Watching the outcome of a G7 summit isn’t normally a priority for Scottish farmers, but in the world of global politics these are not normal times. The decision by the USA to go ahead with a 25% tariff on steel and 10% on aluminium imports from Mexico, Canada and, significantly, from the EU has potential repercussions for other products including dairy and pigmeat. The EU is retaliating with proposed tariffs on a range of products including cranberry juice, peanut butter, motorcycles and denim.

Why it matters

Where agriculture could get involved is if the dairy spat between the USA and Canada was to escalate. Despite the protestations of Justin Trudeau, the prime minister, Canada has a particularly protected dairy market.

The EU found this out with the CETA trade discussions and, even after agreement was concluded, access to Canadian dairy markets remained problematic, with Canada seeking to control a large portion of EU exports through approved Canadian importers.

The Canadians have their own issues with the EU as well, particularly on access to the EU beef market for which they have a 45,000t quota.

They are struggling to get interest among their farmers for producing to EU rules on non-use of hormones or use of acid in the carcase-washing process. For Canadian farmers and the processing industry, this means that pursuing approval to export to the EU isn’t worthwhile, particularly as they have huge access to other international markets, especially Asia.

Canadian dairy protection

Now that access to Canadian dairy markets has come to the attention of the US president and his stated ambition to protect US dairy farmers, we are left to wonder if agriculture is the next stop for a range of import tariffs.

The USA is one of the largest beef importers in the world, as well as exporter – given their demand for burger meat alongside their surplus of steak meat. Their major trading partners for beef are Australia, followed by Canada and Mexico, who are already in the president’s line of fire.

If the president was to target Canada, Mexico and the EU on agricultural produce in the way that he has on steel and aluminium, then we have to wonder how the UK could build an export business to the USA after leaving the EU.

Of course in any trade negotiations between the UK and the USA the main agriculture interest would be from the USA looking for access to the UK, rather than the other way round.

Brexit angle

The confrontation that has emerged between the US and the other G7 members is of particular interest to the UK as trade deals are contemplated after Brexit. The US is identified as one of the most plausible trade deals the UK could make once the constraints of EU membership are removed.

EU production standards

That will not be as straightforward as it may seem. When the EU and USA were in negotiations about a trade deal up until the middle of 2016, negotiations had reached stalemate, largely because of the EU production standards.

It has already been communicated to the UK by the US trade secretary that they should move away from having their standards aligned with the EU if they wanted to negotiate a trade deal with the US. UK minister with responsibility for agriculture Michael Gove has dismissed this idea, suggesting that a future UK government would be more likely to raise standards than lower them.

Firm stand by EU

While the UK wrestles internally with what it wants in a future trade deal with the EU, it is clear from comments made by EU lead negotiator Michel Barnier that the EU is unwilling to show much flexibility. Clearly it is determined that the UK will not have the best of both worlds, so that means much difficult negotiation lies ahead, with no guarantee of a satisfactory outcome.

A collapse in negotiations and hard Brexit can no longer be dismissed as too ridiculous to happen. It is difficult getting to a UK definitive position, and even then it is more difficult envisaging the EU accommodating that.

It is increasingly likely that the end game will be the EU presenting the UK with a “take it or leave it” option later in the year, and neither is good for future trading relations. If they leave, it means trading under WTO rules; if they accept it grudgingly, the relationship will continue to be fraught.

Scottish farmer position

Meanwhile, farmers are left in limbo. The proposals for the next common agricultural policy support package are now being evaluated across the EU 27 and, for the first time in 45 years, are of no direct interest to Scottish farmers. A UK farm support policy is awaited, with the opportunity to put a Scottish-specific angle on it anticipated.

The main battle is to secure the level of financial support as existed under the 2014-2020 CAP and while the financial package is secure for the duration of this parliament, it is essential to tie this down for the longer term to give farmers some certainty as they plan their future investments.

That leaves the issue of trade and for sheepmeat in particular as well as for some cuts of beef and offal, maintaining access to EU markets on current terms is vital.

Similarly, we need to be careful that free access to UK markets isn’t conceded in any future trade agreements, particularly with large exporters of agri-produce, who will likely be an early target of British ambitions to secure independent trade deals.

The political debate in Westminster and Brussels may be fascinating, but farmers need practical direction on a future path for agriculture, particularly in Scotland, where it is such a vital element of the rural economy.