Brexit down on the farm
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OXFORD – The United Kingdom’s withdrawal from the European Union no doubt carries many risks. But, if British politicians and business leaders are right, it also creates an important opportunity: the possibility of building a safer, greener, more efficient, and more innovative farming sector. If the UK manages to seize this opportunity, the EU, the United States, and other economies with highly protected agricultural sectors might follow suit.
As it stands, large parts of UK agriculture are locked into the EU’s Common Agricultural Policy (CAP), which is accused of driving the sector toward larger, more industrial, and more environmentally damaging practices, including by failing to support farm diversity and directing payments to Britain’s wealthiest landowners. A 2005 investigation found that the £3 billion ($3.9 billion) in subsidies that the UK receives from the CAP went largely to major agribusiness and food-manufacturing companies, such as Nestlé, Cadbury, and Kraft.
Once freed from the flawed CAP, Brexit’s proponents argue, the UK will be able to build a more competitive agricultural sector that better serves farmers and agricultural workers, including by reducing dependence on distorting subsidies. And they could be right. In New Zealand, the abolition of subsidies in 1984 helped to catalyze innovation and diversification in the agricultural sector, which today drives New Zealand’s economic growth.
It should be noted, however, that New Zealand’s agricultural sector had decades of experience surviving without subsidies. Indeed, those that were abolished in 1984 had been created in the 1970s as a short-term solution to new challenges to the sector. In the UK, by contrast, subsidies are deeply entrenched and flow to powerful wealthy supporters of the current government. This may explain why the government’s Brexit strategy proposes sustaining subsidies, to be paid for directly from the British public purse.
To be sure, the abolition of subsidies was only one element of New Zealand’s agricultural transformation. Equally important was the effort made by the country’s leaders to secure access to growing markets in the Middle East, Japan, and subsequently in China, which is now New Zealand’s largest export market, accounting for 21% of exports.
For the UK, again the situation is different. New Zealand is a huge net agricultural exporter, producing, for example, 98% more lamb and mutton than its population consumes. For New Zealand, therefore, finding new export markets was a matter of life and death. Britain, by contrast, is a net importer of agricultural products, buying 46% of its food from other countries, including 27% from the EU.
Free-trade agreements are as important to the UK’s effort to ensure its agricultural sector’s competitiveness as they were to New Zealand. But the primary objective must not be to ensure that British agricultural exports are competitive. Rather, Britain must ensure that foreign imports do not overwhelm its own agricultural objectives. In short, the existential challenge facing farmers lies within Britain’s own borders.
Of course, UK farmers will face increased hardship from losing the EU market, which accounts for more than half of what they export. Blocking EU migrants from the UK would also hurt farmers, given that many depend on the seasonal workforce. But the most pressing goal must be for Britain to decide what kinds of farms and food it wants to develop, and then to protect their interests in its deals with the world’s major exporters, with which it is attempting to conclude free-trade agreements. This includes the US, which is already seeking approval for its farmers to sell chlorine-washed chicken in the UK.
Yet the likelihood that British trade negotiators will secure favorable terms for domestic farmers is low. Almost every country in the world – especially the US – has well-organized and influential agricultural industries that are highly skilled at pushing their governments to secure advantages for them in new trade deals.
Moreover, unlike New Zealand’s negotiators, who always placed agriculture at the top of the agenda, UK negotiators are poorly placed to ensure that free-trade agreements protect domestic farmers. They are, after all, representing a services-driven economy, in which agriculture is not a major engine of growth.
As a result, far from protecting national agricultural objectives, new free-trade agreements are likely to bring increases in cheap food imports. Research commissioned by the National Farmers Union predicts that a post-Brexit UK is likely to see its imports of beef, poultry, butter, and milk powder increase.
Given the current state of British agriculture, it will be very difficult for UK farmers to compete with such imports. Many farmers are suffering a long-standing crisis in farm incomes. Young people are fleeing from the countryside; the average age of a British farmer is now 59. And the average British farm is 41 hectares, compared to New Zealand’s 250-hectare farms.
The writer is Dean of the Blavatnik School of Government and Founder of the Global Economic Governance Program at the University of Oxford.
Copyright: Project Syndicate