Up until the middle of the last century, trade agreements were bilateral affairs between two countries and the tendency was for each country to protect its main areas of economic activity by granting very limited quotas to other countries with competitive products. Global trade was in its infancy and often restricted to importing produce that couldn’t be produced on the home market.

In the UK, for example, there was no issue importing citrus fruit that couldn’t be produced at home, or beef and lamb that weren’t produced in sufficient quantities to match consumer demand. In return, the UK exported the leading technology products of the time, such as tractors, cars and communication technology.

In the aftermath of World War II, 23 of the world’s most developed countries came together in Geneva Switzerland and produced a General Agreement on Tariffs and Trade (GATT). The purpose of this was to drive post-war economic recovery through the elimination or reduction of tariffs, quotas and subsidies on traded products, while maintaining meaningful regulation of standards.

GATT evolved into the World Trade Organisation (WTO) as a result of the prolonged GATT Uruguay round of trade talks that started in the mid 1980s and lasted several years. The by-now 123 members of GATT established the WTO in Tokyo in 1995, and since then this has been the forum to address global trade issues and resolve disputes.

One of the most relevant to Irish farmers was the USA referring the EU to the WTO for its banning the sale of beef produced with the assistance of hormones. The WTO found against the EU, but agreement of a significant quota for non-hormone beef satisfied USA needs at the outset – although the issues has re-emerged at the end of last year.

The history of GATT and subsequently WTO may seem to be endless negotiations with little apparent progress. That perception is inaccurate, as the global trading environment today is transformed from what it was at the end of World War II. In the year 2000, international trade was 22 times greater than it was in 1950.

WTO and agriculture

Achieving trade liberalisation in agriculture has proved the most difficult of all at the WTO and this is further demonstrated by the fact that agriculture is always the sticking point in any trade discussion.

In the middle of 2017 the discussions that ultimately led to the EU-Japan agreement went to the brink of collapse over access to the Japanese market for EU agricultural produce. Similarly, even after quotas have been agreed, CETA, the agreement between the EU and Canada, had still issues to resolved round management of the 18,000t dairy quota granted to the EU by Canada.

Currently the big issue in the EU-Mercosur negotiations is access to the EU market for beef, a matter further complicated by the imminent departure of the UK from the EU.

Farm support after Brexit

What is most an issue for farmers is how current WTO rules constrain the level of support permitted for farming. These have shaped recent CAP reforms, as support is now categorised by its impact on production.

For farmers in Scotland it will remain an issue, as a future Scottish agricultural support policy is developed within the UK, as opposed to the EU. Ultimately, farm support is dictated by WTO rules and cannot be designed in a way that allows a country or group like the EU distort global trade.

If direct production support is paid, it is categorised in what is known as the Amber Box, if it is related to a programme that limits production it gets “blue box” classification, while non-production support programmes, eg environmental, are classified as “green box” and are unrestricted.

The headage payments of the McSharry reforms in 1992 would be classified as amber box, but the Fischler reforms and introduction of decoupled payments in 2005 moved the majority of CAP support out of the restricted amber box.

Today, the EU only uses a fraction of its permitted level of amber box support, but that is not the case worldwide. There is a threshold of support that the EU is now comfortably below.

In so far as Michael Gove, the DEFRA minister with responsibility for agriculture, has indicated future UK support for farmers will be heavily tilted towards environmental support. This will comfortably fit into the green box, meaning a future UK Government would have little problem complying with WTO rules on farm support

EU-Brazil proposals

In July 2017, the EU and Brazil combined to make joint proposals to WTO on future support arrangements for agriculture among the 164 member countries that make up the WTO.

The EU and Brazil may seem an unlikely alliance in the context of support for agriculture. However, the fact that they can combine to submit a joint proposal to the now 164 members of the WTO for consideration in Argentina in December, reflects the distance the EU has travelled from providing direct support for farm production.

The EU is like Brazil now, a major global exporter of agricultural produce, and finds itself in competition with countries that continue to provide strong support. The USA is a renowned advocate of free trade, yet US farmers have been among the most protected in the world, with the farm insurance programme essentially a market guarantee.

The reality for EU farmers is that over the past decade in particular, the EU has liberalised agricultural support to the detriment of the productive farmer. They remain constrained by EU production rules on welfare, the environment and use of growth promoters.

The latter fall foul of WTO rules, yet EU farmers must comply with the EU rules. The challenge for the EU is, find a method that stops working against its own productive farmers.

In 2005, the EU unilaterally disarmed by ceasing the provision of export subsidies on produce to third countries, yet in 2016 Argentina introduced a 5% export subsidy on beef sales.

After Brexit, Scotland will have the opportunity to set its own policy for farming within the U, if trade links are to be continued to the EU, EU rules will still have to be complied with to maintain access.

Historically, the Common Agricultural Policy (CAP) was unapologetic in supporting its farmers and food production as Europe recovered from food shortages in the aftermath of World War II. That has long since ceased and farmers in the EU now have to compete globally. The proposals for the CAP after 2020 have indicated that the environment will be a key consideration of parallel importance to the provision of farmer support.