I. INTRODUCTION
Brexit has the capacity to generate profound change for the agricultural sector across the United Kingdom (UK). Farmers will no longer be able to look to Common Agricultural Policy (CAP) support, with the extent and architecture of any future funding becoming a matter for domestic arrangements. Admittedly, CAP expenditure now accounts for a significantly lower proportion of the total European Union (EU) budget (39 per cent in 2015, as opposed to 73 per cent in 1985).Footnote 1 On the other hand, there is evidence that it still makes a major contribution to the financial stability of many UK farms. For example, over 2011–2015 total support provided over 30 per cent of agricultural factor income, with the value of direct payments subsequently increased in 2016 by reason of post-referendum changes in the euro/sterling exchange rate.Footnote 2 At the same time, farmers will prima facie cease to be subject to a wider EU regulatory regime which impacts not only on primary production, but also across the whole agri-food chain. The importance of this regulatory regime may be judged by the fact that many of those who have advocated leaving the EU have wanted ‘lighter touch’ governance for agriculture as an early dividend. Indeed, notwithstanding that the National Farmers’ Union (NFU) purposefully adopted an equivocal approach in the referendum debate, it regarded such EU legislation as a hindrance to competiveness.Footnote 3
This article will explore the legal implications for post-Brexit agricultural support, although attention will also be directed to the wider regulatory regime, since a defining feature of the CAP has been the increasing number of EU obligations relating to the environment, animal welfare and food quality which farmers must observe as a prerequisite to receipt of direct payments, with every indication that such a system of ‘cross-compliance’ is likely to continue post-Brexit. The exploration of these legal implications will proceed in three stages. First, there will be an outline of the current structure of the industry, with particular reference to its diversity in terms of physical landscape, operational scale and legal foundations. Secondly, there will be discussion of emerging policy within both central UK government and the devolved administrations. In this context, specific attention will be directed to the likely extent of funding and the proposed drive towards higher standards in environmental protection and animal welfare. And, in each case, this discussion will extend to the international trade dimension, since it would now seem to be accepted that post-Brexit the UK will be an individual member of the World Trade Organization (WTO) and individually subject to its rules, which are likely to have profound implications in terms of not only tariffs on imports and exports, but also the degree to which the UK can support its farmers. Thirdly, there will be consideration of the potentially difficult issues which arise as a result of agriculture being a devolved matter. The administrations in Northern Ireland, Scotland and Wales have set out visions which differ materially from those emanating from Whitehall, a state of affairs which is consistent with the level of diversity already indicated, as well as earlier policies (such as on the cultivation of genetically modified crops). Yet, questions may be raised as to the extent to which a truly devolved agricultural policy can be implemented when, under the constitutional settlements, key powers in relation to, inter alia, finance and international trade currently remain vested in central UK government.
II. THE STRUCTURE OF UK AGRICULTURE
On a narrow interpretation, the agricultural sector in the UK may be regarded as a relatively small component of the national economy. Its share of Gross Value Added (GVA) in 2016 was less than 1 per cent, while the total labour force on commercial holdings was only 466,000.Footnote 4 On a broader interpretation, however, the agri-food sector in 2015 accounted for a total estimated GVA of £109 billion, some 6.6 per cent of national GVA.Footnote 5 Further, it is an area of vigorous international trade: in 2016 exports of food and drink for the first time exceeded £20 billion, with particular momentum in quality produce, although it may also be noted that it is an area of systemic deficit and that the trade gap in food and drink during the same year widened to £22.4 billion.Footnote 6 Significantly from the viewpoint of post-Brexit trading relations, the bulk of both current imports and exports are to other EU Member States, with those countries being the destination of 96 per cent of exports of sheep meat and 93 per cent of exports of beef.Footnote 7
As indicated, beneath these overall figures there exist significant disparities in the structure of agriculture across the UK;Footnote 8 three examples may be provided. First, the variations in physical landscape prompt not only different forms of land use, but also different policy responses in terms of support for farmers. By way of illustration, in Scotland livestock production predominates, reflecting the fact that the vast majority of agricultural land falls within severely disadvantaged, less-favoured areas.Footnote 9 Consistent with this, the livestock sector in Scotland has enjoyed a proportionately high level of subvention: less-favoured area support schemes have received the greatest sums under the Scottish Rural Development Programme 2014–20; and in Scotland alone there has been specific support for beef and sheep production (until 2015 the Scottish Beef Calf Scheme and now the Scottish Suckler Beef Support Scheme (Mainland and Islands) and the Scottish Upland Sheep Support Scheme).Footnote 10 By contrast, agri-environment-climate schemes have formed the major plank of the Rural Development Programme for England 2014–20, these having especial relevance in the uplands, but also enjoying currency in the lowlands.Footnote 11
Secondly, while the scale of holdings in the UK is large by EU standards, the overall figures again mask regional variations. As of June 2016, the average area of all holdings was 80 hectares, but the average for Scotland was 109 hectares as compared to only 41 hectares for Northern Ireland.Footnote 12 On the other hand, this average for Scotland would seem to reflect the amount of extensive grazing, as opposed to the presence of numerous large-scale enterprises, and a further comparison which could therefore usefully be drawn would be that between the relative net worth of farms. Taking figures for England alone, these reveal that in 2015–16 the average net worth of farms had reached £1.75 million, although again there was considerable variation depending on farm type and location, with mixed, mainly owner-occupied farms being the most valuable.Footnote 13
