The President of the European Commission, Jean Claude Juncker, and leading politicians in some member states may give the impression that, in the forthcoming negotiations of the terms on which the UK will leave the EU, the strongest cards will be held by the EU team, but is that really the case with agriculture?
The EU is about to begin consultation on the Common Agricultural Policy for the period 2020-2025. The UK obviously will have no part in the framing of the policy, but the policy makers will have to take account of the UK's withdrawal. Proposals from member states for the EU's next Multi-Annual Financial Framework (ie Budget) for the five year period have to be put forward by the end of the year. It will have to reflect the loss of the UK's substantial net contribution to the EU; it might therefore allocate less to the CAP, and thus lead to more far-reaching changes to the CAP than otherwise would be likely.
It will be no bad thing for the UK team if changes to the CAP due to budgetary constraints are on the cards when the negotiations get under way, and might lead to a dose of realism in the minds of the EU team when the terms of trade in agricultural products come to be discussed. UK farming interests have expressed justifiable concern about the prospect of tariffs being imposed on exports to the EU, but not so much has been said about the boot on the other foot.
The UK's trade deficit in food and drink, and in agricultural feed, is of the order of 20bn per year, and 16.7bn of this is with the EU. If no special arrangements are agreed, EU suppliers will find themselves have to pay the EU external tariff on their sales to the UK. The cumulative cost of those, thanks to the substantial imbalance in UK-EU trade, would be far greater for the EU suppliers than the cost of tariffs that UK farmers would have to bear on their exports to the EU. And the EU suppliers would find themselves in competition for business with the UK from non-EU countries, such as Australia, New Zealand, the USA and Brazil.
Tariff pressures therefore ought to focus the minds of both teams of negotiators on the benefit of special arrangements, with the EU having more at stake than the UK. Not that the picture is entirely unclouded for UK farming interests. If the UK seeks trade deals with non-EU countries, as the Government has promised to do, there is a risk that those countries will demand concessions on trade in agricultural products that would reduce the UK prices of beef, lamb and dairy products. If the Government were minded to concede and provide some compensatory help for UK farmers, it will have to be up for a challenge. World Trade Organisations rules prevent the offer of compensation in those circumstances; finding a way round will be difficult.