Transcript Agriculture and Horticulture outside the EU Policy options

Shaping a new and dynamic future for
Agriculture and Horticulture
Over the last year…
TRADE
LABOUR
DOMESTIC AGRICULTURAL POLICY
ENVIRONMENT
COMPETITIVENESS
REGULATION
Key NFU areas of consultation
• International trade
• Access to labour
• Domestic Agricultural Policy
International trade
United Kingdom - value of trade with the European Union (2015) primary agricultural and horticultural products
Sugar £k
IMPORTS FROM THE EU
EXPORTS TO THE EU
Poultry £k
Sheepmeat £k
Beef £k
Barley £m
Wheat £m
Butter £m
Milk and milk products £m
Eggs £m
Cheese £k
Pork £m
Vegetables and fruit £m
£7,000
£6,000
Source: HMRC
£5,000
£4,000
£3,000
£2,000
Value (£m)
£1,000
£0
£1,000
£2,000
United Kingdom - value of trade with the Non EU countries (2015) primary agricultural and horticultural products
Sugar £k
EXPORTS TO NON
EU COUNTRIES
Poultry £k
IMPORTS FROM NON EU COUNTRIES
Sheepmeat £k
Beef £k
Barley £m
Wheat £m
Butter £m
Milk and milk products £m
Eggs £m
Cheese £k
Pork £m
Vegetables and fruit £m
£4,000
£3,500
Source: HMRC
£3,000
£2,500
£2,000
£1,500
Value (£m)
£1,000
£500
£0
£500
Trade with Europe
• The European Economic Area (Norway model)
• European Free Trade Area (Swiss model)
• Customs Union (Turkish model)
• WTO Default position
WTO Default
ADVANTAGES
 Not bound by single market rules
DISADVANTAGES
 High tariffs for UK exporters
 No financial contribution required
 No free movement of labour
 Domestic food prices would
possibly rise
 Risk of Gov to unilaterally cut
tariffs
Trade with the rest of the world
• The multilateral dimension (WTO)
– UK to update the terms of membership
– Agreement with the other 163 countries
• The bilateral dimension
– What happens to agreed FTAs?
– Start of negotiations might be delayed
Import access
How can we limit our exposure to imports
produced to lower standards?
– WTO rules prevent restrictions on “Production or
Processing Methods”
– Protect sensitive products through tariffs and
Tarriff Rate Quota
– Promote the values of domestic production to
consumers
Labour availability
• Official sources of labour underestimation:
– 30,428 non UK born workers
– Doesn’t cover seasonal / communal housing
• Any restrictions would impact sector
Access to labour
• Working visa entry
• Points based system
• Seasonal agricultural workers scheme
• Other schemes:
– Commonwealth workers
– Student agricultural workers scheme
Working visa entry
ADVANTAGES
 Control over migration flow
DISADVANTAGES
 Additional admin costs + lead time
 Traceable workers
 Risk to oversee some agricultural
labour shortages
 No certainty about future supply
of labour
Points based system
ADVANTAGES
 To employ skilled agricultural
workers
DISADVANTAGES
 Usually penalises lower skilled
applicants
 Could be tailored to address
shortages in lower skilled labour
 No guarantee that an exemption
for unskilled labour would be
granted
 Temporary working visa to allow
access to temporary labour
 Extensive consultation with Gov
required to get the system right
Seasonal agricultural workers scheme
ADVANTAGES
 Traceable, temporary work force
 Possible exemptions for Employer
National Insurance and pension
auto-enrollment
 Highly productive labour profile
DISADVANTAGES
 UK might be seen as an
undesirable destination following
the EU Referendum result
 Admin costs unknown at present
Domestic Agricultural Policy
What other countries do
Share of annual CAP spending in England
20% Agrienvironment
schemes
3%
Productivity
76% Direct
payments
Domestic Agricultural Policy
1. Income support/insurance-based systems
2. Agri-environment
3. Competitiveness
No support
ADVANTAGES
DISADVANTAGES
 Opportunities to more
 No equal treatment with rest of
entrepreneurial operators and new
Europe
entrants
 Short-term adjustments would
 Sector forced to become more
harm NFU members
productive and competitive
 Land prices might reduce, hitting
 Assuming budget is preserved,
those whose debt relies on that
more resource available for other
collateral
purposes (e.g. competitiveness)
 Not necessarily more resilient to
volatility and price shocks
Decoupled direct payments
ADVANTAGES
 System known and considerable
investment in the infrastructure
DISADVANTAGES
 Contributed to higher land prices
and rents
 WTO green box, not subject to
international discipline
 Difficult to ensure that support
goes to active farmers
 Allow farmers to switch production  Removing greening would simplify
according to market demands, or
the system but money could be
reduce or stop
moved to environmental
programmes
Coupled direct payments
ADVANTAGES
DISADVANTAGES
 Support might go to active farmers  WTO blue box, therefore
production is limited
 Ensure that a certain level of
production is encouraged
 Admin complexity (e.g.
