Exiting the EU would be a disaster for our farmers
In our new weekly column on legal matters, Helen Winter, head of corporate practice at Walker Legal, considers the implications for our agri-food sector of Britain leaving the EU
Debate will intensify as the UK referendum on membership of the EU draws ever closer, with some observers suggesting that it may happen as early as next year. While the UK is a net contributor to the EU, and puts in more than it gets out, this masks the variations in EU support across the country. The devolved administrations actually benefit more than many English regions. There is no guarantee that Westminster would replicate those benefits should the UK leave the EU.
Northern Ireland's economy is disproportionately more dependent on the agri-food sector than other UK regions and benefits from EU membership. While UK agriculture policy after an EU exit is unclear, the objective view would be that local farmers will be worse off.
In a Brexit scenario it is likely that farm subsidy - a large part of average farm income - would be scaled back. Under the 2007-13 Common Agricultural Policy, EU subsidies to UK farmers totalled €3.2bn (£2.37bn) a year. That's around 35-50% of total gross income for a farmer. For a majority, the single farm payment is the difference between profit and loss. Estimates suggest only the top 10% of UK farmers could survive without EU subsidies. While UK agricultural policy post-Brexit is uncertain, it is likely that subsidies would not be on the scale of CAP.
Significant structural changes would probably occur across the industry, with productivity improvements and increased efficiencies needed to sustain many agri-food businesses.
If the UK exited the EU, we would, of course, still want to sell our products there. But to gain access to the EU market, farmers and producers would have to apply EU standards. This is the case for Norway and other members of the European Free Trade Association. So-called 'EU bureaucracy' would actually remain. The only difference would be that the UK would lose any influence (however small) in re-shaping the 'bureaucracy'.
Post-Brexit, the UK would also have to consider trade agreements and tariffs with countries around the world. Trade implications are complicated and uncertain. However, most analysts predict new UK trade policies with non-EU countries would lead to greater competition on the UK market - though food security, safety and provenance may provide some protection to local businesses. However, given that Great Britain (GB) is the main external market for Northern Ireland, this could put further pressure on local farmers as competition intensifies and prices are squeezed.
Northern Ireland's other big market is the Republic of Ireland. Local farmers and producers already have to deal with currency implications of trading, or operating a business, across both jurisdictions. Brexit and a land border with an EU member state could bring additional complications.
Rules of origin checks, import license requirements and even physical border checks could all put upward pressure on trading costs for Northern Ireland businesses and reduce competitiveness in the RoI market. However, over time specific agreements negotiated between Westminster, Stormont and Dublin may abate such requirements.
Agricultural land is also relevant to the EU debate. Basic economics suggests that the problem with subsidies on production is that the cost rises to meet the excess profits created by the subsidy. Agricultural land prices have been inflated over the years by the guarantee of the single farm payment.
The European Commission estimates that eliminating direct payments would bring a 30% cut in land prices across Europe. If farmers have taken out debt based on land value, an anticipated reduction in price caused by a Brexit could have negative consequences. However, lower land prices could assist businesses to scale up production and deliver the efficiencies needed to compete on the world market.
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