Brexit – A UK decision that impacts us all

The possibility of Britain leaving the EU is very real, according to opinion polls, with an in/out referendum expected in June, though the regional administrations are asking for September because of their own elections in May.

With the Prime Minister committed to campaigning for staying in, there will be no work done in advance to present what withdrawal will look like. If it is a no vote, there will be a period of two years for negotiation of the exit process and what new arrangement with the remaining EU 27, as laid out in Article 50 of the founding treaty of Rome.

The possibility of exit has serious implications for Northern Ireland farmers directly, while south of the border a British exit will have indirect consequences as it is the market for half our food and beverage production.

Outlook conference

Over the past week the issue has been examined from an agricultural perspective by the Agriculture and Horticulture Development Board (AHDB), the English levy board, at its Outlook Conference and in a report for the Yorkshire Agricultural Society (YAS).

Professor Alan Matthews from Trinity College addressed the issue at the Outlook conference. There is considerable similarity with the YAS report as in the absence of certainty and a UK exit plan, it is only possible to look at various arrangements the EU has with other non-member countries.

One of the main arguments forwarded by those favouring exit is that the UK is big enough and trades enough with the EU 27 that an arrangement would have to be found as it would suit both parties. They are correct in this – the challenge is what an arrangement might look like. There are five types of trade arrangement that the EU has with non-members.

1. Be part of the European Economic Area (EEA) or the “Norwegian model”

This model enables a non-EU member avail of all the free trade arrangements between EU member states without membership. It operates in Norway, who have twice voted to reject the option of joining the EU as a full member. While this may initially look attractive, in practice it means accepting all EU legislation automatically into domestic law. This means that all the restraints of EU membership remain in place without the opportunity to shape or influence policy as a member. Not an attractive option in UK Government circles.

2. Join the European Free Trade Association (EFTA) – “Swiss model”

This is similar to the EEA in practice but involves incorporating EU law into domestic law by way of bilateral treaties. Switzerland currently has this arrangement but it is thought unlikely that the EU would extend this arrangement to the UK as they are not particularly happy with the time it takes to update Swiss legislation. In any case it would again involve the UK accepting EU legislation into domestic law without the opportunity to shape or influence it.

3. Customs Union with the EU – “Turkish model”

This is a common trade policy, which means that outside the EU, the UK could still be part of the customs union, as is the case with Turkey. Trade and goods can move freely within the customs union area and has less regulatory imposition but would involve accepting International trade agreements.

4. Deep and Comprehensive Free Trade Agreement (DCFTA)

Probably the preferred UK option which would lower or even eliminate tariff buyers and give more regulatory freedom than the other arrangements. However, it would be necessary to have post-exit UK standards recognised and accepted as equivalent to the EU in order to trade. For example, in an exit situation the UK couldn’t independently decide it would allow the use of hormones in beef production and trade that product into the EU.

5. Most Favoured Nation (MFN) – WTO option

This is essentially trading on a tariff paid basis and is the most unlikely option unless there is a serious breakdown in relationships after a British exit. It would be the most costly option both for Britain and the remaining EU27.

Professor Matthews is of the view that British-EU trade in agri-food would likely continue tariff-free but with Britain staying outside the single market. This would involve the return of border formalities including between Northern Ireland and the Republic of Ireland and an inspection regime to ensure compliance with EU legislation, an administrative burden in itself. Even outside a tariff arrangement, Professor Matthews estimates that the cost of doing business between the UK and the EU 27 would be an extra 5%.

Impact on farmers

Aside from trade, the other consideration that will concern Northern Ireland (NI) farmers is how the UK would support agriculture in a post-exit situation. Currently they receive €320m in direct payments to farmers. With the UK being a net contributor to the EU budget, there is no doubt that the Westminster government would have the resources to continue this payment after withdrawal. However, it would mean that the NI Executive would have to negotiate directly with Westminster on support for agriculture as the CAP money from Brussels is ringfenced. In a UK-only situation, the money saved from not contributing to the EU would be lobbied for by other resource hungry lobbies such as health and education and agriculture could find itself a lower priority in a UK context than it is in an EU context.

There is also a possibility that UK government support for agriculture could be more environmental-based and less by way of direct payments to farmers.

Any impact on farmers south of the border will come by way of market access to the UK and the possibility of the UK entering bilateral trade deals that could give favourable access to the UK for agri food which would compete with Irish exports to our main market. In addition there would be the 5% additional cost of doing business, as Professor Matthews indicated.

Agriculture afterthought

There is a general consensus that impact on agriculture will be one of the least considerations in the mind of UK voters when they go to the polls.

Wider political considerations will be the biggest influence with issues like migrants and control of borders dominating the debate to this point. It is possible that the advocates for withdrawal have had the campaign to themselves up to this point, and that is why the exit vote is ahead in the polls.

Perhaps as people get more engaged when a “stay in” campaign starts and the uncertainty of an exit may persuade the less engaged voters to stay with the relative certainty that the EU despite its flaws, provides rather than step into the unknown.