8.The plan for the UK’s future trading relations with Europe and the rest of the world have yet to be set out by the Government. The UK might come to an arrangement which retains membership of the Single Market. It might leave the EU but remain in the customs union with EU member states and other countries. Or it may make arrangements based purely on World Trade Organisation regulations, applying tariffs on UK exports and imports, and to the rules of trade. Although nothing is finalised, the Prime Minister has indicated that the UK is likely to leave the single European market and the Customs Union. Whatever trading scenario is adopted is likely to affect the support the UK can provide to its agriculture sector, with consequences for future environmental land management.
9.Defra, in its submission to this inquiry, acknowledged the impact of international responsibilities and trade conditions on environmental land management policy:
Developing our own agri-environment policy will, of course, need to take account of our international environmental obligations as well as wider trade policy, including our future relationship with the EU and our prospective commitments at the World Trade Organisation.
10.Regardless of the trading model used after we exit the EU, UK policy development will continue to be influenced by international factors from the EU and the wider international community. Leaving the EU will probably mean that the UK will no longer be part of the Common Agricultural Policy (CAP) or covered by key pieces of European environmental legislation, although compliance may be necessary to maintain access to the single market or remain within the customs union. According to the National Farmers Union any question about the impact of leaving the EU on UK biodiversity is hypothetical until the outcome of trade negotiations is known. Because of this, it is vital that the negotiation process to leave the EU and to enter into new trade agreements considers the impact of proposed agreements on UK land management and biodiversity, and the extent to which environmental protections are supported or hindered by new arrangements.
11.Payments to farmers are subject to World Trade Organisation (WTO) rules. The EU has a specific agreement with the WTO covering those CAP payments that are classified as market distorting or potentially market distorting subsidies, which includes aid that is coupled to production. The UK will probably need to negotiate for a share of the current EU allocation of allowable subsidy if it wishes to continue payments such as the Scottish Suckler Beef Support Scheme. More broadly, WTO rules will constrain how any new payments can be made. For example, payments for environmental land management through Pillar 2 of the CAP are currently calculated on the basis of income forgone plus costs so that they can be classified as non-trade distorting. These payments may still need to be subject to the same constraints outside the EU in order to comply with WTO rules.
12.If the UK chooses not to enter into an arrangement with the European Single Market the UK farming industry may face tariffs and non-tariff barriers when exporting produce to the EU. Tim Breitmeyer of the Country, Land and Business Association told us that 95% of UK sheep exports go to the EU, and that:
If we are exposed to a common customs tariff because we do not have free access to Europe, the effect will be significant, in excess of 30% tariffs. For an industry and a sector in the industry that is already in very marginal existence, that then poses huge problems to viability in the uplands, for instance, going forward.
Mr Breitmeyer indicated that beef farms would face even higher tariffs, potentially in excess of 50%. The Wildfowl Wetlands Association highlighted that in 2014, the average Most Favourable Nation (default rate) tariff on dairy imports into the EU was 36%: these tariffs are set by the WTO and would apply to trade between the UK and the EU. Changes in tariffs and subsidies in New Zealand in the 1980s required rapid adjustment by farming businesses to increase specialisation and efficiency.
13.Non-tariff barriers were also a cause of uncertainty and concern. George Dunn from the Tenant Farmers Association was asked whether the UK, after the leaving the EU, would be able to require imported food to meet domestic standards without falling foul of WTO rules. He replied:
That is the £64,000 question, the WTO rules and how we play that through WTO, because the non-tariff barriers are a big issue for WTO membership.
14.We heard further concerns regarding a situation in which the UK leaves the EU and is fully exposed to the global market. Patrick Begg of the National Trust told us that there is a huge amount of damage that could be done if UK farmers attempted to compete directly on price with farms in countries such as Brazil or Argentina through over-intensification:
Any discretionary effort that might go into countryside management, environmental quality, cultural heritage or landscape, all of those things are sacrificed on the altar of that competitiveness treadmill.
Other witnesses expressed concern that trade agreements designed to benefit other sectors of the UK economy would involve risk to the agricultural sector. Guy Smith of the National Farmers Union told us:
The best and most famous example of that is the use of hormones in South America. If the financial services sector asks Mr Fox’s trade negotiation team to do a deal with South America whereby they can get their services into there and in return all we get is beef, obviously there will be a problem for our farmers because they will be placed at a competitive disadvantage.
