The impact of Common Agricultural Policy Reform on UK Agriculture

Written evidence submitted by the Food and Drink Federation (FDF) (CAP 20)

The Food and Drink Federation (FDF) represents the UK’s food and drink manufacturing industry, the largest manufacturing sector in the country, with a Gross Value Added of about £21.6 billion. The UK is also the world’s eighth largest exporter of value-added food and non-alcoholic drink products, with nearly £10 billion of overseas sales.

At both a UK and EU level the sector operates in increasingly open and competitive international markets. To succeed, our industries must have access to adequate supplies of raw materials that are safe, of high quality and competitively priced. We are committed customers of UK farmers, purchasing around two-thirds of the country’s agricultural output. But to supplement this supply base, we also import ingredients for further processing.

Although successive rounds of CAP reform are moving EU agriculture towards greater market orientation, further reform is needed to consolidate this progress. We also believe that more needs to be done to protect and enhance UK and EU productive potential to help meet the coming challenges of food security and climate change. This means doing more to safeguard natural resources, such as soil and water and to preserve biodiversity. In short, we need a sustainable food and farming policy, looking at the supply chain as a whole and based on resource efficiency and comparative advantage rather than historical patterns of production.

How will the Commission’s proposals affect the ability of UK agriculture to be competitive in a global market?

1. The Commission has suggested three broad options to launch further debate on reform of the CAP, stopping short of offering significant detail as to how these options might be achieved. Given the lack of detail, it is difficult to accurately evaluate the potential impacts of this document.

2. FDF is pleased that the Commission has included the competitiveness of the food supply chain as a key objective for reform of the CAP. Ensuring viable food production, encouraging increased productivity and improving the functioning of the food supply chain will help improve the competitiveness of UK farming and food. But much will depend on the choice of options proposed.

3. In this context, it is disappointing that the Communication sees increased trade liberalisation as a potential threat rather than an opportunity. A more market-oriented CAP, more open to world trade would stimulate export performance and help boost competiveness. This is essential for us to maintain investment and production within the UK, as companies make new regional or global investment decisions and as the EU enlarges.

Do the proposals ensure fair competition for British agricultural products within the European Union?

4. The EU is a very diverse area of agriculture production. The more that CAP tools and mechanisms are adapted to local circumstances, the greater the risks of market distortion and unfair competition. The principle of comparative advantage needs to be reflected in a system which also encourages resource efficiency. Supporting inefficient or unproductive sectors will not help the EU to remain competitive or meet future food security needs. It may also harm UK interests.

5. FDF would therefore like to see less emphasis on potentially market distorting national flexibilities such as those introduced under Article 68 of the CAP Health Check of 2008. Any such aid needs to be directed primarily towards environmental priorities.

Will the proposals achieve the correct balance between productivity and sustainability?

6. FDF is pleased to see that the proposals include an emphasis on productivity and sustainability, with two of their three main objectives for the future CAP being ‘viable food production’ and ‘sustainable management of natural resources and climate action’. However, there is again a real lack of detail regarding measures to achieve this, particularly in the case of productivity.

7. More needs to be done to improve ecological resource efficiency. But this needs to be done in ways which avoid unintended consequences or hamper productivity. Any new measures also need to be simple to administer and monitor.

Do the proposals place the UK in a good position to help meet future food supply challenges?

8. Depending on the options chosen and the detailed mechanisms involved, the proposals have the potential to help the UK in meeting future food security challenges. But it would be preferable to have sustainable food production as a more explicit policy aim to mark a step change in the reform process and to ensure that market distorting measures continue to be phased out and that available resources are used to develop productive potential and preserve natural capital.

9. As an example of this, FDF welcomes the Commission’s continued commitment to the removal of dairy production quotas in 2015. The end of quotas and the forthcoming proposals from the High Level Expert Group on Milk should help to ensure improved market orientation in the dairy sector, enabling long term planning by dairy farmers and increased stability. UK food and drink manufacturers have faced significant shortages in supplies of dairy raw materials in recent years and improvements in the functioning of the dairy market would be welcomed.

Will the proposals redress the imbalance in support to different sectors created by the historic basis of payments?

10. The Commission favours greater equity in the distribution of direct payments between Member States rather than redressing imbalance in support to different sectors of production. FDF welcomes the abolition of historical CAP payments to move towards a fairer and more equitable system that rewards active farmers, however it is unclear which ‘objective’ criteria the Commission will base payments on and exactly how this will impact different sectors and UK agriculture in general.

What aspects of the proposals should be made a common policy, and which are best left to Member States?

11. A strong EU common policy for farming and food is essential for guaranteeing equitable competition conditions within the EU. Maintaining a single market for agricultural products must remain the guiding principle for the future. It is important to ensure that national flexibilities and exemptions do not create distortion which would harm the single market or the supply of raw materials to the food industry.

Can the proposals be implemented simply and cost-effectively, within a short time-scale?

12. The options presented by the Commission are lacking in sufficient detail to adequately evaluate potential costs and difficulties of implementation. The proposed greening of pillar 1 is potentially burdensome and a complicated measure to enforce.

December 2010

The UK Food and Drink Manufacturing Industry 

The Food and Drink Federation (FDF) represents the food and drink manufacturing industry, the largest manufacturing sector in the UK, employing around 440,000 people. The industry has an annual turnover of over £72.8bn accounting for 15% of the total manufacturing sector. Exports amount to almost £10bn of which 79% goes to EU members. The Industry buys two-thirds of all UK’s agricultural produce.

The following Associations are members of the Food and Drink Federation:

ABIM Association of Bakery Ingredient Manufacturers

ACFM Association of Cereal Food Manufacturers

BCA British Coffee Association

BOBMA British Oats and Barley Millers Association

BSIA British Starch Industry Association

CIMA Cereal Ingredient Manufacturers’ Association

EMMA European Malt Product Manufacturers’ Association

FA Food Association

FOB Federation of Bakers

FPA Food Processors’ Association

GPA General Products Association

MSA Margarine and Spreads Association

SB Sugar Bureau

SMA Salt Manufacturers’ Association

SNACMA Snack, Nut and Crisp Manufacturers’ Association

SPA Soya Protein Association

SSA Seasoning and Spice Association

UKAMBY UK Association of Manufacturers of Bakers’ Yeast

UKHIA UK Herbal Infusions Association

UKTC UK Tea Council

Within FDF there are the following sectoral organisations:

BCCC Biscuit, Cake, Chocolate and Confectionery Group

FF Frozen Food Group

MG Meat Group

ORG Organic Food and Drink Manufacturers’ Group

SG Seafood Group

VEG Vegetarian and Meat Free Industry Group

YOG Yoghurt and Chilled Dessert Group