10.The vast majority of international exports of Welsh agricultural produce go to EU nations. Over 80% of food and animal exports, including over 90% of exports of meat, dairy and eggs, and animal feed, go to the EU. Currently the trade of agricultural produce between Wales and the EU is facilitated by the UK’s membership of the Single Market and Customs Union, which remove all tariffs, customs and regulatory barriers to the movement of goods.
11.Post-Brexit, there is a range of possible outcomes for the UK’s future trading relationship with the EU, and negotiations between the UK and EU are ongoing. It therefore remains to be seen what the future UK-EU trade relationship will look like, and what this will mean for the agricultural sector. The UK and EU have agreed in principle to a transition, or implementation, period which means that current trading arrangements are expected to continue until 31 December 2020.
12.We heard varying interpretations of the potential impact, on different sectors within Welsh agriculture, of changes to UK-EU trade relations. For the most part, the evidence we heard expressed substantial concern about the impact of Brexit, particularly in relation to the export of lamb. The concern of the industry is that, on leaving the EU, the imposition of tariffs could make it impossible to export to key EU markets. We heard, for example, that if the UK were to trade with the EU using the Common External Tariff, effective tariffs of 84% could be applied to cattle carcasses, 46% on lamb carcasses, 61% on cuts of lamb and tariffs of between 43%-50% on pig meat. Gwyn Howells, Chief Executive at Hybu Cig Cymru—the industry body responsible for the development, promotion and marketing of Welsh red meat—told us: “what we must avoid at all costs is reverting to WTO rules or tariffs on sheep meat because our exports would be decimated.” These concerns were brought into even sharper relief by the suggestion that lamb from Spain and Romania is already displacing Welsh lamb in some parts of the EU market.
13.The concerns we heard were reflected by many of our witnesses stating that they would be best served by retaining access to key EU markets with no new tariff and customs barriers. Lesley Griffiths AM, the Welsh Government’s Cabinet Secretary for Energy, Planning and Rural Affairs, told us that, in her discussions with stakeholders, the message which had come through was that they were very concerned about the possibility of tariffs on trade with the EU, and wanted “unfettered access to the single market”.
14.While there was universal concern about the future of lamb exports post-Brexit, we were told that the imposition of tariffs on imports of agricultural produce to the UK market could make the smaller but still important Welsh beef and pork sectors—where the UK is currently a net importer—more attractive on the domestic market. The Environment, Food and Rural Affairs Committee has also considered this issue, and heard that the process of replacing imported meat with domestic produce would not be swift, because rearing additional cattle “from conception to killing” would take a minimum of two years. We note there would also be a delay to increasing production for nations seeking to export more agricultural produce to the UK, should the UK agree preferential trade deals with those countries.
15.It is not just the potential imposition of tariffs that will determine the sale of agricultural produce from Wales to the EU post-Brexit. We met with officials from the Irish Government who were clear that non-tariff barriers such as customs and veterinary checks would be necessary in the absence of a customs union or agreement on agricultural standards between the UK and the EU. In evidence submitted to our predecessor committee, NFU Cymru underlined the challenge these types of barriers would create, saying that producers of perishable goods “cannot afford to see their produce held up at international borders by red-tape and bureaucracy.”
16.The UK Government has not yet set out its preferred option for future trade relations with the EU, but George Eustice MP, Minister of State for Agriculture, Fisheries and Food, told us that he would be “supporting Welsh agriculture by arguing passionately for a free trade agreement and a customs agreement that mean we can have frictionless borders and tariff-free trade across the board, including in those sectors that are important to agriculture”. Asked whether he would support membership of the Customs Union and Single Market if this was the only way to achieve frictionless and tariff-free trade, the Minister for Agriculture told us:
I don’t think it is the only way it can be achieved. As you will all be aware, it is a very live discussion at the moment—the nature of a customs partnership or a customs agreement. A cross-Government deliberation is going on at the moment about what that partnership or agreement should look like. We have been clear that you do not need to be in a customs union to have frictionless trade, nor, indeed, to have tariff-free trade.”
17.The EU is the main market for exports of Welsh agricultural products; it is the destination of over 80% of Welsh food and animal exports, including over 90% of meat, dairy, egg and animal feed exports. Barrier-free access to EU markets is therefore essential to the future of Welsh agriculture. The majority of our witnesses, including the Welsh Government, believed this would best be met by continued membership of the Single Market and Customs Union, but we note that there are many different options for future trade relations between the UK and EU, and that the UK Government believes it is possible to achieve frictionless borders and tariff-free trade through a free trade and customs agreement. Whatever the UK’s future trade relationship with the EU, it must reflect the market access needs of Welsh farmers.
