Following the EU Referendum in June 2016, we are left with a situation of uncertainty. Following the recent High Court ruling, even the UK Government, despite the vote, cannot confirm whether we will actually leave the European Union (EU).
Assuming the legal wranglings reach the same conclusion as the EU Referendum and “Article 50” is invoked, our thoughts turn to the changes to be faced by the agricultural and rural sector.
Some of the main concerns for the agricultural and rural sector are: Trade – access to the single market; Labour – the free movement of persons; and the Common Agricultural Policy (CAP). There are many spin offs from these areas, such as environmental legislation and competition too.
It is important to remember that we have been a member of the EU since 1973 and, since then, many rules and regulations have shaped our agricultural industry. Even the process of leaving the EU will take at least two years, with the UK Government indicating that we will not leave the EU until the summer of 2019. Given the longevity and plethora of rules and regulations, there is not expected to be any sudden change to the current measures. It is highly likely that the current rules and regulations will continue to apply once we leave the EU, and even long after that.
Impact on Trade
The majority of our export market is to the EU. Approximately 90% of the UK’s beef and lamb is exported to the EU. It is crucial for Scotland’s producers, therefore, that we are able to secure a mutually convenient economic agreement with the EU in order to limit any barriers to our exports into the EU market. At present, the EU has tariffs which are imposed on any imports from outwith the EU. If the UK falls within that ‘external category’ with tariffs applying in full, or is unable to negotiate an economically acceptable tariff, then UK producers may have to look to a new export market or adapt to remain competitive. Of course, we continue to import products from the EU so the bargaining power is not totally weighted in favour of the EU, and our exit from the EU provides an opportunity to create relationships with and explore alternative markets. Nevertheless, our export market is likely to change which will result in changes for producers.
In addition to the importance of trade and our relationship with our export markets, similar concerns exist surrounding the labour market. At present, approximately 20% of our agricultural workforce is European. The Scottish and UK Governments have provided reassurance that no European citizens will be required to leave the UK following the UK leaving the EU. However, the question remains as to what barriers will be imposed on European citizens entering the UK in the future. This is particularly important to the horticultural sector, which relies heavily on European seasonal workers.
Common Agricultural Policy
The CAP implements a system of agricultural subsidies and other programmes across the EU. The objectives of the CAP were market unity, community preference and financial solidarity. Each member state recognised the importance of the agricultural industry to their economy and the EU as a whole. Most people associate CAP with the subsidy system, currently the Basic Payment Scheme. The UK Government has guaranteed subsidy payments until 2019 and have also guaranteed all agri-environmental schemes entered into prior to Brexit. The Agricultural sector is heavily dependent on subsidy support. Leaving the EU provides an opportunity to sculpt a new system to replace the Basic Payment Scheme – one that is specific to each country of the UK and recognises the factors that are important to our Agricultural and Rural sector. With around 80% of land in Scotland being designated as Less Favoured Area (which is EU terminology) it is important that any new system recognises the diverse rural landscape in Scotland and provides accordingly. The system will also require to account for any barriers to trade, to allow the UK to remain competitive and sustain its export market. Any new system should take account of the role that farmers and land mangers play in providing food security, sustainability to rural communities and protection of the environment.
Environmental measures will not disappear overnight and indeed if the UK is to continue to export to the EU it is likely we will have to continue to maintain environmental and animal welfare standards to allow access to that market. The Scottish agricultural sector in particular has a reputation for quality through specific schemes such as QMS Assurance Schemes, “Red Tractor” and British Lion Mark which are internationally recognised. These quality assurance schemes will continue to promote access to international markets, which has become particularly important as preparations continue for the UK leaving the EU.
Whilst each particular sector will have specific concerns, this broad overview assesses the impact of Brexit to the Agricultural and Rural industry. Uncertainty potentially may stifle investment in the short term and many campaigners are pressing for clarity in order to prepare for Brexit. Now that the issues and focusses have been identified (by many) it is important to work to shape the future of the industry. There are no solutions offered as yet, and it is likely that there will remain many more questions than answers for some time.