For many farmers in the United Kingdom, the aftermath of succession from the European Union could be nicknamed Nexit.
The decision to leave the 40-year-old relationship in 2019 has left many people in agriculture swimming in a sea of uncertainty as everything from farmer payments, labour availability, regulations, tariffs and border controls is up for review. No one is sure what happens next.
At this point, the U.K. government decided to “lift and shift” and transferred all the EU legislation to U.K. books. Regulations and laws will be reviewed over time.
“It is more complicated than people think it is,” said Peter Hardwick of the Agriculture and Horticulture Development Board (AHDB), an umbrella organization for British commodity groups supported with farmer levies.
Head of international market development, Hardwick and others know past trade deals take years to settle before goods start to flow freely. Part of the frustration is a lack of clarity about the end goals.
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Conversely, the EU has given the impression it does not want to concede too much for fear of encouraging other members in the 28 country bloc to leave.
Many people blame the initial dispute over immigration policy where the U.K. had to accept more migrants than it wanted as a member of the European Union.
Under a new agreement Britain has indicated it wants to continue with the four freedoms of movement for goods, services, capital and labour. The EU responded if Britain wants free movement of goods it must accept free movement of people as well.
Ultimately the corporate world may settle disagreements as the big retailers challenge governments about guarantees of consistent supply, food standards and keeping food prices reasonable.
“The one thing government will not want as a result of Brexit is higher food prices which is slightly different from protecting agriculture. It may actually be the opposite,” said Jim Davies, head of the marketing and communications arm of AHDB.
The British government has promised an agriculture policy next year tailored to its own needs rather than requiring balance and approval from the other members of the EU.
But frustration is growing within the farming community with what it sees as inaction from the department for environment, food and rural affairs.
“We can ask questions of (Department for Food and Rural Affairs), which you would imagine they should be able to answer. It is quite a frightening situation,” said Rob Burns, head of crop exports for AHDB.
“At the moment we have trade agreements through Europe that covers 300 commodities for import and export, tariff free. No one knows what is going to happen when that fails,” said Burns.
“The politicians are in such a mess. They will probably just take on board everything they possibly can and keep it as it is. It is much simpler, not only dealing with Europe but with other countries,” he said.
The U.K. and Ireland are probably the closest trading partners within the EU and both sides have a long list of questions about what happens next.
Since the Brexit vote, the pound sterling has weakened 15 percent against the euro. It has made U.K. exports more competitive, but created tension for Ireland because it uses the euro.
“Brexit is already having a negative impact on the value of agriculture and food products and our exports to the U.K., principally as a result of depreciation of sterling,” said Paul Hogan, European Commissioner for agriculture and rural development at the Agricultural Science Association 75th conference at NAAS,
Ireland. An Irishman working for the EU, he is opposed to the U.K. decision.
Businessperson Niall Browne is also frustrated. He is chief executive of Dunbia, an Irish meat processing firm that processes nearly one million cattle and 2.6 million sheep in Ireland and the U.K.
“We know we are suffering major currency volatility but apart from that, we are in an information vacuum, which is being fueled by unnecessary and unhelpful speculation. We do not have the detail to make business decisions in relation to Brexit,” he said.
“Any disruptions to the current supply chain have very negative consequences for farmers, for consumers, business and indeed for the wider EU community,” he said.
Many U.K. farmers have not paid attention in the past but may have to learn to watch currencies as well.
Their farm support payments are in euros and it may get their attention if they receive less money, said Gavin Dick of the AHBD cereals and oilseeds division.
“There are individuals who pay a lot of attention to it and use it to their advantage to sell by, but for the majority of farmers it does not come across their horizon,” said Dick.
Immigration policy may have ultimately been a major cause of the vote to leave the EU, but the farm sector needs thousands of workers for horticulture, dairy, pork and processing. Most of those workers come from Eastern Europe and there are signs fewer are willing to come to the U.K. under a cloud of uncertainty.
“This is a unique situation,” said Hardwick.
“The argument the EU makes is people came here in good faith and their rights should continue to be guaranteed under the legal framework under which they arrived here,” said Peter Hardwick.
Soft fruits are an important crop in Scotland and England where strawberries, raspberries, black currants and blueberries are grown for the local fresh market as well as processing.
Labour shortages have cast a shadow over commercial growers’ prospects. Some growers had to abandon some of last year’s harvest because of the labour shortage.
“The bulk of the specialist growers would typically bring in over 300 migrant workers at the peak times. Out of that 50 or 60 would work here year round,” said Dick.
