Brexit: What next for the UK food and farming sector?

A Newgate event with Phil Hogan, European Commissioner for Agriculture and Rural Development

As part of its ongoing communications work on Brexit, Newgate Communications jointly hosted a breakfast seminar with the Food and Drink Federation (FDF) on the post-Brexit trading and regulatory landscape for the agri-food sector. The keynote speaker was Phil Hogan, European Commissioner for Agriculture and Rural Development, who gave his observations and thoughts on the upcoming Brexit negotiations and their likely implications for UK’s farmers, food and drink manufacturers and retailers.

The event attracted much interest among the sector and there seemed to be genuine thirst for knowledge and insight from the audience on the European Commission’s perspective. With formal negotiations yet to begin and the UK in the middle of a general election campaign, there has arguably been precious little clarity or forward-thinking in the current UK policy debate. For businesses assessing the uncertainty ahead, much of the current political rhetoric and media coverage is unhelpful, myopic and overly partisan. Commissioner Hogan, of course, represents the European Union’s interest and, therefore, a one-sided view – but his candid assessment of the road ahead and straight talking advice provided a refreshing perspective for many in the room.

His key observations and recommendations can be summarised as follows:

 

  1. The next six to nine months will be focused on ‘settling the divorce’

Those who are familiar with European Council Guidelines and Commission’s negotiating directives will know that the EU wants a phased approach to Brexit discussions, ensuring that the ‘terms of withdrawal’ are discussed before negotiations on a future trading relationship begin. This will mean that sufficient progress will need to be made on matters concerning the financial settlement, the status of EU nationals and the Northern Ireland border before any trade talks start (the UK Government, on the other hand, wants to discuss terms of withdrawal and a future free trade deal concurrently, although there’s some scepticism whether it can achieve this).

The issue of financial settlement may prove politically controversial and to some represents ‘political poison’. In his view, however, it was better for both sides to have the row upfront, rather than haggle over money at the end of the talks. He thought it would be possible for both parties to establish the methodology and modalities of the UK’s obligations and phase payments over time. He said that the issue of EU citizens’ rights “shouldn’t be controversial” as it was a key priority for both sides. For the issues relating to the Irish border, however, he noted that there was currently no clear proper solution. He added that the UK leaving the customs union would cause enormous difficulties for the flow of movement between Northern Ireland and the Republic. He expressed concern that if things start to go wrong on trade, it may encourage more antagonistic and sectarian political forces, which could threaten peace in the region.

Getting through this ‘Phase 1’ stage, therefore, will require goodwill and flexibility on both sides. He said that if these discussion progress well, then productive discussions on a free trade deal can begin in January/February 2018. From the UK’s perspective, he thought that it will require the Prime Minister to facedown the hard-line elements in her own Party and the media in order to make the necessary compromises during this time. To this end, he considered that the Conservatives winning a large majority in the election would potentially be helpful in achieving this.

For businesses, perhaps the key takeaway is that even under the most optimistic scenarios, they are unlikely to gain much insight into the direction of a future trade deal (or transitional deal) until 2018 at the earliest.

 

  1. The EU27 are united and the UK has fewer negotiating cards than its politicians make out

Commissioner Hogan went to some lengths to stress the unity of the EU’s position, among the 27 member states and the Commission. He said it has been “no struggle” at all in getting member states to accept the negotiating directives and agree on  a unified position on Brexit. This unity had been threatened in the context of rising nationalism and populism in many member states, but now, following the Dutch and French elections, there was now a feeling that the EU had turned a corner and a level of political certainty and stability had been restored. In addition, he believed that the election of Emmanuel Macron would be a driving force in the next step of integration within the Union and a renewed Franco-German partnership.

He observed that this unity would mean the UK would be unable to ‘pick off’ individual member states on key issues. He also felt that the UK’s bargaining position was not as strong as some of its politicians have made out and some of the headlines in the UK media had not been helpful. The UK Prime Minister’s insistence that “no deal is better than a bad deal” was not seen as a credible position on his side – indeed “no deal” would be the worst deal, particularly for the agri-food sector with the imposition of harsh tariffs on a variety of goods and produce.

 

  1. The free trade deal is a ‘benign subject’ and it’s in everyone’s interest to get a good deal

While other aspects of Brexit negotiations may prove difficult, Commissioner Hogan said that discussions on the future free trade deal should be relatively uncontroversial, as it was in everyone’s interest to get a good deal. He did not think that EU would seek to “punish” the UK on a trade deal, as some media reports have suggested.  In addition, he noted that in Michel Barnier, the Commission’s negotiating team had a very practical man who wants to do a deal (who has his own personal credibility attached to ensuring talks do not fail) and was unlikely to let small areas of disagreement jeopardise broader talks.

He said that there was an ‘open mind’ on his side about the possibility of a transition agreement, but getting an extension to the talks would not be easy, given some of the ill-feeling among the member states.

 

  1. Hogan’s advice for the UK food and farming sector

Commissioner Hogan concluded his talk by providing some advice and recommendations to the industry representatives in the audience, as it seeks to protect its interests and engage with policy decision makers and politicians on upcoming negotiations. These were as follows:

  • Study the EU-Canada Comprehensive Economic and Trade Agreement (CETA) – this would provide the likely basis for how legislation and regulations between the two jurisdictions are resolved in a future trade deal. For the food and farming sector, this would involve issues around food safety, food standards and animal welfare.
  • Adopt a ‘whole government’ approach to its advocacy and lobbying. Ensure that any policy proposals can effectively resonate with the 27 member states – it would be a good idea, therefore, to test policy proposals with other member state governments.
  • Make sure that agriculture and food forms one of the UK Government’s ‘key asks’ in negotiating a free trade deal
  • Advocate, if possible, that the UK remains within the customs union. Hogan acknowledged that this was unlikely, as it was now a commitment to leave the customs union in the Conservative Party manifesto (although he added, cheekily, that if Theresa May had already changed her mind on one manifesto commitment, she might do the same on this).

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