The phrase ‘trade, not aid’ was a landmark saying of the 1960s.
It came from a United Nations conference, where developing countries said they wanted to do business with richer countries, and not just receive financial aid. Roll on 50 years and this is in many ways the issue central to the Brexit debate. Long term success or otherwise is not about how much can be squeezed out of the Treasury to support agriculture, but about the conditions set for the farming and food industries being able to sell what they produce around the world.
Advocates of Brexit seem to believe that once it happens the whole world will rush to do business with the UK, relieved they no longer have to deal through the European Commission. Much is made of prospects to trade with the Commonwealth in a new trading bloc. However, so far as agriculture is concerned, while there are 52 countries in the Commonwealth most are small, while many that are large will be more interested in selling food to the UK than buying from it. However the only show in town is to make a commercial success of Brexit, whether or not businesses wanted it to happen. That process will not be helped by wishful thinking about trade. The sooner a cold dose of reality reaches Whitehall the better it will be for farming and food as key industries within the UK economy.
As things stand now exports should be booming. Sterling is at close to record low levels against key currencies such as the euro and US dollar. Businesses should be able to capitalise on that to beat competitors to the punch when it comes to export business. This has to be happening, although there are not many press releases from businesses posing beside big export orders. For now we have the best of both worlds.
We have a huge currency rate advantage – and as still full EU members we have access to the growing number of markets opened up through trade deals between the EU and various countries. The most notable in recent times are Japan and Canada, but a lot more are in the offing. Until Brexit happens UK companies can gain as much from these arrangements as businesses elsewhere in the EU. They should be coining it now and preparing for inevitably tougher times ahead when the EU-27 swap from trading on the same terms as us to being our biggest competitor.
One of the most controversial potential trade deals for the EU is with the Mercosur countries of South America, including the meat giants of Brazil and Argentina. This has been in the offing for years, and is as controversial with farm lobby organisation now as when negotiations began. However according to the commission this will be agreed in principle by the end of the year, while work continues on similar free trade deals with Mexico, Australia and New Zealand. What makes the Mercosur deal controversial with farmers is that it would ease tariffs for importing beef. The commission has admitted this will have a severe impact on the European beef industry. That is why beef, and indeed ethanol for biofuels, are classed as sensitive products in the negotiations. Brussels will make an offer on how much it is prepared to give away on these next month, but whatever is said it cannot be good news for the beef industry. Making this even more controversial is that Brussels is pressing ahead, despite the well publicised problems in the Brazilian beef industry.
This is going to hit the beef industry – the only question now being how hard. There is however a deeper concern for the UK in the Mercosur talks. To date the reason they have been held back is largely down to pressure from Ireland to protect its beef industry. That has been to the benefit of farmers elsewhere in the EU, and Ireland will maintain that pressure. Spring forward a couple of years until we are in the post-Brexit trade negotiations and there is one simple question farmers need to ask. That is who then will protect the interests of agriculture against the undoubted attractions of a free trade deal to help the wider economy. To date we have been protected mainly by the Irish and the French, but come March 2019 all bets will be off, and UK agriculture will be fighting its own corner from a weak position in an industrialised economy.