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Alan Swinbank, a retired professor of agricultural economics at University of Reading, warned of great uncertainty around the future of the advantages negotiated by the EU as a whole with the World Trade Organisation (WTO).
“There are two areas where there is absolutely no consensus as far as I can see among lawyers,” said Swinbank. “One is how the maximum amount of subsidy the EU is currently allowed to give to its farm sector would be shared out between the EU and the UK.”
Farm subsidies are strictly controlled under WTO rules, and only those that are deemed to fall into the so-called “green box” because they do not distort prices are allowed. Swinbank said that although the eligibility of direct EU payments to green box status is questionable, no other country has yet challenged it. He added that it was unclear how much of the farm support currently allowed to the EU under WTO rules would transfer to the UK after Brexit.
We could potentially be in some difficulty if we continued with the direct payment
“If we came out of the EU and continued to give that same support within Britain, and in the divving up of the allowance between the EU and the UK we ended up with a very small allowance, we could potentially be in some difficulty if we continued with the direct payment,” Swinbank said.
“If it was deemed not to be a green box payment, we could end up in a situation where we were exceeding our WTO allowances.”
While he and other experts invited to speak before the UK House of Lord’s new Brexit agriculture inquiry agreed that direct payments should be phased out, they added that this should happen over a number of years.
“We do need to have some kind of transitional arrangement to make sure that farm businesses are not faced with a cliff edge,” said CAP specialist Wyn Grant, professor emeritus of politics at the University of Warwick.
Tariff-rate quotas
Swinbank said that the UK and the rest of the EU would also have to share out existing tariff-rate quotas, which define volumes of products that can be imported from non-EU countries at a lower rate of duty. “People who have lots and lots of discussions in Geneva tell me that the Australians and others are monitoring that development very carefully, because how these tariff-rate quotas are re-allocated between the EU and the UK matters enormously to some of their trade interests,” he said in reference to the WTO’s headquarters in Switzerland.
The panel discussed the case of New Zealand, which can export up to 228,254t of lamb to the EU every year at zero duty under such a tariff-rate quota. The UK is by far the largest importer of kiwi lamb in the EU, taking in one quarter of all lamb imported into Europe from New Zealand by volume. The re-direction of these trade flows is likely to have a significant impact on lamb markets in New Zealand, the UK, and the rest of the EU.
Hormone beef
Finally, Swinbank warned that the UK could face legal action if it maintained some of the trade restrictions currently imposed by the EU. “If we were trading by ourselves and we continued to have restrictions on beef hormones, then I would predict that the US would take us through a dispute settlement panel with the WTO pretty quickly,” he said.
The US has recently revived a WTO dispute on the EU’s hormone ban, and the UK would face similar challenges – this time on its own.
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