Brexit: Trade in Food

Stephen Gethins Excerpts

Thursday 14th June 2018 Westminster Hall

[Stephen Gethins (North East Fife) (SNP)]

I thank the Chairman of the Select Committee and its members for the work that they have put into the report over the past few weeks. The food and drink sector is enormously important across the UK. Mr Gray, I hope you will forgive me if I focus a little on the Scottish food and drink sector, which has grown enormously and very successfully over the past few years. It is a huge and very important employer, not least in rural communities, and the excellence of its products is increasingly recognised throughout Europe and elsewhere in the world.

The fishing sector in my own constituency is not quite what it once was, but it is still there, with fishermen working exceptionally hard producing fine produce that is then sent off around Europe from the quaysides in places such as Pittenweem. A large agricultural sector produces some of the finest food and drink, which makes its way to destinations throughout the UK and elsewhere in Europe.

There are other successful food and drink industries, including a growing number of whisky distilleries, which complement yet further the fantastic, vibrant food and drink sector in North East Fife. I recently visited a newly opened gin cottage, Darnley’s Gin, near Kingsbarns, which I would heartily recommend to people if they make it up as far as St Andrews. I recommend that the Select Committee visit it at some point, if it ever gets the opportunity. We cannot overstate how valuable such industries are and, as I have said, they are particularly important in rural communities.

The hon. Member for Tiverton and Honiton (Neil Parish) said something enormously important about clarity in the Government’s plans to leave the European Union. The Committee is right to seek greater clarity, regardless of what side of the debate people may have sat on. The EU is Scotland’s biggest overseas export market for food and drink—69% of food exports go to the EU, which is worth three quarters of a billion pounds. In Pittenweem, for instance, the lorries take the food products and they arrive in restaurants in Spain, France, Belgium the very next day. That is where customs checks become exceptionally important, and I know that is something that the Minister will want to touch on.

Fresh food and drink processes are where the customs union really comes into its own, and I wonder whether the Minister can give us some clarity. We are seeking clarity for something that may happen not in the years to come but in the months to come. In a sector that is already planning for next year—it does not plan a day ahead and it may plan years ahead—clarity has so far been very poor, and I know there have been a huge number of concerns about that.

The National Farmers Union Scotland has called for the UK or for Scotland to remain part of the customs union for that very reason—the critical importance of the customs union to our food and drink sector, to our export markets and our partners elsewhere in Europe—but there are other important areas as well. Protected geographical status is exceptionally important to the food and drink sector. Perhaps the Minister will want to update us on where we are with that. It is not just with whisky: Arbroath smokies recently obtained that status and there are other such products as well, so it is an important point.

The food and drink sector is employing an increasing number of people. Newburgh in my constituency has the highly successful Lindores distillery, and farmers next door are looking for a little certainty as well. We know from the Scottish Government’s analysis that any plans to take us out of the European Union will have an impact on our economy, and that is reflected in the UK Government’s own analysis, which we have all seen: that any plans to take us out of the European Union will hit our economy hard.

The Scottish Government analysis shows a loss of 8.5% of GDP, £12.7 billion, and by 2030, £2,300 per individual. That will hit industry, including the food and drink industry, because it relies on our relationship with the rest of Europe so heavily. Although those are figures from the Scottish Government—they have published those figures, so they are publicly available—we know that they reflect the UK Government’s figures. They are pretty much the same figures, because they were drawn together by a wide range of independent economists, whom the Government employ to teach them about this kind of thing. Will the UK Government now publicly publish their figures to inform a fuller debate about these key issues? The Scottish Government have been very open about this, but the UK Government have been less so.

I have mentioned the devastating figures for Scotland —my part of the United Kingdom—but Professor Graeme Roy of the Fraser of Allander Institute says that the food and drink sector in other parts of the UK will be even harder hit. Other hon. Members will reflect on that, but there is nobody here from Northern Ireland. We know how important it is to sort out that border problem, given the food and drink exports that go to and fro over the course of producing food and drink items. The World Trade Organisation rules would be the worst of all.

One issue that affects farmers now is seasonal workers. I hope the Minister will tell us how we can tackle that issue. Lord Duncan, the Parliamentary Under-Secretary of State for Scotland, was good enough to join me at a farm in my constituency recently. Mr and Mrs Mitchell, who run Allanhill farm, told him that they need clarity now, because their seasonal workers are down. The produce of that berry farm is for consumption across the UK and elsewhere in Europe, and they need to know whether to plant their next crop so they can harvest it next year. That is a very difficult decision if they do not have certainty about seasonal workers. This is not something we will be debating in the future; we are debating it in the here and now. Will the Minister reflect on the urgency of our food and drink producers’ situation?