CPRE supported this perspective, telling us:
Development of new policy could be constrained by the type of trading agreements the UK establishes with other countries; the interests of agriculture will no doubt be weighed in the balance with other industries, including the financial services sector, with greater economic weight and influence; current high standards in this country could be undermined by unfair competition from countries with lower standards.
Guy Smith of NFU also said:
[T]here is concern among our members that they feel that British farmers tend to operate to world-beating high standards, particularly on animal welfare and on food safety and food assurance. We desperately do not want to see those standards watered down if we are forced to compete against agricultures in other parts of the world that clearly do not have such high standards.
15.UK policy has historically placed a greater emphasis on environmental funding than other EU countries. Under the terms of the CAP it is possible for countries to transfer up to 15% of funding from Pillar 1 to Pillar 2: in the period to 2020 only 11 member states plan to transfer funds from Pillar 1 to Pillar 2, typically at a much lower level than the UK (exact budget transfers are determined by the devolved nations), with 5 Member States choosing to transfer funds away from Pillar 2. Existing inequalities caused by different funding approaches may get worse after leaving the EU. Evidence submitted by Dr Viviane Gravey, Dr Charlotte Burns and Professor Andrew Jordan told us that:
Further greening of the CAP is less likely without UK Government and civil society campaigning for greening from within the EU. A halt to further CAP greening, or indeed a roll-back of current greening efforts in the EU will make it difficult to green agriculture policies in the UK without putting UK farmers at a competitive disadvantage.
16.Leaving the EU will bring significant changes in the relationship between UK farmers and the international market, including risks such as the introduction of tariffs and non-tariff barriers when selling to the EU and a reduction in barriers to entry for other countries selling to the UK. Were this to happen, it would put UK farmers at a competitive disadvantage. If farmers are forced to compete on price alone they may put pressure on Government to reduce environmental standards to help them do this. Such a lowering of standards would not only be environmentally damaging but could make farming itself less sustainable. Changes to trade arrangements risk making it much harder to design a future UK environmental policy capable of achieving the Government’s environmental ambitions; management of this risk requires the involvement of both the Department for International Trade and the Department for Exiting the EU, as well as Defra.
This conclusion is linked to our fourth recommendation.
17.Work to protect the environment in the UK is integrated with the work of other countries across Europe in a variety of ways. Decisions regarding the UK’s future relationship with Europe may affect the extent to which this integration continues:
18.In addition to influencing environmental policy in the EU, the UK has benefitted from collaboration with European research partners. According to the Society for the Environment “for the last 40 years, the UK has shared wisdom with continental colleagues in pursuit of better environmental standards across Europe.” The Society for the Environment described the UK as part of a ‘Great European Project’ due to the international nature of environmental and natural resources management, and called for the Government to maintain relationships with environmentalists and decision makers across the EU to ensure common objectives are pursued. Dr Gravey highlighted the need for a decision to be made as to the extent of collaboration with Europe:
There are questions about whether it would be valuable for the UK to remain a member of the European Environment Agency, to still be able to share into all that information sharing between the member states, good practices, to see what works in other countries and in the UK as well. But that would require an active decision by the Government to do so.
19.The Scottish Wildlife Trusts highlighted the significance of European Funding for environmental research, pointing to the €6.9 billion of Framework Programme 7 (FP7) funding received by the UK over the period 2009–2013, and the €80 billion of funding available over 7 years (2014 to 2020) across Member States through the EU’s research and innovation programme Horizon 2020. This funding supported many research sectors. In addition, specific funding for environmental research has also been received from the EU LIFE Programme, which supported 8 research projects with budgets ranging from nearly £1 million to over £7 million pounds. The UK Government has stated that business and research institutes will continue to be eligible for EU funding for multiple year projects, and that the Treasury will underwrite the payment of such awards, even when specific projects continue beyond the UK’s departure from the EU. However, the Treasury will only guarantee projects signed after the Autumn Statement if they are in line with ‘UK priorities’, though no further detail has been given about what these priorities are. But we have heard concerns over the availability of funding over the longer term.
