Exiting the European Union: The Department for Environment, Food & Rural Affairs and the Department for International Trade Contents

2Working with industry and devolved administration

Uncertainty over the future relationship with the EU

21.The scope of both departments’ EU Exit programmes remains uncertain and is dependent on policy decisions yet to be taken and the outcomes of negotiations. Departments are having to respond flexibly to these developments, plan for a range of scenarios and build appropriate contingencies into their plans.45 The Department for Environment, Food and Rural Affairs (DEFRA) told us that the precise scope of its work will depend both on whether a transition period is agreed and the shape of the future economic relationship with the EU and that therefore flexibility and continuing dialogue is necessary.46 The Department for International Trade (DIT) explained that, although a transition period was possible, it would continue to work to this March 2019 deadline, with a view to transferring existing EU trade deals with third countries to the UK by this time.47 Despite the inclusion of a transition period in the Draft Withdrawal Agreement, published after our evidence session in March 2018, both departments will nevertheless need to maintain their plans for a “no deal” scenario, requiring all the necessary functions to be in place by March 2019 in the event that negotiations break down.

22.Both departments gave examples of how they were building flexibility into their programmes. Defra is replacing the EU’s Trade Control and Export System, known as TRACES, for clearance of imports of animal and animal products. It is being designed to handle third country imports, as the EU system currently does, but will also have the built-in option to handle imports from the EU, should this be necessary.48 DIT told us that all of its workstreams were dependent on the passage of legislation, and that it needed to build in flexibility to its plans to cope with any delays.49

23.This uncertainty is making it difficult for the departments to communicate effectively with stakeholders. Defra told us that, in the food sector, for example, it has an extensive programme of engagement, and is staging a series of regional events with food manufacturers and retailers as well as the British Retail Consortium and the Food and Drink Federation. It has also established a food sector council that enables the Department to engage on relevant issues. However, the lack of clarity was making it difficult for the department to determine the most appropriate messaging for stakeholders. In the event of no deal, the department will need to work quickly with industry to determine the actions that need to be taken.50

24.DIT also outlined its programme of engagement with stakeholders including business, trade associations and industry groups through regional round tables and the British Chamber of Commerce, but acknowledged that it had to be smarter about how it worked with stakeholders and view it as a more “joined-up effort”. On the question of trade with the US, DIT has not yet been able to determine its position. It is still working through where the UK would benefit most from trade with the US and therefore what the UK’s negotiating strategy will be. It feels that it is unable to communicate fully with industry at this stage about how this might turn out.51

Working with the devolved administrations

25.About 80% of Defra’s functions are in devolved areas of policy. Agriculture, fisheries and environment are all devolved. Membership of the EU has until now provided a common framework within which the devolved administrations are able to exercise their own policy discretion. Leaving the EU changes all that, and Defra must now agree common UK frameworks with the devolved administrations in all of the devolved policy areas.52 DIT also has to work closely with the devolved administrations to inform trade policy development, to agree a UK trade framework for future trade agreements in the devolved administrations and on the Trade Bill.53

26.Defra explained that devolution is one of a number of workstreams that cut across the individual workstreams and that the Department has formal structures in place for regular contact with the devolved administrations. It requires all workstreams to be able to account for the implications and impact of devolution. In each of the devolved policy areas, Defra told us it had undertaken a “deep dive” over a two-day workshop to work through the type of framework that would be needed: whether it needed legislative backing or whether a memorandum of understanding would be sufficient, or if a degree of regulatory divergence between the UK nations would be acceptable. Specific examples include ongoing discussions in the future farming policy arena over frameworks for food labelling and geographical indications (the protection of names for geographically based food products, such as Dundee cake and Melton Mowbray pork pies). Defra told us that the devolved administrations regarded its engagement with them as “exemplary”.54

27.DIT told us that it had consulted with the devolved administrations in the development of the Trade Bill. The Department works closely with Invest Northern Ireland, the Welsh Government and Scottish Enterprise and Development International to ensure they are working together on trade missions and bringing inward investment to the whole of the UK. We asked DIT why none of its regional offices was located in Wales or Scotland. DIT explained that trade promotion is a concurrent power (i.e. shared between the UK government and the devolved administrations). DIT told us that its staff liaise closely with Welsh Government offices in Wales. Although DIT has no offices outside England, DIT told us that its staff frequently travel to Scotland and work very closely with counterparts in each of the nations with the aim of bringing investment to the whole of the UK. The reformed Board of Trade also covers the whole of the UK and the Secretaries of State for the devolved administrations are advisers to the Board.55

The regional and sectoral impacts of Brexit

28.We challenged DIT on its understanding of the regional and sectoral impacts of Brexit on inward investment and jobs and industry’s ability to trade smoothly. We asked about the assessments the Department had made of the impact on different business sectors and regions of different trade deal scenarios.56 The Department explained that the assessments are preliminary and refused to be drawn on whether they would be published when completed, saying it was a decision for Government. It also said that there is analysis going on across government with input from the Department’s analysts, looking at the implications for inward investment and exports of different policy decisions and of potential outcomes of the negotiation.57

29.We asked specifically about the Department’s engagement with the automotive industry and the supply chain issues that have been raised by companies in that sector.58 The Department told us that it works closely with BEIS on the automotive and other sectors and has developed preliminary assessments for this sector. The Department uses its automotive sector teams in 108 countries to talk to potential inward investors and BEIS is responsible for developing the industrial strategy and assessing the potential impact on jobs in the UK of the different scenarios.59 HMRC leads on customs and the Department works closely with it to help in assessing the implications of different scenarios on the automotive sector and the supply chain.60

30.We questioned whether the Department was doing enough to engage businesses in its work on Brexit. The Department explained that it has over 250 international trade advisors spread over England in 18 regional offices, whose job it is to talk to local business. The Department also works with the Chambers of Commerce, Local Economic Partnerships and trade bodies and sector groups. It has developed a digital portal great.gov.uk which is a one-stop shop for exporters, aimed at providing information and opportunities to potential exporters.61

31.We challenged the Department on its decision to reduce the number of trade advisors in London and whether, as an alternative, the British Chambers of Commerce are being used effectively. The Department acknowledged that although it worked with trade and industry organisations, it needs to get better and smarter at working with them.62 The Department also acknowledged that it needs to better understand small businesses and the specific issues they face when trying to export and whether or not they use the digital portal. The Department said that it needs to have a better offer for medium-sized companies on the digital portal.63

45 C&AG’s Report (Defra), p 10; C&AG’s Report (DIT) p 17

46 Q 27 (Defra)

47 Q 33 (DIT)

48 Q 13 (Defra)

49 Q 21 (DIT)

50 Qq 62–63 (Defra)

51 Qq 84, 85, 92 and 97 (DIT)

52 C&AG’s Report (Defra), p 24

53 C&AG’s Report (DIT), p 27

54 Qq 64–65 (Defra)

55 Qq 89–92 (DIT)

56 Qq 9, 11–14 (DIT)