Post Segments
Cherry-picking – the only agricultural trade the CITP understands
Most of the information in the CITP’s latest paper has been cherry-picked to support the case for dynamic alignment with the EU’s SPS regulations regardless of whether the statistics are accurate. Unfortunately, the paper’s authors don’t appear to understand the Rules of Origin in the UK EU TCA nor the economics of trade. Nor have they considered the UK’s agricultural production potential, UK consumer requirements or the UK’s limited agri-food exports to any destination – EU or non-EU.
This badly researched paper appears to be written to give some cover to any UK politician willing to propose rejoining the EU by the backdoor and leaving the UK as an EU vassal state. All apparently for the sake of slightly less paperwork (but considerably more agricultural regulations and less innovation) for the UK’s very small amount of agri-food exports to the EU. Exports that have continued since Brexit, despite the UK not having an SPS nor a Veterinary agreement with the EU.
Who is the CITP?
I had never heard of The Centre for Inclusive Trade Policy (CITP) before reading this paper. Its website tells me that it is a research centre based at the University of Sussex Business School and was only established in April 2022. It is well funded to the tune of £8 million from the Economic and Social Research Council with another £4 million from its member institutions. Apparently, the CITP focuses on innovative trade policy research, and inclusivity in both formulation and outcome. This point is important because the CITP’s latest paper isn’t promoting inclusivity but dynamic alignment with the EU, an institution that excludes agri-food goods with the imposition of high tariffs, small quotas and strict SPS and TBT regulations. The EU is the antithesis of inclusivity.
The CITP has ten people in its leadership team, 39 researchers and three PhD students all under the leadership of Professor Michael Gasiorek. However, this paper was written by Emily Lydgate, the CITP Deputy Director and Alex Carson-Taylor who is not associated with the CITP but runs a consultancy, that describes itself as ‘a diversified trade, development and investment organisation focused on the global agri-food chain and natural resources.’ Emily Lydgate specialises in international Trade law and is currently ‘working on an EU Horizon 2020 grant project on how EU Free Trade Agreements and wider trade policy reflect the goal of securing sustainable agricultural practices and leading on a report for the UK Committee on Climate Change on trade policy and emissions reduction.’
Key Points one – employment and exports
The paper starts with some ‘Key Points’. The first is that the UK’s agri-food sector accounts for approximately 13% of the UK’s workforce implying that this is an important sector for the UK’s economy. While this is true, the vast majority of these people are not involved in agri-food exports as the Chart on page three of the CITP report clearly shows. This chart comes from a Defra publication, Food Statistics in your pocket, it is a summary of Defra’s much more informative annual publication entitled Agriculture in the UK 2023. If the CITP paper’s authors had bothered to read the long version, they would know that although the sector employs 4.4 million people, 85% of them are employed in restaurants, food retailing and food manufacturing – these businesses are primarily domestically focused and will continue to operate without an SPS agreement with the EU. Of the 10% involved in agriculture and fishing and the 5% involved in Wholesaling, a few of them may be affected by an SPS agreement, but not many, as I will explain in detail later in this article.
Another Key Point claimed by the CITP paper is that ‘UK agrifood exports to the EU have decreased by on average 16.34% per year compared to the previous 3-year period.’ This is not true! But as it is in the first bullet point of the paper, it is a good guide to the accuracy of the whole paper. Using Defra’s figures in constant 2023 prices, what the CITP meant to write was that the UK’s average agri-food exports to the EU in the three years post Brexit (2021, 2022 and 2023) is 16.3% lower than the average for the three pre-Brexit years (2018, 2019 and 2020). This is not a per-year change but the difference between two 3-year averages.
What the CITP paper didn’t explain, or perhaps doesn’t know, is that the three years before Brexit were the UK’s highest agri-food exports ever, measured in 2023 prices. Theresa May’s strategy of threatening to leave the EU without a trade deal certainly helped move UK agrifood exports, especially those products that store easily. 2019 saw record agri-food exports to the EU of all product sectors except animal feed and sugar which both made records EU exports in 2018.
