BREXIT AND AGRICULTURE IMPLEMENTING A NEW LEGAL FRAMEWORK

BREXIT AND AGRICULTURE: IMPLEMENTING A NEW LEGAL FRAMEWORK FOR A NEW AGRICULTURAL POLICY CENTRE FOR EUROPEAN LEGAL STUDIES, CAMBRIDGE 8 March 2017 Michael Cardwell, University of Leeds

OUTLINE 1. Agriculture in the UK: its Structure and Finance 2. The Government Vision for Agriculture in the UK Post-Brexit 3. A Domestic Legal Framework 3. 1. Financial Support to Farmers 3. 2. Rural Environment 3. 3. Farm Animal Welfare 3. 4. Inputs for Production and Biotechnology 4. International Trade 5. Some Conclusions

1. Agriculture in the UK • The total labour force in agriculture on commercial holdings as at June 2015 was 476, 000 (including farmers and their spouses) • The Utilised Agricultural Area (UAA) as at the same date was 17. 1 million hectares (covering 70 per cent) of the total UK land area • The average area per commercial holding as at the same date was 80 hectares Source: Agriculture in the United Kingdom 2015 (Department for Environment, Food and Rural Affairs (DEFRA) et al, 2016)

1. Agriculture in the UK • In 2014, the agri-food sector contributed £ 108 billion to the UK economy (approximately 7. 2 per cent of national Gross Value Added) • The average net worth across all English farms in 2014/15 was £ 1. 6 million, with 53 per cent having a net worth of at least £ 1 million Sources: Agriculture in the United Kingdom 2015; and DEFRA, Balance Sheet Analysis and Farming Performance, England 2014/2015 (28 July 2016)

1. Agriculture in the UK The pattern of land use and production varies considerably throughout England, Northern Ireland, Scotland Wales: eg, in 2015, there were 5. 3 million hectares of land located on Less Favoured Area holdings in Scotland, accounting for 86 per cent of all agricultural land (including common grazing) Source: Scottish Government, Agricultural Land Use in Scotland http: //www. gov. scot/Topics/Statistics/Browse/Agriculture. Fisheries/agritopics/Land. Use. All

1. Agriculture in the UK • Agriculture is an area where powers have in essence been devolved to the Northern Ireland Assembly, the Scottish Parliament and the National Assembly for Wales • The 2001 Devolution Memorandum of Understanding addresses the relationship between the devolved administrations and the UK Government in respect of obligations to implement EU law

2. Agriculture in the UK Post-Brexit “Departure from the EU would mean departure from the Common Agricultural Policy (CAP) and its subsidy and regulatory regimes. This would have a drastic impact. The CAP represents almost 40% of the EU budget and the largest element of the UK’s EU costs”: House of Commons Library, Leaving the EU, Research Paper 13/42 (2013) 54

2. Agriculture in the UK Post-Brexit Early indications of the approach to be adopted by the UK Government “We continue to believe that expenditure on market price support and direct payments to farmers under Pillar 1 of the CAP represents very poor value for money. The UK has always made clear that we would like to move away from subsidies in the long run”: House of Commons Written Answer 221523 (27 January 2015)

2. Agriculture in the UK Post-Brexit At the Oxford Farming Conference on 4 January 2017, George Eustice MP, Minister of State (DEFRA) provided reassurance that funding would continue, but in exchange for providing ecosystem services, as well as insurance and supporting productivity: Farm Subsidy System to be Overhauled Post-Brexit, Says Eustice https: //www. ofc. org. uk/insights/farm-subsidysystem-to-be-overhauled-post-brexit-sayseustice

2. Agriculture in the UK Post-Brexit “…leaving the EU offers the UK a significant opportunity to design new, better and more efficient policies for delivering sustainable and productive farming, land management and rural communities. This will enable us to deliver our vision for a world-leading food and farming industry and a cleaner, healthier environment, benefiting people and the economy”: The United Kingdom’s exit from and new partnership with the European Union, para 8. 15

2. Agriculture in the UK Post-Brexit At the NFU Conference on 21 February 2017, the Rt Hon Andrea Leadsom MP, Environment Secretary, enunciated five policy principles: 1. trade; 2. a productive and competitive sector; 3. environment; 4. the promotion of animal and plant health and welfare; and 5. resilience https: //www. gov. uk/government/speeches/environ ment-secretary-speaks-at-nfu-conference

3. 1. Financial Support to Farmers • Pillar I: Direct payments under Regulation (EU) 1307/2013 which for the 2015 EU financial year accounted for 3, 150 million Euros out of total CAP expenditure in the UK of 4, 109 million Euros In large part, this is delivered as ‘decoupled income support’ on an area basis through the Basic Payment Scheme, together with the Greening Payment for agricultural practices beneficial for the climate and the environment Source: Agriculture in the United Kingdom 2015

