the introduction of the Carbon Border Adjustment Mechanism, or CBAM, from 2027. Perhaps one of the reasons it has gone somewhat unnoticed is that it is an older policy than some of the other announcements.

CBAM was being introduced under the Convservative government, with the policy aligned to the introduction of a similar scheme in the EU.  Nevertheless it has garnered attention with talk of charges of up to £50 per tonne for fertiliser once it is introduced.

The scheme is based upon the current UK emissions trading scheme (ETS), and is designed to stop emissions leaks, whereby those industries which are subject to the cap and trade system of the ETS are unable to compete against imports with the same emissions footprint but a lower cost of carbon emissions.

How much extra fertiliser (and other products such as steel and cement) will cost depends on a calculation set out by HM Treasury and detailed below.

From this calculation, it is clear that some of the liability will depend on the carbon price in the economy the product is being imported from.  For a significant proportion of UK agricultural inputs subject to the CBAM levy, the EU is the primary import origin.  The EU has established its own CBAM, due to start in 2026, it operates through a different system to that proposed for the UK, but would negate some or all of the carbon charge.

There are, however, other nations where there is no carbon costing mechanism in place, or where the cost is comparatively low.  A prime example would be for Egyptian Urea. Where this is the case, the cost of urea would go up following the introduction of the CBAM in 2027.

To calculate this liability we need to look at the emissions embodied in Urea.  The total emissions embodied, according to the EU CBAM mechanism, are 1.9 tonnes of CO2e per tonne of product.  Of this 0.12 tonnes are indirect emissions (electricity) and 1.78 tonnes the direct emissions.

Using a second Treasury calculation we can work out the effective UK carbon price. The calculation for this is set out below.

The current UK carbon price in the ETS is around £35 per tonne of CO2e.  This price has been as high as £80 per tonne in the past twelve months.  We would expect this value to rise over time.  Crucially the carbon price used in the CBAM calculation will be an average of the values of sold carbon in the UK ETS auction.  This means that the value of the CBAM rate is liable to be different each month.

The UK also has a Carbon Price Cupport (CPS) in place to support decarbonisation in fossil fuel electricity generation; this is presently set at £18 per tonne.  We would expect this to fall as the electricity industry decarbonizes.

Finally, the fertiliser industry benefits from an 80% ‘free allocation’ adjustment.  The free allocation is an allowance for UK industry in support domestic production where the UK ETS may result in carbon leakage.

Taking all of these figures into account, then the UK CBAM rate for urea would be calculated as £9.91 per tonne of CO2e.  The true CBAM rate will not be known until it is published by UK government prior to the introduction of the CBAM.  Due to the complexity of such systems a single CBAM rate will apply to all fertiliser and ammonia imports.  However, as one of the more emission-intense products Urea is a useful proxy at this moment in time.

Applying the level of embodied emissions to the UK CBAM rate we can estimate the UK CBAM liability on Urea – the additional cost to the product, due to the CBAM – would be £18.83 per tonne of Urea imported.  This is around 5% of the current price of Urea.

Over time we would expect the carbon price to rise, the Office for Budgetary Responsibility currently forecast the carbon price at £44.50 per tonne from 2025 to 2029.  We would also expect the value of CPS to decline as will the level of the free allowance.  This would increase the UK CBAM liability.  The rate of change for these elements is unknown.  Using the OBR forecasted carbon cost the UK CBAM liability (with the present CPS and free allowances) would be £23.34 per tonne of Urea.

If all parts of the calculation move as expected, the cost of the CBAM liability would increase over time.  However, some of the headline fertiliser price increases being quoted look high to us.  We should also remember that a significant proportion of fertiliser is imported from the EU.  If there is a reliable reference value for the carbon emissions in the exporting nation, this can be used to offset the UK CBAM rate.  Therefore, a lot of imported fertilisers will have little or no CBAM levied on them. 

We must also consider behaviour change in this analysis.  Over the period of time that carbon prices increase, and so the price of fertiliser increases, we are likely to see a greater focus on nitrogen use efficiency or a shift towards less emission intense fertiliser.