The CITP also didn’t explain that exports in some sectors have fallen dramatically while others, less so. The 3-year average of UK Fruit and vegetable exports to the EU, for example, has fallen by over 40% simply because of the Rules of Origin in the UK EU Trade and Cooperation Agreement (TCA). I have written about this many times, but it would appear that the authors of the CITP paper, despite their credentials, have not read the TCA’s Rules of Origin. Before Brexit, many tropical fruits and nuts grown in Commonwealth countries were landed in the UK and then re-exported to other EU countries. These re-exports were recorded as UK exports by the EU’s Intrastat. Now the same exports are recorded as exports from their true countries of origin. This is also true for UK ‘exports’ of sugar and sugar preparations, down 35% between pre and post-Brexit 3-year averages, and UK ‘exports’ of coffee and tea, down 19%.
Other UK exports in agri-food sectors were lower in the three-years post-Brexit due to covid lockdown disruptions, lower production due to high fuel and fertiliser costs and poor growing seasons or cheaper (EU and non-EU) imports and in some cases because of increased local demand.
However, UK beverage exports to the EU, which make up more than a fifth of all UK agri-food exports to the EU by value, almost made a new record in post-Brexit 2022 but were considerably lower in 2023. This is unsurprising as the bulk of these exports will be high-value consumer products, whisky and gin, goods that most consumers cut back on during times of financial distress. It is disingenuous of the CITP to imply that lower agri-food exports to the EU post-Brexit were only due to a lack of an SPS agreement without considering the economic climate in these markets and the changes to the way we record exports.
Countries can’t export goods they don’t produce
Had the authors of the CITP paper read more than just Chapter 13 of Defra’s Agriculture in the UK report, they would have found the production numbers for most of the UK agricultural produce in Chapters 7 and 8 or they could have downloaded the Defra data sets which in most cases go back to the 1980s. The Defra commodity Supply and Use tables are in volumes so they are a more accurate measure of changes in export quantities than value data. The export and import figures are also helpfully divided between EU and non-EU countries.
Had the CITP looked at this data they would have discovered that UK fruit, vegetable and potato production have all been falling since 2015, UK sugar production reached its peak in 1997, and oilseed rape production has been falling since 2011. UK Barley production was highest in 1984 but this is also the beginning of the Defra records so it may have been higher before that. (Barley was a large export crop at the time and the UK exported about 2 million tonnes to both EU and non-EU countries. The UK now exports virtually no Barley but uses everything it produces and imports another million tonnes from the EU.) UK wheat production varies a lot each year due to the price when sowing decisions are made and the eventual yield, determined by weather and pestilence etc. The UK’s largest wheat crop was in 2008 but our highest yield per hectare was in 2015. In contrast, UK Oat production had its largest production year in 2021, after Brexit.
The point of all this is to explain that agricultural exports depend on total UK agricultural production. If the UK population consumes most of the UK supply, then our exports will be lower. Many EU countries have greater agricultural land, similar climates and soil types to the UK and can produce the same crops at a cheaper price. A new Sanitary and Phytosanitary Agreement (SPS) with the EU won’t change this and it is ridiculous of the CITP to suggest that a lack of such an agreement is the reason for lower UK agri-food exports. We can’t export goods that we don’t produce.
A similar mistake was made in a paper published by Aston Business School, Would a Veterinary Agreement be a boost for UK-EU agrifood exports? in June 2024. The CITP paper cites the Aston paper as supporting its case for an SPS agreement even though the Aston paper only covers a veterinary agreement and its conclusions are ludicrous – its authors have assumed that the UK has unlimited capacity to produce and export food to the EU and that the EU has an unlimited appetite for UK agri-food. Neither of course is true. Even when the UK was a member of the EU, with full access, the UK didn’t export 22% more agri-food to the EU and then we were miscounting our fruit, vegetable, coffee, tea and sugar re-exports as exports.
We should expect lower agricultural exports to continue as Defra encourages more UK farmers to take their land out of agricultural production to grow wildflowers, plant trees or build solar farms with overly generous Environment Land Management Scheme (ELMS) payments. This will affect UK exports to both EU and non-EU countries and an SPS agreement will not change this.