Abattoirs have a unique problem because many meat inspectors are Spanish and once the U.K. leaves the EU, they will have to train their own staff. Abattoirs also employ large numbers of foreign workers, mostly from Poland.
Once the divorce is complete, the U.K. will have its own standing in the World Trade Organization. It needs to set its own tariff schedule and must notify the WTO. It would likely follow the EU tariffs already in place.
The agriculture departments of England, Wales, Scotland and Northern Ireland commissioned a study on post-Brexit trade alternatives. Conducted by the University of Missouri, three different scenarios were modelled and concluded changes in trade flows would have important consequences on U.K. commodity prices, production and domestic agriculture polices.
The study examined the consequences of a free trade deal, no deal with the EU and trade liberalization with the world.
It concluded the best the U.K. could hope for is a free trade agreement with the EU. It would retain tariff and quota-free access to the continent.
If the U.K. does not manage a free trade agreement with the EU by the time it leaves, Europe must apply the same tariff on U.K. goods as it does to all other WTO members. This could be punishing for agriculture because the duties for many products is high, depending on the commodity.
The University of Missouri predicts serious consequences for the livestock sector with higher consumer prices and the opportunity to bring in cheaper products from low-cost producing countries.
For example, beef and cheese prices would go up because the U.K. is a net importer, while a commodity like barley would go down because it is a net exporter.
If tariffs are in place, a physical customs border must be established between the U.K. and the EU, including a barrier for inspections between Northern Ireland and the Republic of Ireland.
British Prime Minister Theresa May said she wants a frictionless customs arrangement and a free-trade deal with the EU to prevent this.
Deciding whether there should be a solid border between the Republic of Ireland and Northern Ireland is a contentious issue. There are no border controls at present.
“If there was a proper, well-thought-out trade deal at the end of this, possibly there would be no need for any kind of a border issue but a lot of this depends on what the U.K. decides it really, really wants,” said Irish farmer Angus Woods.
Another problem is the lack of border controls and infrastructure between the U.K. and EU because there are no physical customs inspection points. These would need to be built at key crossings.
“Today through the port of Dover and the Channel tunnel, in a year, four million vehicles travel through that corridor. There is a vehicle every eight seconds and that is only possible because vehicles don’t stop. There is no need and nor is there any provision for a border post to be there,” said Hardwick.
No one wants lengthy vehicle lineups at inspection points. If an eight-second stop morphed into a minute, there would traffic jams for miles.
The British government published a paper about customs arrangements that may not be practical but they realize there are technical ways like electronic tracking and payment of tariffs at the point of dispatch to clear customs.
The EU prides its high animal welfare and environmental standards so it is likely the U.K. will continue to follow those in order to continue trading on an equal footing.
Many of the standards are not necessarily coming from the EU but from retailers, who have made specific demands of suppliers. U.K. retailers will not reverse those standards.
However, regulations lifted from the EU must be rewritten for the Britain’s purposes.
Some aspects are straightforward and anything called a directive is already transposed into U.K. law.
There are two types of regulations.
Operable regulations do not rely on European regulatory authority to operate and monitor it. Regulations like the domestic auditing of plants are an example.
Inoperable regulations like the Veterinary Medicines Directorate were under the EU system that controls the approval of veterinary medicines across the union. There is no U.K. veterinary medicine directorate so one must be created or agreed upon during a certain period of time so it can continue operating under the European equivalent agency.
As members of the EU, British farmers are entitled to farm subsidies and follow European farm policy crafted in Brussels through the Common Agriculture Policy.
“If we are not members of Europe anymore we won’t have access to the Common Agriculture Policy and then what happens?” said Phil Bicknell with the Agriculture and Horticulture Development Board.
Beef, sheep and cereals are dominant industries but analysis shows few make a profit on their own, so farmers depend on subsidies and diversification to survive.
“The positive from an U.K. perspective is we have got an opportunity with Brexit to develop a farm policy that works and fits,” said Bicknell.
AHDB has researched agriculture policy frameworks from other parts of the world like Canada, United States, Australia and New Zealand to craft a model that works for British farmers working a diverse landscape at different levels of sophistication and technology.
“Government policy always seems to be a step behind what is needed. The last common agriculture policy reforms focused quite a lot on greening the policy when the biggest challenge facing the industry was around volatility,” said Bicknell.
The U.K. government has promised to continue payments until 2020, but no one knows what to expect after that.
The CAP paid for production but gradually payments were adjusted with the latest permutation expected to attach a subsidy to environmental care and services.
This is more palatable to taxpayers who complain about paying farmers when there is already pressure on services like health care and education.