 

Chief Brexit Negotiator Resigns

On 18th December, Lord Frost, the UK Government’s Chief Brexit Negotiator, and co-architect of both the Trade and Cooperation Agreement (TCA) with the EU and the Northern Ireland (NI) Protocol, resigned with immediate effect.  In his resignation letter, he cited issues with the Government’s direction of travel on Covid policy and higher taxation as key reasons for his departure. However, many suspect that frustrations with how negotiations with the EU are progressing on the NI Protocol were also influential.  In recent weeks, some progress had been reported on medicines and the UK’s stance on the European Court of Justice had softened but negotiations will continue into 2022 with agri-food, particularly Sanitary and Phytosanitary (SPS) regulation continuing to be a key stumbling block.

Whilst some see Lord Frost’s resignation as a blow to the Prime Minister, others believe that the possibility of a deal on the NI Protocol in early 2022 has increased.  Particularly with the Foreign Secretary, Liz Truss, now taking on the responsibility of overseeing negotiations with the EU.  Ms Truss is popular with Conservative party grassroots and is viewed as more of a pragmatist than Lord Frost.  Her experience as Defra Secretary (2014-2016) and International Trade Secretary (2019-2021) should also be helpful in addressing remaining SPS and customs issues.  She will be deputised by Chris Heaton-Harris MP who has become Minister of State for Europe who will support the Foreign Secretary on EU Exit and NI Protocol issues.

Trade & Agriculture Commission Report

The Trade and Agriculture Commission (TAC), the body set up to advise the Government on future trade deals, has published its ‘final’ report on 2nd March.  However, as the TAC will soon move onto a statutory footing, giving it a greater role in evaluating future Free Trade Agreements (FTAs), we will be hearing more from this body in the future.  This report, therefore, is likely to be the first of several.

The report itself is a well-polished document and sets out how much UK consumers are currently spending on food and drink (£46.60 per person per week in 2018/19), the volume of food consumed by food group, and the origins of food being consumed (55% of food consumed is grown and produced in the UK).  It also outlines the implications of leaving the EU, highlighting the disruption caused to devolved regions from friction on UK-EU and GB to NI trade as well as the changes in regulatory authority from the European Food Safety Agency to UK agencies.  It urges that these issues need to be resolved quickly.

The TAC proposes an overarching vision for UK agri-food which centres on having an ambitious trade policy that ‘contributes to a global farming and food system that is fair and trusted by all its participants, including farmers, businesses and citizens, from source to consumption’.  It also calls for food to be ‘safe, healthy, affordable, produced in a way which does not harm the planet, respects the dignity of animals and provides proper reward for those involved.’

Linked with this, the TAC suggests six guiding principles to develop a value-generating and values-driven UK trade policy. These are;

  • Promote the liberalisation of trade, to positively influence innovation and productivity, and price and choice for consumers
  • Prioritise a thriving domestic agri-food sector supported by complementary domestic and trade policies
  • Ensure that agri-food imports meet relevant UK and international standards on food safety and biosecurity
  • Match tariff-free market access to relevant climate, environment, animal welfare and ethical standards, remedying competition issues arising where permitted imports do not meet relevant UK and international standards
  • Lead change, where needed, to the international framework of rules on trade and relevant standards, to address the global challenges of climate change and environmental degradation
  • Support developing countries in accessing the full benefits of the global trading system.

The guiding principles reveal the balancing act that the UK is trying to achieve by liberalising trade on the one hand but safeguarding standards on the other.  The ambition of matching tariff-free market access over time provided standards can reach relevant UK/international requirements is arguably the most complex.  It suggests some form of ‘nuanced’ tariff system which could potentially add (yet) another layer of bureaucracy to an agri-food sector already struggling to implement the requirements of the UK-EU Trade and Cooperation Agreement (TCA).  Much will depend on how these high-level principles are implemented in practice as they are open to differing interpretations. 

