Farmers gain since referendum

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When the EU farm commissioner, Phil Hogan, was speaking in Dublin this week about the challenges of Brexit, it was clear this does not just pose challenges for the farming and food industry in the UK.

Ireland faces huge risks, as do others in the EU-27. On that basis the hard line being taken by some member states over negotiations with the UK is not tenable. The sooner that is accepted by politicians in Brussels and national capitals around the EU, the more realistic negotiations will become.

Farmers here have gained since the EU referendum, because of the plunge in the value of sterling against the euro. This has made exports more competitive. However the Irish have been putting a brave face on the exact opposite effect. The UK is its biggest food market, and food its biggest export earner. Irish suppliers are being paid the same in sterling by the major supermarkets, but that translates into a lot less in euro. Estimates are that this has already cost the Irish beef industry 80 million euro, and the dairy industry is probably taking an even bigger hit. A hard Brexit that would limit access to the UK market would cost the Irish economy 1.5 billion euro a year, with 600 million of that coming from the dairy industry alone.

That is a big hit, and Ireland is not alone on the list of vulnerable food suppliers to the UK. The Netherlands is the biggest, and others that would feel the pain include Germany, France, Denmark and Poland. This reflects the UK long being a net importer of food. Brexit without a trade deal would mean that exports from the UK to the EU would be on the basis of World Trade Organisation tariff rates, which would make business impossible. The response of those supporting a hard Brexit would be that the UK would impose the same tariffs, but it is unlikely the government would even contemplate the impact that would have on food prices.

This is why a deal is the best route. In cold war rhetoric this is a zero sum game, where there can be no winners or losers. This was the background to comments by Phil Hogan in Dublin this week. He was conscious that his audience was largely made up of worried Irish farmers and food industry representatives. He sought to reassure them, by underlining his confidence than an ‘ambitious and far-reaching’ bilateral trade deal would be reached between the EU-27 and the UK before Brexit happens. He however also stuck to the Brussels line that the UK would not be able to cherry pick the parts of the Single Market it wants, without accepting free movement of EU citizens and indeed making a financial contribution to the EU budget.

More controversially, Hogan claimed that in the UK those with ‘crazy ideas’ about a hard Brexit were losing the argument with people and the business community. He also made clear that there could be no bilateral deals between the UK and individual countries within the EU 27. That included any special arrangements between the UK and Ireland, although there seems to be some sympathy in Brussels for ways to be found to limit the impact of a hard border between Northern Ireland and the Republic of Ireland.

Many in the Dublin audience will have been reassured by the Hogan comments. Like any politician he was comfortable on home ground and played to the gallery. There was some reassurance for farmers here in his confidence that a trade deal would be struck, even if it is likely to be well down the two year Brexit negotiations road before that is confirmed. However concern remains about the prospect of a hard Brexit, with no trade deal. Hogan might dismiss those advocating this as the source of ‘crazy ideas’ but from their standpoint their stance is logical. They see trade with the rest of the world, beyond the EU-27, as the real prize of Brexit. That would include opening the UK to cheap food imports, which is why this is such dangerous thinking for farmers. The comments from the United States that it, like others, is more interested in a trade deal with the EU and its 500 million citizens than 60 million in the UK, might dent their confidence.

But there is plenty of support within government and the Conservative party for a hard Brexit with no trade deal in 2019.