18.In formulating its preferred vision for future UK-EU trade relations, the UK Government should recognise that the overwhelming view of the representatives we heard from was that they would be best served by retaining membership of the Single Market and Customs Union, in order to ensure current access to EU markets with no new barriers—be they in the form of tariffs, customs controls or other checks.
19.The European Union’s systems of Protected Geographic Indicators (PGIs) and Products of Designated Origin (PDOs)—which are used to protect the name and provenance of certain food and drink products—underline the quality and protect the status of Welsh produce. PGIs and PDOs give protected status to the marketing and sale of agricultural produce, and we have heard that these designations have been the foundation of the export across the EU of produce such as Welsh lamb and beef, Anglesey sea salt and Welsh laverbread. Glyn Roberts, President of the Farmers Union of Wales, told us that the protected status of Welsh lamb and Welsh beef was of “paramount importance”, and that the status of Welsh lamb was particularly important in terms of exporting to France and Italy. If these products were no longer protected post-Brexit, there would be a risk that producers in other countries could produce imitation products using Welsh product names, creating unfair competition for genuine Welsh produce. The Welsh Government Cabinet Secretary told us that protected food names were important to the companies that have them, and that she wanted to see these protections continue post-Brexit.
20.We heard that there was widespread support across Welsh agriculture for the retention of geographic indicators post-Brexit, and that this would be important in maintaining business continuity and demonstrating that Brexit had not led to any diminution of standards. The Government has said that it will establish a UK-wide Geographical Indications (GI) scheme which will enable recognition from the EU scheme. It expects that “all current UK GIs will continue to be protected by the EU’s GI schemes after we leave the EU.” That said, the UK Government has not agreed to the EU’s proposals for dealing with geographical indicators, which were included in the draft withdrawal agreement.
21.The European Union’s system of Protected Geographic Indicators (PGIs) and Products of Designated Origin (PDOs) protects the provenance and underlines the quality of Welsh produce. This has been particularly important for Welsh lamb, where its status has been the foundation for its export across the EU. Facilitated by these protections, Welsh agricultural produce has been exported across the EU, benefitting the Welsh economy and focusing international attention on Wales and Welsh produce.
22.The Government must ensure that future arrangements for geographic indicators lead to no reduction in protection for agricultural producers, and that Welsh producers can enjoy continued recognition by the EU’s system of Protected Geographic Indicators.
13 National Assembly for Wales, Senedd Research, , June 2017
14 Department for Exiting the European Union, , 19 March 2018
15 Q134 [John Davies], Q504 [Cennydd Jones]
16 Q130 [John Davies], Q190 [Gwyn Howells], (AGR0013) para 26
17 Hybu Cig Cymru, , Figure 2: Likely effective EU tariff rates under WTO rules, page 7. Tariffs are a combination of additional sums charged as a proportion of the value of the product and fixed amounts paid per unit (usually by weight). In combination this produces an effective ad valorem rate.
18 Q190 [Gwyn Howells]
19 Q187 [Gwyn Howells], see also data published by the (November 2017) analysing increased Romanian sheep meat production.
20 Q157 [Glyn Roberts], Q513 [Laura Elliott]
22 Q184 [Gwyn Howells]
23 Environment, Food and Rural Affairs Committee, Third Report of Session 2017–19, , HC 348, para 44
25 (AGR0013) para 28
28 PGI is open to products which must be produced or processed or prepared within the geographical area and have a reputation, features or certain qualities attributable to that area. PDO registration describes products having characteristics resulting essentially from the geographical area and the know-how of the producers in the area of production. E.g. Anglesey Sea Salt and Conwy Mussels.
31 Q172 [John Davies]
32 [on Food: Origin Marking], 19 February 2018
33 Department for Exiting the European Union, , 19 March 2018. The UK Government has marked up the draft withdrawal agreement produced by the EU, indicating where text has been agreed between negotiators, where a policy objective has been agreed but text needs to be agreed, and where there is no agreement and discussions are ongoing. The text relating to geographical indicators is in the latter category.
Published: 9 July 2018