The report sets-out 22 recommendations for the UK Government. These can be grouped into five areas;

  1. Develop a bold, ambitious agri-food trade strategy: aligned to a broader UK Food Strategy that would seek to provide a unifying logic and direction for all UK devolved regions, Government departments and industry stakeholders . It would also strike and appropriate balance between liberalising trade and safeguarding key standards. This is certainly something that the UK should aspire to. However, it is especially challenging given that the interests of UK Devolved regions looks set to diverge further as each implements its own agricultural policy and Northern Ireland remains subject to EU Single Market rules for agri-food goods.
  2. Provide international leadership on key issues such as climate change: the opportunities arising from hosting the G7 summit and COP26 this year should be grasped to show the UK’s leadership credentials not just on climate change but on animal welfare, labour rights, ethical trading and combatting anti-microbial resistance. One of the UK’s key objectives from COP26 should be to develop a more robust methodology to accurate net emissions from each farming sector (i.e. gross emissions less on-farm sequestration). 
  3. Continue to strengthen the UK’s approach to negotiating and scrutinising trade agreements: lessons from the TCA should be applied elsewhere.  Future trade deals need comprehensive impact assessments considering both UK-wide and devolved issues. These should also consider qualitative impacts where quantitative measures are lacking. Presumably, the TAC would play a key role here once its Terms of Reference have been agreed. 
  4. Enhance export promotion, market access and marketing: the TAC highlights the UK’s food ‘offer’ being one of quality, traceability, heritage, safety and high environmental and welfare standards.  It urges that opportunities to grow exports beyond the negotiation of trade agreement need to be embraced energetically by the UK Government.  Arguably, the UK is behind the likes of New Zealand, Netherlands and Ireland in this regard and such initiatives need to be embraced at the highest levels in Government if they are to make an impact in key markets such as China.  The TAC rightly highlights the potential offered by ‘heritage’.  Globally, consumers are increasingly seeking ‘experiences’ and authentic British produce is highly-regarded in many regions.  In this era of Covid-curtailed travel, food is a key means to experience another culture. The strong country associations of iconic products such as Stilton, Welsh lamb and Scotch beef have the potential to be a major source of competitive advantage.
  5. Align trade, aid and climate change policies relating to agri-food: so that these work together to strengthen UK relationships with developing countries over time, to diversify Britain’s food supply, support its food security goals and overseas economic development. Aligning these policies is worthwhile, but arguably this policy alignment should be wider and include domestic agricultural policy which was not given much emphasis by the TAC but is a crucial part of the policy framework.

The key difficulty for the TAC was that it was set-up in July. By then, negotiations with the US, New Zealand and Australia were already underway.  Recently, the TAC Chairman admitted that he had no visibility of how those negotiations are going.  This is a concern because what has already been negotiated with these countries, particularly the US, might contradict what the TAC is recommending.  The true litmus test will be the extent to which the UK Government and Parliament takes on board the TAC’s recommendations when concluding and ratifying FTAs with other countries.  Time will tell as to how much influence the TAC ultimately has in practice.  The report is accessible via:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/969045/Trade-and-Agriculture-Commission-final-report.pdf

Brexit – The Tumult Continues

This past month has been one of, if not the most, tumultuous of the entire Brexit process.  It started off on a fairly promising note with EU leaders (most notably the German Chancellor) giving the UK Government 30 days to put forward its proposals on an alternative to the Backstop.  However, the mood has become more downbeat since then with the publication of the Government’s plans for a No-Deal Brexit (Operation Yellowhammer – see previous article), the prorogation of Parliament which the UK Supreme Court has judged to be unlawful, and the disclosure of the UK Government’s alternative Backstop arrangements (delivered by a ‘non-paper’) which the EU deemed to have failed each of Brussels’ three key criteria.  All the while, the Government’s preparations for a No-Deal continue apace with some notable updates of relevance to agri-food trade.

