The UK government may be unable to support farmers with direct payments once the UK formally leaves the EU, according to rules set out by the World Trade Organisation (WTO).
Under WTO de minimis rules, which the UK will be subject to after it leaves the EU, developed countries are strictly limited in the size of direct supports that can be paid to farmers.
Speaking at the recent Oxford Farming Conference, UK secretary of state for the environment, food and rural affairs Michael Gove promised to maintain annual subsidies to farmers at £3.1bn to the end of 2022.
He also floated the possibility that payments could be maintained, broadly at that level to the end of 2024, although with a new cap applied to the highest subsidy claimants.
After that, he was clear that area payments would end, with public money only going to those farmers who deliver public goods linked to the environment.
However, it is questionable whether the UK will actually be allowed to maintain current funding levels to farmers after it formally leaves the EU, either in 2019, or after a transition period running to the end of 2020.
The rules
WTO rules state that developed countries can only pay direct supports to farmers up to an amount that does not exceed 5% of the total value of agricultural production in that country.
In the UK, total output by the country’s agriculture sector was just under £23.3bn in 2016.
Based on this figure, the UK government would only be able to pay annual subsidies to farmers of less than £1.2bn, or less than half the current value of subsidies paid to UK farmers, under the 5% threshold set out under WTO rules.
Should the UK pay above this level of direct subsidies to its farmers after it leaves the EU, other countries that are members of the WTO are likely to make complaints.
Amber box
The EU currently has an exemption to these WTO rules on farmer supports as part of an "Amber Box" allocation for all its member states.
The Amber Box allows the EU to pay direct subsidies to farmers that is above the 5% threshold.
It is likely the UK will seek to negotiate a share of the EU’s Amber Box allocation as part of the wider Brexit negotiations.
However, a special report from the House of Lords on Brexit and its impact on agriculture said the UK government was “overconfident” of securing a share of the EU’s Amber Box entitlement.
The report goes on to say that countries such as China and India, which are regularly accused of exceeding the 5% threshold of farmer supports, would almost certainly raise objections to the UK leaving the EU but keeping a slice of its Amber Box allocation.
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