AIC supports EU Remain as best for agribusiness

The Agricultural Industries Confederation (AIC) has concluded that the business interests of the UK agricultural supply industry are best served by the country remaining in the European Union. The UK farm unions are also in favour of continued EU membership.

A statement from the AIC board, following a discussion at its April meeting, notes: “On balance, and after rigorous assessment, our professional opinion is that despite the ongoing need to reform EU policies – particularly in the areas of sustainable agriculture; science and the introduction of new technologies, the short, medium and long-term interests of the AIC Membership in the agricultural supply industry would be better served by remaining within the EU.”

The AIC stresses that it is not advising its members how to vote, but balancing the pros and cons of EU membership for the supply trade. It has prepared an analysis of the likely effects on UK agriculture whether in or out of the EU, ahead of the June referendum. However, it says there is limited hard information available.

The EU Referendum: What could it mean for the agricultural supply industry? is a 12 page analysis compiled by AIC head of policy - external affairs Paul Rooke that is available to AIC members only. The analysis notes that CAP support is worth some £3 billion annually to the UK, 75% in direct Pillar 1 payments and 25% through Pillar 2 rural development funds. While there is no information on potential support levels post-Brexit, in the longer term “the UK is unlikely to maintain support at current CAP levels”. Lower support levels, at perhaps 30% of CAP subsidies, point to only 10% of UK farmers being able to compete with their EU counterparts from outside the community. In addition, a more restrictive UK independent migration policy could affect the seasonal agricultural and horticultural labour availability.

Should the UK remain in the EU, future CAP reform – the next package is due for 2020-27 – is likely to continue the trend away from direct support, particularly for larger holdings, while pressure on environmental standards – air, soils and water – will increase.

Leaving the EU is uncharted territory, as no member has ever left before. Although Article 50 of the EU Treaty sets out a process for a negotiated exit over two years, dependent on a qualified majority of EU members, it has never been used and is untested.

Turning to trade, UK food exports are split approximately equally between EU members and third countries. But the UK gains access to third country markets through EU trade deals. At the moment, the EU is involved in a number of bilateral trade negotiations – TTIP with the US; Mercosur with Brazil and Argentina; plus talks with Canada, Australasia, Japan and Thailand. Even at EU level, these discussions are slow and tortuous - they are unlikely to be any faster or more advantageous for an independent country.

Post Brexit, the UK could trade through the European Free Trade Area (EFTA) or European Economic Area (EAA), both of which would require sticking to EU Single Market standards, but with no influence over how these are developed. EEA members also pay for single market access. As the world’s 5th largest economy, the UK could negotiate its own free trade agreement with the EU – but this could take time to achieve and agriculture would be only one of many industries negotiating market access. Outside of the EU, the UK might be subject to export tariffs – for example a 12.8% tariff on UK wheat exports to EU countries.

An independent UK could gain on the innovation front. The UK’s support for science-based decision making has put it at odds with many other member states – this could be a benefit outside the EU. An acid test will be the EU decision on new gene editing technologies that could move the science on from the GM debate that has paralysed the EU for the last two decades. An independent UK might attract more global research funding if it was free of such constraints.

“On available information, it is difficult to conclude anything other than that leaving the EU would, for an interim period at least, see reduced farm incomes with little meaningful red tape burden relaxation,” notes the report.  “Any reduction in regulation on the environment; health and safety and food and feed safety would depend on the trading arrangements outside the EU – if an independent UK wanted to trade with the Single Market, it would need to comply.”

In conclusion: “it is clear that a decision to leave the EU but retain trading opportunities via membership of EFTA, EAA or equivalent would mean the UK retaining much of the legislation that is one of the drivers to leave”. While the AIC laments the lack of detail on the shape of agriculture in the EU after further EU reform, it notes there is even less on any national UK agricultural policy if the country does vote to leave.