Prorogation of Parliament ‘Unlawful’

This was the unanimous verdict of eleven Supreme Court judges delivered on 24th September.  The prorogation has been rendered void and Parliament resumed on 25th September.  This is another major setback for the Prime Minister as the Government no longer has a majority in the House of Commons (HoC) as it removed the whip from 21 MPs for voting against the Government.  The PM also lost his bid to have a mid-October election and there appears to be very little appetite for MPs to agree on any long-term course of action on Brexit.   A summary of the current state-of-play is;

  1. Brexit could still be achieved by getting a deal with the EU ratified by Parliament: despite the embarrassment arising from the Supreme Court ruling, Brexit is still achievable if the UK Government can achieve a deal with the EU at the EU Council meeting on 17-18th October, and thereafter, getting a majority of MPs to back that deal.
  2. If a deal with the EU is not achievable, Article 50 would be extended again:  the ‘Benn Act’ (officially titled the European Union (Withdrawal) (No. 2) Act 2019) passed by MPs a few weeks back would result in another mandatory extension of Article 50, if a Brexit Deal cannot be reached during the EU Council.  Theoretically, the PM could choose to ignore the Benn Act.  Such a course of action would likely result in another Supreme Court case, with an unfavourable ruling again likely.  In such a scenario, it is possible that the Supreme Court could instruct another official to sign an Article 50 extension letter if the PM refused to do so.
  3. Agriculture Bill reinstated: the Agriculture Bill is currently at the Report stage ahead of a third reading at the House of Commons.  With the prorogation of Parliament the Bill had ‘fallen’  – i.e. as it had not been passed by the end of the Parliament, it would have to be re-presented from scratch in the next Parliament.  But, now the prorogation has been ruled illegal, the Bill has risen from the dead,  As Brexit is likely to take up the vast proportion of Parliamentary time for the foreseeable future, it is likely that further progress on this Bill is still several weeks, if not months, away.

In this volatile environment, a General Election is becoming more likely, potentially in November if another Article 50 extension takes effect.  However, there is also increasing talk of a Government of National Unity, led by one of the parental figures in the HoC (Harriet Harman or Ken Clarke).  This move would require approval from Labour in a no confidence motion.  However, its leadership would prefer that an alternative Government be led by Jeremy Corbyn.  He would then seek to negotiate an alternative Brexit Deal with the EU and put that before the British people in a confirmatory referendum (with Remain the other option).  So all of this effectively means that after three years, the three broad Brexit options (Deal, No-Deal, No Brexit) all remain in play, but it does make a No-Deal at the end of October less likely.  Little wonder then that many think the Brexit process is going round in circles.

UK’s Alternative Backstop Proposals Not Legally Operable

Having been set the 30-day challenge by Angela Merkel a few weeks back to come up with a viable alternative to the Backstop, the UK’s proposals eventually emerged via a ‘non-paper’ (an unofficial document reflecting the ideas that the UK has put forward rather than concrete proposals representing a definitive UK Government view).  These were deemed by the EU to fall short on all of its three key tests on viability and were not legally operable. These key tests (objectives of the Backstop) are;

  1. Having no hard border on the island of Ireland
  2. Protecting the all-island economy
  3. Preserving North-South cooperation

The UK proposed an all-island Sanitary and Phytosanitary (SPS) zone for agri-food goods; thus expanding the regulatory frontier that already exists for live animals between Northern Ireland and Britain.  It would have only been applicable to some areas (e.g. animal health and food safety checks) and not others (e.g. labelling rules on ingredients, allergens and additives etc.).  Furthermore, industrial goods and customs procedures relating to Northern Ireland would remain within UK rules, and not the EU regulatory regime as proposed by the original (NI-only) Backstop.  From an EU perspective, this would potentially mean a gaping hole in the integrity of the Single Market as false declarations could potentially be made on what a consignment of goods contains, thus meaning that ineligible products would be smuggled into the EU market.  In such a context, the imposition of a hard-border between Northern Ireland and Ireland would eventually become necessary, as alluded to by EU Commission President Jean-Claude Juncker recently.

The UK proposals also referred once again to (frequently untried and therefore untrusted) technological solutions and trusted trader schemes which have already been rejected several times by the EU.  As we’ve argued previously, that is not to say that technology does not have a long-term role to play – it does – but given current capabilities, it cannot replace human intervention in undertaking physical checks to verify the eligibility of meat products and the like.  In the meantime, some form of insurance mechanism (Backstop) is required. 