Key Point two
The CITP paper claims that before Brexit the UK and EU had developed highly integrated supply chains and that since Brexit, as a ‘3rd Country’, UK traders have a new set of regulatory barriers to deal with. ‘Traders’ is an interesting term, and although it would cover both importers and exporters, a review of UK trade data shows that the UK imports about 2.5 times as much agri-food from the EU as it exports to the EU.
The UK’s ‘3rd country’ status has not stopped the EU from exporting their agri-food products especially as the UK has not introduced any border checks on EU imports, something that the CITP paper is quite scathing about. So who is being inconvenienced by our lack of SPS alignment? Or are EU exporters worried that without the UK being tied into EU SPS rules, we may be able to import cheaper producers from non-EU suppliers?
This has certainly happened with sugar, with the UK replacing French beet sugar imports with Brazilian cane sugar since Brexit. I expect to see additional EU import substitution by CPTPP countries after the UK’s accession next week. This would be beneficial for both UK consumers and also for the CPTPP countries, several of which would still be regarded as developing nations.
It is surprising that a think tank dedicated to ‘Inclusive Trade’ would be trying to tie the UK to EU imports instead of encouraging more trade with CPTPP countries. But they are. The CITP paper is proposing that the UK dynamically re-align with the EU to counter the divergence that has happened as the EU has continued to tighten crop regulations while the UK has improved its animal welfare regulations – an area that did not interest the EU even when we were members. So, while the UK has finally banned live animal exports for slaughter, the EU has lowered its pesticide maximum residue limits (MRL).
However, a country does not have to formally align with the EU for its farmers to meet the EU’s MRL requirements. Farmers that rely on exports to the EU have already reduced their pesticide use to meet the EU’s new MRL standards, without the need for dynamic alignment. If UK farmers haven’t done so, then we can assume that horticultural exports to the EU are not a large market for them. As the UK is a large net buyer of EU fruit and vegetables, we already benefit from the EU’s strict MRLs without needing to sign an agreement.
Although the CITP paper would like to imply that all of the UK’s agri-foods need to comply with the EU’s MRLs, that isn’t true. The UK exports less than 3% of its vegetables to the EU by weight and only 6% of its fruit. An SPS agreement will not increase these percentages, just as being a member of the EU didn’t increase these percentages.
To keep things in perspective, the table below, using DEFRA trade tonnage, shows the proportion of UK cereals, oilseeds and horticultural production that is exported to the EU. All are less than 20%, most are less than 10% and few proportions have changed since Brexit other than those that included miscounted re-exports such as sugar and fruit. The UK only grows apples, pears and berries commercially and growers that export a large proportion of their production to the EU will already be complying with EU MRL rules.
Meanwhile, why would Britons want to give up on their new animal welfare regulations, to align with the EU? It wouldn’t help the UK’s strawberry growers, they are already complying with EU regulations if they export there, but it will harm UK animals. UK Animal rights activists have been unhappy with the European treatment of animals since the 1980s when they used to block trucks trying to export UK veal calves to the EU. After all of these years of campaigning why would they want to realign with countries that still allow the force-feeding of geese, among other things?
Devolved agricultural regulations
The paper does mention that since devolution, the UK does not have a single set of agricultural regulations and that each country is able to impose regulations that suit their weather and type of agriculture. Both Scotland and Wales, for example, are more heavily geared to grazing than to crop or cereal production. Attempting to impose alignment with EU SPS regulations especially if Scottish and Welsh farmers are selling most of their production locally or to England seems like an unnecessary battle for the new government.
Ireland and Northern Ireland agri-food trade
The CITP paper also fails to mention that a large part of the UK’s agri-food exports to the ‘EU’, especially unprocessed commodities such as milk and eggs, go to the Republic of Ireland and are exported from Northern Ireland rather than from Great Britain. For all intents and purposes, Northern Ireland is still in the EU and its farmers still comply with EU regulations. An SPS agreement would make no difference at all to this trade. Nor for that matter would a veterinary agreement.