That is echoed by James Orr, who farms around Blebo Craigs in my constituency. I am sorry to be talking about my own constituency, but those are the examples I know best. For example, I recently learned that there are only two places in Scotland where broccoli can be grown. One is in my constituency, because it is so sunny—yet another reason for the Select Committee to visit us. Broccoli has to be harvested by hand, and it is really important that it is not left to rot in the field. If seasonal workers are down, there is the distinct danger that that will happen.

On trade, the Scottish Government have done a lot of work on farmers markets and on promoting the food and drink industry, because agriculture is, of course, reserved to the Scottish Government. Will the Minister tell us how that will work in the future? The Secretary of State for Scotland is making a statement right now, but we have not had much in the way of certainty. The legislative consent motion for the European Union (Withdrawal) Bill, which will have a direct impact on this area, was refused by three quarters of parliamentarians in the Scottish Parliament—not just Scottish National party Members, but Labour, Liberal Democrats and Green Members, too.

Will the Minister tell us how we will take that forward? For instance, what will happen in the future if there is a dispute between the UK and Scottish Governments? I know the Minister will do everything he possibly can to avoid disputes, but such things will happen. If there is a dispute over the trade in food and drink, will Westminster simply override that decision, and therefore 20 years’-worth of devolved settlements?

What will happen if there are more trade disputes with, for example, the United States? Although the tariffs are being applied to steel, there is considerable concern that they will also affect the food and drink sector. The whisky industry, for example, has highlighted that. If we step outside the European Union, we step away from those closest to us in terms of our trade and our economy. They are closest to us politically and geographically, which is particularly important to the food and drink sector. What happens when the UK stands itself alone against the world? That is not a particularly comfortable place to leave our food and drink producers.

What happens to access to the critically important single market? Like the customs union, the single market and freedom of movement are hugely important to our food and drink sector. We have no clarity about those issues at present. I know the Minister will not be able to give us all the answers, but he needs to provide certainty. I thank Committee members again for their valuable work on this timely report. I hope the Minister’s response will reflect the urgency of the situation, as Committee members have done in their work.

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[George Eustice]

I agree with my hon. Friend. I was going to come on to why it is in everyone’s interest to do the type of agreement that we are offering. We do not believe that we have to have total uniformity of regulations on these various issues to have a frictionless border. It is quite possible to recognise what in trade jargon is called equivalence.

Our offer to the European Union is that bold and comprehensive free trade agreement, tariff-free trade and frictionless borders, where the European Union and the UK can both adopt a risk-based approach to any border checks they might put in place, assisted by technology. We want to give each other confidence by agreeing a set of arrangements through which we will recognise the equivalency of our various regulations. That can be done. Our starting point is not as a third country trying to establish a trade deal with the European Union, but as a member state that is stepping back from being a European Union member. On day one, we start with absolute uniformity of our regulations. That is unique in the world, which is why it is absolutely possible to do the type of agreement on borders that we seek.

The other point to recognise is that the European Union has a trade surplus with the UK in food and drink alone of £18 billion each year. It may feign indifference to its trade with the UK for the purpose of the negotiations that are going on, but that matters. Access to the UK market matters to Irish beef farmers, poultry producers in the Netherlands, pork producers in Denmark, horticultural producers in the Netherlands and cheese producers in France. They need access to the UK market. Therefore, it is in their interest to take up what we are offering, which is a comprehensive free trade agreement with frictionless borders.

[Stephen Gethins]

Will the Minister tackle the issue of how the customs relationship will work? Can he set that out? How will seasonal workers work? That is a matter of urgency; other Members also have made it clear that it is a matter of urgency.

[George Eustice]

I noted the hon. Gentleman’s points from his speech and will come back to them.

First, I want to address one of the questions posed by the report: what happens in a no-deal scenario? The reality is that there are quite a number of options open to an independent country in control of its own trade policy. It does not have to be most favoured nation rules, and that is the end of the story. One option for an independent country when setting its own trade policy would be to have unilateral tariff rate suspensions—it would keep the bound tariffs where they were, but it could suspend them on certain product lines if it wanted to. It also could have what is called an applied tariff for some product lines that was lower than the bound tariff set in the WTO schedule.

An independent country could also establish unilaterally something called autonomous tariff rate quotas—ATQs. They enable the country to create a quota in certain product lines to allow that tariff-free trade.

My hon. Friend the Member for Tiverton and Honiton pointed out that one of the issues is that those have to be what is described in trade jargon as erga omnes—open to all—around the world and not just to the European Union, but we could, of course, abide by our own sanitary and phytosanitary regulations. In a short period where such measures might prevail, our existing trading partners would find it easier to satisfy those and potential new ones. There are many tools in the box that we would have as an independent country controlling our own trade policy.