In the coming weeks, it is likely that there will be an increased focus on finding a NI-only (or unique set of arrangements for NI’s circumstances) route to overcome the impasse.  As a minimum, this would have to encompass harmonisation with EU regulations on the entirety of agri-food-related regulations within Northern Ireland (and applicable to goods entering NI) whilst ensuring that the province’s constitutional status within the UK is not affected in any way.  Recently, the prospect of giving the Stormont Executive (currently suspended) a role in the acceptance of such regulations was mooted; however, the EU does not want NI to have a veto on the imposition of rules across the Single Market.  It is prepared to countenance a consultative role, similar to that offered to Norway and Switzerland in some areas. Perhaps one way to address this would be to give the NI Executive some voting rights in a qualified majority voting context, but no veto?  However, the extent to which that would be legally operable is questionable. 

More Brexit Preparation Notices Published

There has been a continued ramping-up of efforts by the Government to help businesses to prepare for post-Brexit trade with the EU.  Some of the key notices published recently are ;

Undoubtedly, the Government’s preparations for Brexit are accelerating but significant gaps remain, particularly when it comes to issues associated with Northern Ireland.  Furthermore, publishing guidance is one thing, ensuring that businesses and relevant competent authorities are operationally ready for the changes imposed is another matter entirely.  

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 and Customs

There has been much recent debate about the UK Government’s proposals on its future customs relationship with the EU.  This has centred on two key options put forward in August 2017 – a Customs Partnership and a Customs Arrangement (known as maximum facilitation (‘Max Fac’).  Both of these concepts, have been rejected, in their previous form, by the EU.  A third customs option also appears to have emerged, but it too is facing opposition from the EU.

Despite this, the Prime Minister recently established two Cabinet sub-groups to further examine each option put forward in August.  One group which includes Michael Gove (DEFRA Secretary), Liam Fox (International Trade) and David Lidington (Cabinet Office Minister) are considering the Customs Partnership.  Meanwhile, Greg Clark (Business Secretary), David Davis (DEXEU Secretary) and Karen Bradley (Northern Ireland Secretary) are examining Max Fac.  These options are generating intense debate within the Conservative party with the Brexiteers favouring Max Fac whilst the Europhiles are leaning towards the Customs Partnership. Both options are briefly summarised below;

  • Customs Partnership: involves the UK collecting tariffs on the EU’s behalf for goods transiting through the UK intended for use in countries within the EU Customs Union.  The UK would also apply its own tariffs for goods intended for use in the UK market.  At the border, importers would pay whichever tariff was highest and could subsequently reclaim the difference based on any proportion of the consignment was used in the lower tariff territory.  It is claimed that this approach would obviate the need for customs processes between the UK and the EU, including between Northern Ireland and Ireland.  Such a system would require an elaborate tracking system to check whether goods were being tariffed appropriately and a ‘robust enforcement mechanism’.  The EU has dismissed it as ‘magical thinking’.  Furthermore, whilst a customs border might be obviated there would still need to be border controls to check product standards (especially in the food sector) unless the UK continued to align all of its regulations with the EU. 
  • Max Fac: this would involves creating a border between the UK and the EU, but seeks to make this border ‘as frictionless as possible’ through the application of technology and recognition of ‘trusted traders’ amongst other mechanisms.  It would also allow smaller traders on the Irish border to trade as they currently do with no new restrictions.  This option has been criticised by many in industry, particularly in Northern Ireland, where some believe that it would create a ‘smugglers’ charter’ and would undermine the integrity of existing food safety systems.  It is also not clear that the technology exists, or that the Government could implemented it quickly enough, to make this option work (see below).

HMRC Weighs Into the Debate

The HMRC estimates that Max Fac would cost businesses between £17-20 billion per year to implement, primarily due to the increased costs associated with customs declarations.  This equates to about twice the UK’s annual net contribution to the EU budget.  Brexiteers such as John Redwood have rubbished these estimates claiming that they are highly speculative and claim that trade is already taking place with non-EU countries with costs nowhere near this amount.  Nevertheless, all credible analysis indicates that dealing with customs, even under a free-trade agreement, does create additional costs.

Jon Thompson (Head of HMRC) also said that the Customs Partnership would have a negligible cost to business over time – a view which will play into the hands of the PM who is said to favour a Customs Partnership-type model.  Mr. Thompson also stated that neither model would be ready to implement by 2021 and suggested that a lead-in time of between three to five years would be required to establish the systems needed, once it became clear what these would consist of.