3. 1. Financial Support to Farmers • Pillar II: Rural development support under Regulation (EU) 1305/2013 which for the 2015 EU financial accounted for 959 million Euros (including co-financing by the UK) In 2015, the flagship Environmental Stewardship Scheme enjoyed the largest budget in England (£ 394 million, provisional), but the Less Favoured Areas Support Scheme the largest budget in Scotland (£ 66 million, provisional) Source: Agriculture in the United Kingdom 2015

3. 1. Financial Support to Farmers What will be the level of direct payments to farmers post-Brexit? A major concern of farmers has been that they will see the reduction of (or even removal of) Pillar I direct payments while such support remains in place for farmers in the remaining EU -27

3. 1. Financial Support to Farmers In the short term, the UK Government has announced that the agricultural sector will receive the same level of funding that it would have received under Pillar I until 2020: Letter from the Chief Secretary to the Treasury to the Secretary of State for Exiting the European Union (12 August 2016)

3. 1. Financial Support to Farmers A potential advantage post-Brexit is that the direct payments regime can be more closely tailored to national conditions (as opposed to either a ‘one size fits all’ approach or a complex structure designed to address disparities across the EU)

3. 1. Financial Support to Farmers At present, there is increasing focus on: • support for the delivery of ecosystem services; • support for income-loss insurance schemes; and • support for measures to boost productivity (with little indication that Pillar I payments will continue in their present form)

3. 2. Rural Environment Brexit is regarded by Government as an opportunity to reduce environmental regulation for farmers: Rt Hon Angela Leadsom MP, Environment Secretary, at the Oxford Farming Conference on 4 January 2017 (The Guardian, ‘Andrea Leadsom promises Brexit bonfire of regulation for farmers’ (4 January 2017))

3. 2. Rural Environment On the other hand: (i) there will remain ‘national designations’ (such as Sites of Special Scientific Interest); (ii) there will remain international agreements (such as the Convention on Biological Diversity); and (iii) cross-compliance obligations imposed on the receipt of Pillar I and Pillar II payments are in any event regarded as mandating no more than ‘good agricultural practice’ (such as in relation to nitrate pollution)

3. 2. Rural Environment Further, “[i]t is not clear how far the UK might withdraw from the [Habitats] Directive’s requirements if it withdrew from the EU because the UK has a heritage in this policy area”: House of Commons Library, Leaving the EU, Research Paper 13/42 (2013) 60

3. 2. Rural Environment And care must be taken that a legislative lacuna does not arise post-Brexit: “[t]he Government needs to ensure that it maintains the strength and range of protection given to the UK’s most valuable wildlife sites, particularly around Natura 2000 sites currently defined through EU legislation”: House of Commons Environmental Audit Committee, The Future of the Natural Environment after the EU Referendum, Sixth Report of Session 2016 -17, HC 599, 17

3. 2. Rural Environment Two issues of broad application: • what will be the shape of the governance framework (including regulatory/administrative agencies); and • how will the precautionary principle be accommodated?

3. 3. Farm Animal Welfare • Much EU farm animal welfare legislation is directed to achieving ‘minimum standards’: see, eg, Council Directive 2008/120/EC laying down minimum standards for the protection of pigs • The UK has a tradition of anticipating or exceeding these standards (eg, sow stalls in the pig sector were banned in the UK as from 1 January 1999, but such a ban only became applicable to all holdings under EU legislation on 1 January 2013, and then subject to exceptions)

3. 3. Farm Animal Welfare Accordingly, there would seem to be potential for Brexit to lead to high farm animal welfare standards See also Case C-5/94, The Queen v Ministry of Agriculture, Fisheries and Food, ex parte Hedley Lomas (Ireland) [1996] ECR I-2553 (export of live sheep to Spain); and Case C-1/96, The Queen v Minister of Agriculture, Fisheries and Food, ex parte Compassion in World Farming [1998] ECR I-1251 (veal crates)

3. 3. Farm Animal Welfare The Secretary of State for Environment, Food and Rural Affairs at the Conservative Party Conference on 3 October 2016 saw UK farmers as world leaders in terms animal welfare, food safety and food traceability; but note also the UK Government proposal in March 2016 to replace the official code in the poultry sector with industry-led guidance, a proposal, in the event, swiftly abandoned (The Guardian, ‘Government planning to repeal animal welfare codes’ (25 March 2016))

3. 4. Inputs and Biotechnology In the case of inputs, debate continues regarding: • the current EU prohibition on the use of certain neonicotinoids on the basis of a finding that they present high acute risks for bees (Commission Implementing Regulation (EU) No 540/2011, as amended by Commission Implementing Regulation (EU) No 485/2013); and

3. 4. Inputs and Biotechnology • current and potential EU restrictions on the use of glyphosate: see, eg, European Commission, Frequently Asked Questions on Glyphosate (29 June 2016) http: //europa. eu/rapid/pressrelease_MEMO-16 -2012_en. htm Particular importance was attached to such issues prior to the Referendum: see, eg, NFU, EU Referendum: UK Farming’s Relationship with the EU (NFU, 2016) 20