It is strange that the CITP paper didn’t mention this, maybe they have never looked closely at what the UK exports to the EU and which EU country imports UK agri-food. For example, the UK is largely self-sufficient in eggs, producing about 90% of its consumption and importing the rest from the EU, predominately the Netherlands, Belgium and France. However, the UK does export a smaller quantity of eggs, 86% of which went to the Republic of Ireland. These eggs probably come from Northern Ireland. So, although the CITP paper is correct that it would be usual for 15% of egg exports to be inspected, eggs exported from Northern Ireland to the Republic will not be inspected due to the Irish Protocol Windsor Framework.
Other considerations
The CITP paper claims that the new government’s ambitions for economic growth could be met by growth in the agri-food sector is ludicrous. This is one of the UK’s smaller export sectors and Defra is paying farmers to take land out of agricultural production while the Net Zero Department is subsidising farmers to cover their flat agrarian land with solar panels instead of wheat.
The CITP believes that the EU’s Carbon Border Taxes (CBAM) and its Deforestation-Free Product regulations will somehow affect UK agri-food exports even though the UK government also plans to introduce a CBAM on imported fertilisers, the only agricultural product covered by either jurisdiction. The UK’s agricultural land was cleared hundreds of years ago so won’t be affected by the deforestation-free products regulations. The UK reached a low point of only 5% forestland in 1905, and since then re-forestation has brought UK forests back to 13% of the total land mass. Defra is also paying farmers to take farmland out of production to plant trees. If anything, we are over-complying with this EU regulation.
The CITP paper complains about the UK’s lower trade deficit in Agri-food with the EU but to most economists, and the general population, a lower trade deficit sounds like a good thing and improves UK food security. Why would we want to rely on one trade bloc for our food? It is not the cheapest supplier and has the same seasons and weather patterns as the UK.
The CITP paper quotes a June 2023 Farmers Weekly publication claiming that 70% of cereal growers, 68% of dairy, beef and sheep producers and 81% of vegetable growers believe Brexit has had an adverse impact. But the CITP didn’t mention the cited publication states the main concerns of the farmers were: a lack of labour to pick fruit and vegetables, a lack of labour in abattoirs, loss of the Basic Payment, an increase in input costs (fuel and fertilizer), and that the UK government had not reduced red tape. None of these issues would be solved by the UK aligning with EU SPS regulations.
The CITP paper has a useful table of the documentation and processes needed for the UK-EU agri-food trade. None of these things are unusual. Any business that exports goods will quickly learn which Harmonised System codes apply to their products and they will know the source of their inputs for rules of origin calculations etc. These things are required for trade all over the world and are generally handled by computer programs. As for the risk of inspection: the UK has banned live animal exports for slaughter so the 100% inspection rate will be limited to breeding animals and racehorses which are generally exported in small numbers and most breeders and trainers are familiar with the process as they export animals all over the world. The inspections of 15% of eggs have already been dealt with above while the 1% inspection rate for meat products should be acceptable. After all human health is more important than increasing our trade statistics or lowering the costs of producers.
UK imports from CPTPP countries
The CITP paper’s claims about the CPTPP are incorrect. Although the EU is not a party to the CPTPP, it does have trade agreements that include agri-food products with nine of the CPTPP countries. None of these countries have dynamic alignment with EU SPS regulations. While Chile, a member of the CPTPP, does not allow its farmers to treat their beef cattle with hormone pellets, the CITP’s fears around this issue are unfounded.
The CITP paper also claims that if the UK imports agri-foods from CPTPP countries, produced to non-EU regulatory requirements, then the UK would be forced to ‘accept border controls to monitor the flow’. I assume they mean border controls with the EU. But we already have border controls and all UK exports to the EU require Rules of Origin documentation which would alert the EU to any goods being reexported from CPTPP countries that don’t meet EU SPS requirements. That is literally the point of the paperwork that the CITP wants to avoid.
EU agreements with New Zealand and Switzerland
The paper compares the EU’s veterinary agreements with Switzerland and New Zealand without reminding its readers that Switzerland is landlocked by the EU, and all of its food imports must pass through at least one EU country. Switzerland also provides a major highway for agri-food goods to pass from Italy to Germany or from France to Austria.