A Third Customs Option?

In recent days, a third option appears to have emerged which, it was hoped, would help to overcome the deadlock in the Brexit negotiations.  This proposal, which some think of as a Hybrid Customs Partnership plan, was tabled by the UK this week in Brussels.  It is understood that it would also represent a backstop which would align the UK as a whole, not just Northern Ireland, with the rules of the Single Market and Customs Union for a time-limited period only (but longer than the ‘transition period’ already agreed).  This time-limited period would then give the UK the scope it needed to develop the systems required for its Customs Partnership model.

This too appears to have been rejected by the EU, although there are signs, that it has not been completely ruled-out.  The Brussels view is that the backstop envisaged in Paragraph 49 for the December Joint Report would apply to Northern Ireland only, given the wording in Paragraph 46 which states that the “commitments and principles outlined in this Joint Report will not pre-determine the outcome of wider discussions on the future relationship between the European Union and the United Kingdom, and are, as necessary, specific to the unique circumstances on the island of Ireland.”  The UK on the other hand has taken a broader view, claiming that the wording of Paragraph 49 states that “the United Kingdom will maintain full alignment…”, not Northern Ireland. Therefore, the backstop could apply to the UK as a whole.

It is understandable that the UK has taken this more expansive view and there are attractions to this perspective for several EU Member States, particularly Ireland whose 2016 trade with the UK is valued at €66 billion. This includes €32 billion in goods, of which nearly €9 billion is in agri-food, and €34 billion in services. Other countries, such as the Netherlands and Denmark, which rely heavily on trade with the UK, particularly for agricultural products are also believed to see the attractions of this proposal.  That said, EU Member States are reluctant to break ranks on this issue, as it is seen as another attempt by the UK at cherry-picking.

This impasse looks set to drag on to the European Council in June, but as Michel Barnier has reminded us on many occasions, time really is ticking, and there are now just a few months left to get all of this agreed.  A time-limited, interim arrangement beyond the current transition period is the only realistic way to achieve this whilst facilitating a ‘smooth and orderly Brexit’ which the PM called for back in January 2017.  Whatever form the eventual relationship takes, no matter what its name is, it is crucial that the time is taken to get it right.  For agriculture, this is especially critical.  In this regard, the five-year ‘agricultural transition’ envisaged in DEFRA’s recent consultation might be a prudent model to apply elsewhere as well.

UK Industrial Strategy: Food & Farming

New residential Government has launched an industrial strategy for the UK economy.  The White Paper entitled ‘Industrial Strategy – Building a Britain for the Future’ sets out a long-term plan to boost the productivity and earning power of the people in the UK.  The 255 page report focuses on ‘5 foundations of productivity’;

  • Ideas – the worlds most innovative economy
  • People – good jobs and greater earning power for all
  • Infrastructure – a major upgrade to the UK’s infrastructure
  • Business Environment – the best place to start and grow a business
  • Places  – prosperous communities across the UK

The report includes a number of references to agriculture stating ‘we will put the UK at the forefront of the global move to high-efficiency agriculture’.  It includes a new ‘ Transforming food production – from farm to fork’ programme which aims to put the UK at the forefront of advanced sustainable agriculture.  The White Paper also reports that over the coming years, the CAP will be replaced with incentives to grow the markets for  ‘innovative technologies and techniques’.

The report which was launched on 27th November appears to be full of nice ideals and lofty ambitions but a bit short on actual plans.  And a lot of the policies that are in it seem to be stuff that has already been announced. The full paper can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/662508/industrial-strategy-white-paper.pdf

New Environmental Body

Michael Gove, Environmental Secretary, has announced plans to consult on a new independent body for environmental standards.  The new body will advise Government as well as having the powers to challenge and hold the Government to account after we leave the European Union.  Currently environmental decisions in the UK are overseen by the European Commission.  These are based on a number of ‘Environmental Principles’ such as polluter pays and sustainable development.  The consultation will also look into the content of a new policy statement to ensure these environmental principles underpin future policy making in the UK.  The consultation on the ‘scope and powers’ of the independent body will be launched early next year.