3. 4. Inputs and Biotechnology • Member States enjoy increased autonomy following enactment of Directive (EU) 2015/412 of the European Parliament and of the Council, under which it is possible for them to restrict or prohibit the cultivation of GMOs in their territory • Accordingly, in the case of GMOs, there has already been a degree of ‘repatriation’ at EU level, with corresponding extension of national and regional competence

3. 4. Inputs and Biotechnology This extension of national and regional competence has seen different decisions taken as to cultivation of GMOs across the UK, with ‘opt outs’ having been demanded for Northern Ireland, Wales and Scotland, but not for England: European Commission, Restrictions of Geographical Scope of GMO Applications/Authorisations: Member States Demands and Outcomes

4. International Trade “We definitely want to continue maximising trade possibilities with our European neighbours…But there also enormous opportunities around the world”: Rt Hon Angela Leadsom MP, Environment Secretary (Farmers’ Weekly (21 October 2016)) “So with zero tariffs and zero non-tariff barriers as our starting point, we are striving for the best possible access for our farmers and food exporters”: Rt Hon Angela Leadsom MP, NFU Conference on 21 February 2017

4. International Trade • What will be the treatment on Brexit of the EU’s existing tariff commitments under the WTO Agreement on Agriculture (Ao. A)? • Will the UK be entitled to a share of the permitted level for domestic support to farmers currently scheduled under the Ao. A in the name of the EU (without differentiation between Member States)? • Export subsidies are unlikely to be a major issue following their effective abolition for developed countries at the 2015 Nairobi Ministerial

4. International Trade A preliminary question is to establish the EU’s existing schedules in respect of both tariffs and domestic support: see, eg, Written Evidence of Peter Ungphakorn to House of Lords Brexit: Agriculture Inquiry (9 February 2017) http: //data. parliament. uk/writtenevidence/committe eevidence. svc/evidencedocument/eu-energy-andenvironment-subcommittee/brexitagriculture/written/46569. htm

4. International Trade • The most recent Schedule for goods to be certified was that for the EU-25 (December 2016) • In the case of domestic support, the most recent EU notification (for the 2012 -2013 marketing year) revealed considerable ‘head-room’: 5, 899. 1 million Euros of non-exempt support granted as against a 72, 378 million Euros ‘ceiling’: WTO, G/AG/N/EU/26 (2 November 2015)

4. International Trade Tariffs • In the absence of agreement with the remaining EU-27, WTO rules would place high tariffs on the export of certain agricultural products (eg, approximately 40 per cent in the case of lamb) • Would the UK Government consider unilaterally reducing tariffs on the import of agricultural products so as to bear down on food prices? • How would tariff rate quotas be divided (eg, would account be taken of their historic origin/ specific relevance to certain Member States)?

4. International Trade Domestic Support Various methods of division have been suggested, including: • division on an historic basis (eg, the proportion contributed by the UK to the EU’s Total Aggregate Measurement of Support when the Ao. A was concluded); and • division according to more current patterns of grant?

4. International Trade L. Bartels, ‘The UK’s status in the WTO after Brexit’ https: //papers. ssrn. com/sol 3/Papers. cfm? abstract_ id=2841747; L. Brink, ‘UK Brexit and WTO farm support limits’ http: //capreform. eu/uk-brexit-and-wto-farm-support -limits/); and A. Matthews, ‘Establishing the UK’s non-exempt limit on agricultural support after Brexit’ http: //capreform. eu/establishing-the-uks-nonexempt-limit-on-agricultural-support-after-brexit/).

4. International Trade • If the UK adopts a less precautionary approach to pesticide/herbicide use (eg, in relation to neonicotinoids or glyphosate), will other WTO Members be able to condition imports under the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)? • And will similar considerations apply in the case of GM crops?

4. International Trade To what extent will WTO rules permit ‘higher standards’? See, eg: • GATT Article XX(a): EC – Seals; • SPS Agreement (in particular, Article 3. 3 and Article 5): EC- Hormones; and • Agreement on Technical Barriers to Trade (TBT Agreement) (in particular, Article 2. 2): US – Tuna II (Mexico) Are the SPS and TBT rules more accommodating in the case of animal health than animal welfare?

5. Some Conclusions • There is a likelihood that the Pillar I direct payments regime will be substantially reconfigured post-2020 • Will the UK prioritise ‘competitive advantage’ by lightening the regulatory burden on farmers/ intensifying production or seek ‘market differentiation’ through the promotion of premium products (or seek to achieve both)? • A less precautionary approach to regulation may be adopted, with specific reference to England

5. Some Conclusions • UK agricultural policy post-Brexit must still comply with WTO rules • In the absence of agreement, there may be high tariffs on UK exports of certain agricultural products to the EU (with possibly no tariffs on imports) • There is less than full certainty as to the treatment post-Brexit of the EU’s WTO schedules for tariffs and domestic support