Environmental considerations
The CITP paper is concerned that UK exports will be restricted if we don’t comply with the EU’s stricter packaging and waste, single-use plastic, arsenic levels and geographical indication requirements. But any UK agri-food producers that export to the EU will have already complied with these regulations and often do so for all of their production including domestic sales in the UK. For example, most people will have noticed that many of the lids on plastic drink bottles in the UK are now attached to the bottle as required in the EU. A country doesn’t have to dynamically align with the EU for its manufacturer to make their own decisions to align their production to EU regulations if their revenue relies on exports to the EU.
As for the reduction of neonicotinoids. This regulation started before the UK left the EU. The UK retained the ban but there have been emergency use powers given to some UK farmers whose crops suffered from aphid infestations. Aphids greatly reduce crop yields, so farmers are in a Catch-22 situation. If they use the pesticides, they will have a good yield to meet local and export demand, but using the pesticide restricts them from exporting to the EU. However, if they don’t use the pesticide, they have a lower yield and so don’t have enough to export and may not have enough to meet local demand, forcing the UK to import crops from countries that still use neonicotinoids. This may sound fanciful, but it is true of UK rapeseed production, where the UK has gone from a net exporter to a net importer with Ukraine as its largest import supplier, even though Ukraine still allows the use of neonicotinoids, (which are probably made in the EU).
The EU also imports rapeseed from Ukraine. So, I am not convinced that the EU would be able to ban crops produced using neonicotinoids provided the seeds meet the EU’s Maximum Residue Levels (MRL) for the pesticide. WTO law prohibits import restrictions that do not have any connection with the animals, plants or the environment of the importing country but are solely focused on the animals, plants or the environment of the exporting country (except for animal welfare issues).
For the record Australia has lodged a formal complaint with the WTO over the EU’s new lower MRLs, arguing that the EU’s stringent MRLs are not based on sound science and unfairly create trade barriers to their agricultural products while both Canada and New Zealand have also raised concerns over this issue. The WTO dispute resolution process is now examining the case to determine whether the EU’s MRLs are indeed trade-restrictive and not justified by scientific evidence. That said, both Australia and New Zealand lowered their own MRL’s last year even though Australia does not have a trade agreement with the EU and the New Zealand EU FTA only came into force in May this year. Countries don’t need dynamic alignment to decide to lower their MRLs to match those of their trading partners.
Conclusion
I agree with the CITP that the UK and EU should recognise the equivalence of each other’s SPS measures as the UK does with Australia and New Zealand. But that does not require dynamic alignment or worse unilateral alignment as proposed in the recent Product Standards and Methodology Bill. Such an alignment would make a mockery of Brexit, with the UK’s regulations being made to protect its foreign suppliers rather than its domestic consumers. It would also undermine the UK’s more open attitude to gene editing for precision plant and animal breeding which could increase UK agricultural productivity.
The CITP paper claims that before Brexit, around 90 per cent of UK food law and policy was made by the EU and that this deep regulatory harmonisation underpinned the UK’s reliance on EU food. However, I would suggest that this regulatory harmony enforced the UK’s reliance on EU agri-food suppliers. As did the EU’s high tariffs and small quotas on non-EU agri-foods. The UK is now free of this straight-jacket.
The UK is reliant on imported food as its population has outgrown its agricultural production, so it should open its imports to all suppliers, not tie itself to the EU. EU exporters appear to have adapted to the new system without any problems other than competition from some non-EU countries for UK customers.
The UK now has free trade agreements with some large agricultural producers. Not just Australia and New Zealand but also Peru, Chile, Mexico, Canada, Malaysia and Vietnam. And we may soon have trade agreements with India and maybe even the US. Why would anyone want to tie the UK into an SPS agreement with the EU when we are the buyer of their products, and the EU should know – the customer is always right. Perhaps the EU would consider complying with UK animal welfare regulations in order to continue exporting 650 thousand tonnes of pork and 300 thousand tonnes of beef to the UK each year. Have our trade officials even suggested this? I doubt it. Maybe our trade officials need to ‘be more Trump’. To coin a phrase.