My hon. Friend also asked about a sector-by-sector analysis. He will be aware that in December last year, the Department for Exiting the European Union published analyses for each sector. The hon. Member for Stroud (Dr Drew) read that and was very complimentary about the detail in it. There was a specific report in there on the food and drink sector—my hon. Friend will be aware that, in addition to that, the Government have done a great deal of more detailed ongoing analysis and modelling—but for reasons that we have been clear about, and that I think Parliament understands, there are certain things in a negotiation that we should not put out there. Not everything that we have done has been published, but we have published that report sector by sector.

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[George Eustice]

Yes. I was going to return to that point. The Select Committee report states that we have to take care during the transition. We absolutely recognise that. Indeed, in our recent consultation, we described what we have as an agricultural transition, where any changes we make to the support regime will be done gradually over a number of years to take account of the fact that we do not want to deliver unsustainable shocks to the industry that it would not be able to cope with.

My hon. Friend the Member for Tiverton and Honiton mentioned the importance of Northern Ireland. I absolutely understand that a huge amount of trade takes place across that land border. That is why, unsurprisingly, the way we should approach that issue dominates much of the discussion about our future arrangements with the European Union. He will understand that that is a much broader discussion, which is being handled by people in the Government more senior than me.

Let me pick up on some of the issues raised by the hon. Member for North East Fife (Stephen Gethins), such as customs, which is being looked at. We have a cross-Government working group, which has brought on board lots of Departments, including Her Majesty’s Revenue and Customs and the Treasury, to look at customs, as well as DEFRA and our Animal and Plant Health Agency to look at border inspection posts. DEFRA’s focus is ensuring that we have the right capacity at any border inspection posts, and we will seek to agree our approach to that. Generally speaking, customs is regarded as an easier and more administrative thing to do, rather than necessarily requiring lots of checks and infrastructure at borders. Technology really has moved on in that area.

I simply make the point that one of our biggest successes in food and drink—perhaps the biggest, and certainly the biggest in Scotland—is Scotch whisky. We have zero tariffs on Scotch whisky, but that sector competes globally and has a recognised international brand. It is also very used to dealing with national markets, even within the European Union, because there are different alcohol duty rates so there must be bonded supplies for each country. There are sectors that have got very good at managing borders. Several hon. Members made the point in yesterday’s debate that we have borders even within the single market for things such as customs duties.

Probably the second biggest food export from Scotland is Scottish salmon, which again is renowned around the world. Scotland’s biggest competitor in that sector is Norway, which is outside the European Union and outside the single market for the purposes of fish products, because, as the hon. Gentleman will know, the European economic area does not cover fisheries products. So there are sectors, including fisheries and Scotch whisky, that have developed quite sophisticated ways to address some of these challenges. This is not an insurmountable problem.

The hon. Gentleman also raised seasonal labour. We recognise that that issue is important, which is why the Home Office commissioned the Migration Advisory Committee to look at what our labour needs will be after we leave the European Union. The MAC is already doing that piece of work. It published an initial summary of the responses it received, and it is now looking in earnest at what arrangements we will need after we leave, and in particular after the end of any transition period.

However, in some ways we already have the necessary structures in place under our existing migration system, through things such as tier 3. That is currently set at zero because we have free movement of people, but we could make some allowance for work permits in less skilled sectors if we wanted to and deemed that we needed to. We have been clear that we are looking at the idea of a seasonal agricultural workers scheme. We had one, which ran successfully from 1945 until 2013, and we have been clear that we are looking at that issue. I worked in the soft fruit industry for 10 years, so I am fully aware of some of the challenges. Those are issues that we will have the power to deal with as an independent country—they will not need to be negotiated with others.

[Stephen Gethins]

I am astonished by the Minister’s use of the phrase “an independent country” given that Ireland, Greece and Denmark all consider themselves independent countries. On customs and seasonal workers, he referred to infrastructure. I mentioned urgency, so what is the timescale for that infrastructure? We have heard from a wide range of experts—we still believe experts—that the end of 2021, or even the end of 2020 when the transition period ends, is not realistic. Have they got that wrong?

[George Eustice]

Look, on your first point—sorry, Mr Gray, it is a contagious problem. On the hon. Gentleman’s first point, there are degrees of independence. As things stand, as an EU member we do not have an independent farming policy, an independent fisheries policy or an independent policy on migration. When we leave and become not an EU member, we will have independence in those areas.

On the hon. Gentleman’s second point, there will be some challenges, but we have been working on this area. One scenario we have been planning for right from the referendum result is a no-deal scenario where we come out without an agreement, even in March next year. There are contingency plans and work has been done to prepare for such scenarios. While there will be challenges, we are aware of them and have been addressing them.