20.Many of the UK’s special places and nature reserves have been developed in collaboration with the other Member States of the EU. The Natura 2000 series comprises sites across the EU designated for the protection, through the Birds and Habitats Directives, of habitats and species recognised as being of European-wide importance, and this broader context helps to focus the UK’s conservation efforts. Flora and Fauna International pointed to Natura 2000 as exemplifying cross-boundary collaboration for biodiversity conservation, and the Shropshire Ornithological Society said it could “see no reason why” the UK should not continue to contribute to and maintain this series once we have left the EU.
21.Many species migrate between the nations of the EU and beyond, making nature conservation a cross-border issue. Steve Trotter of The Wildlife Trusts (England) said:
We must be aware of cross-border considerations. For many migrant species or things like newts and bats, and particularly for invasive species, there is a great potential for us to lose the positive impacts of having different European countries taking action on species that may be of interest to the UK, and Ireland for that matter. Preventative measures can take place long before species arrive here so we need to think about how we liaise and co-ordinate with Europe on cross-border issues that may not be reflected in the legislation.
22.A number of Natura 2000 sites in Northern Ireland adjoin sites in the Republic of Ireland. The Republic of Ireland will continue to be required to report to the EU on the condition of its Natura 2000 sites and these may be affected by policy driven changes on the NI sites. The potential divergence between UK and EU policy will require specific coordination to ensure that protection of these sites is not compromised, particularly as there is a risk that European agricultural policy becomes less green without the UK leading the way. Dr Thérèse Coffey MP, Parliamentary Under-Secretary for Defra, told this inquiry that:
We are working, I believe, with the Republic of Ireland. There is no reason why we can’t continue to work in a collaborative way that benefits us and other members of the European Union in some of the common challenges that we have.
However Ulster Wildlife argue that although the challenges of Northern Ireland’s position as the only part of the UK with a land border with other EU Member States has been recognised as regards border controls, the implications for the natural environment on both sides of the border have not been sufficiently highlighted.
23.Evidence to this inquiry has highlighted further cross-border concerns relating to the UK’s Overseas Territories, including those physically outside the EU. These include:
24.The sharing of environmental knowledge and approaches with Europe through membership of the EU has provided significant benefits to the sector which are at risk when the UK leaves the EU. Arrangements for collaboration over cross-border environmental issues must form part of negotiation with the EU and the Government must give clear commitments in advance about how the funding and support currently provided to UK environmental research and the Overseas Territories for management of marine reserves by the EU will be fully replaced.
This conclusion is linked to our second and fourth recommendations.
8 As reported in The Daily Telegraph 3rd September 2016, accessible here:
9 Defra ()
10 Dr Viviane Gravey ()
11 National Farmers Union ()
12 Dr Viviane Gravey ()
13 National Farmers Union ()
14 Q188 (Mr Tim Breitmeyer)
15 Wildfowl and Wetlands Trust ()
16 West Berkshire Stronger Together ()
17 Dr Olaf Schroth ()
18 Q196 (Mr George Dunn)
19 Q185 (Mr Patrick Begg)
20 Q257 (Mr Guy Smith)
21 Campaign to Protect Rural England ()
22 Q257 (Mr Guy Smith)
23 As reported here:
24 Dr Viviane Gravey ()
25 Society for the Environment ()
26 Membership of the European Environment Agency currently comprises the 28 European Union Member States together with Iceland, Liechtenstein, Norway, Switzerland and Turkey
27 Q162 (Dr Viviane Gravey)
28 Scottish Wildlife Trust ()
29 British Ecological Society ()
30 Q372 (Right Hon. Andrea Leadsom MP)
31 British Ecological Society (), Scottish Wildlife Trust ()
32 Fauna and Flora International ()
33 Shropshire Ornithological Society ()
34 Q115 (Mr Steve Trotter)
35 Council for Nature Conservation and the Countryside ()
36 Q118 (Dr Viviane Gravey)
37 Q19 (Dr Thérèse Coffey MP)
38 Ulster Wildlife ()
39 UK Overseas Territories Conservation Forum ()
40 UK Overseas Territories Conservation Forum ()
21 December 2016