inspections)
 Redistribution of support between
sectors if there is agreement on
 Other operators in the chain might
how this should be done
extract the value of those
payments
 Production structure more rigid
Deficiency payments
ADVANTAGES
 Provided that target price is fair, it
gives strong protection against
price (not volume) volatility
DISADVANTAGES
 WTO amber box, subject to
international discipline
 Not popular with treasury because
annual cost is unpredictable and
potentially large
Bond payments
ADVANTAGES
DISADVANTAGES
 The bond would give the farmer
 To give enough liquidity to the
certainty of payment for as long as it
market, there could be no
was valid, allowing long-term
restrictions on who holds the bonds.
planning
A lot of farm support to go out of the
sector.
 As the value would be highest in the
early years, there would be an
incentive for farmers planning to
retire, or with large debts, to cash in
early. This would encourage more
rapid structural adjustment
 No cross-compliance.
 Unless support payments are
reduced or ended at the same
rhythm in the rest of the EU, the
bond system would not guarantee
 It does not increase the gov’s
equality of treatment with our
financial commitment, while farmers
competitors.
can capitalise their asset through the
private bond market.
Insurance type systems
ADVANTAGES
DISADVANTAGES
 Purpose is clear and justifiable
 US and Canadian schemes are
complex and require heavy
administration and availability of
data.
 Provides assistance only when
required
 Can be a safeguard against price
volatility and weather related
volume fluctuations
 Can be regarded as non-trade
distorting (although WTO rules
limit the compensation to 70% of
the income loss)
 No viable instruments have yet
been devised for the livestock sector
 Lengthy lags between the income
loss and compensation
Other elements of agricultural support
Agri-environment
ADVANTAGES
 Popular with Gov and NGOs
 Environmental enhancement
measures improve image of
farming and can help avoid overprescriptive regulation
DISADVANTAGES
 WTO rules limit payments to costs
incurred or income foregone
 NGOs will insist on ambitious
outcomes
 Could restrict production and
 Could be designed to allow parallel
threaten food chain investment
best use of productive land
• Can create permanent
• Can be regarded as non-trade
distorting
dependency on payments
Competitiveness measures
ADVANTAGES
DISADVANTAGES
 More relevant if we are entering a  Can involve picking winners- which
more liberal trading environment
can be bureaucratic and arbitrary
 Benefit all sectors
 Can benefit agents and middlemen
 Most measures are not trade
 May benefit those best at
applications, not the most
distorting- eg contributions to R&D
deserving
 Encouragement of investment can
also be linked to environmental
gains (eg more energy efficient
buildings)
• Would be welcomed by wider food
chain
• Improved competitiveness may
not be sufficient to combat price
volatility
Next steps
• To consolidate results of consultation
• NFU Extraordinary Policy Board 29/09/2016
• NFU Council 10/10/2016 - Framework for policy
• More work on policy details will be required as
negotiations and policy developments start to
unveil