Thirdly, a fundamental consideration remains that agriculture is a sector where the legal foundations differ substantially by reason of powers having been devolved to the Northern Ireland Assembly, the Scottish Parliament and the National Assembly for Wales;Footnote 14 and, in this context, the broad extent of the devolved powers has received express affirmation from both the UK Supreme Court and the Court of Justice of the European Union (Court). Thus, the Supreme Court has held that the National Assembly for Wales was competent to introduce a regime for the regulation of agricultural wages in Wales, notwithstanding argument by the Attorney General that in reality the legislation did not relate to agriculture, but to employment and industrial relations (matters which had not been devolved).Footnote 15 The Court has also confirmed that, in circumstances where the constitutional system of a Member State provides devolved administrations with legislative competence, it would not of itself amount to discrimination contrary to Community law if those administrations were to impose different criteria on the receipt of direct payments by farmers.Footnote 16 Accordingly, as the law is presently constituted, there is much scope for legislative differentiation across the UK; and, where EU law has granted discretion for regional implementation, the devolved administrations have shown themselves capable of putting in place regimes which depart materially from that in England.Footnote 17 Perhaps the clearest illustration would be provided by their rural development programmes, each separately approved by the European Commission. But a sense of the direction of travel may also be gleaned from the recent decisions by Northern Ireland, Scotland and Wales (but not England) to seek restrictions on the cultivation of GMOs within their territories.Footnote 18 A matter of some significance for post-Brexit agricultural policy is that the decisions would seem to have been underpinned by a resolve to celebrate a more environmentally-attuned approach to farming and food: as stated at the time by the Northern Ireland Environment Minister, ‘[w]e are perceived internationally to have a clean and green image. I am concerned that the growing of GM crops, which I acknowledge is controversial, could potentially damage that image’.Footnote 19
III. EMERGING AGRICULTURAL POLICIES
A. General
Following the 2016 membership referendum, the details of post-Brexit agricultural policy have not been swift to emerge. Indeed, at the NFU Conference in February 2017, the then Secretary of State for Environment, Andrea Leadsom, acknowledged that farmers were still ‘looking for clarity on specific issues – such as the future of direct payments, the prospects for seasonal agricultural workers, and access to the single market to name just a few’.Footnote 20 At a broad level, nonetheless, there were soon indications of a preference for free trade and for a ‘bonfire of regulations’. For example, she confirmed an intention to continue to maximise trade with the EU, while at the same time making reference to the ‘enormous opportunities around the world’;Footnote 21 and she also saw the opportunity to reduce ‘red tape’ as a prime post-Brexit objective.Footnote 22
In addition, the outlines of future agricultural support regimes could be detected. Consistent with earlier policy documents, however, there was less than enthusiasm for the continuation of direct payments to farmers on an area basis, with instead a growing expectation that farmers would be required to earn receipt of their support, looking to alternative models such as the provision of ‘public goods’ or ‘ecosystem services’.Footnote 23 Even before the referendum the Minister for Agriculture, George Eustice, stated that:
[t]he UK has always made clear that we would like to move away from subsidies in the long run. However, we recognise that there is scope for using taxpayers’ money to pay farmers for public goods that the market otherwise would not reward, such as protecting the natural environment, supporting biodiversity and improving animal welfare.Footnote 24
And such sentiments have been echoed thereafter. At the Oxford Farming Conference on 4 January 2017, the same Minister for Agriculture affirmed that funding would remain in place, but in exchange for the provision of ecosystem services (together with support for insurance and productivity);Footnote 25 and it was his view before the House of Lords European Union Energy and Environment Sub-Committee that ‘rewarding farmers for what they do for the environment’ was ‘a legitimate aim of public policy’.Footnote 26 Similarly, the Government response to the Report of that Committee reiterated that ‘[a] new agri-environment system that encompasses a broad recognition of the public goods delivered by our farmers, such as our treasured countryside and landscape is a priority’.Footnote 27
More recently, policy objectives would seem to be coalescing around the receipt by farmers of support for the promotion of high levels of environmental protection and at least one further ‘public good’, namely animal welfare.Footnote 28 In particular, the new Secretary of State for Environment, Michael Gove, announced that, ‘alongside encouraging greater bio-diversity and the way in which farmers manage their land, I also want to see higher standards across the board of animal welfare’, with both of these objectives being seen as integral to the generation of a ‘Green Brexit’.Footnote 29 Indeed, this ‘race to the top’ is arguably developing as a defining feature of future UK agricultural policy, although there would also appear to be certain headwinds which such an approach will face. In particular, concerns have been forcefully expressed that it would be difficult to maintain high environmental and animal welfare standards in the event of an influx of cheaper imports produced to lower specifications.Footnote 30 These concerns were heightened following a rather equivocal rejection of the prospect of imports of chlorine-washed chicken by the Secretary of State for International Trade, Liam Fox.Footnote 31 That having been said, central UK government would, for the present, seem to be stopping short of a more purely ‘public goods’ model as championed by their adviser, Professor Dieter Helm. More precisely, he has advocated that the use of public funds on the purchase of ‘public goods’, directly contracted through public bodies, is to be preferred to the maintenance of existing levels of subvention (even if focus is shifted to the environment); and, while he has been clear that farmers may be well placed to secure these direct contracts, he has also countenanced that others may participate in the ‘market’.Footnote 32 Such a regime would, however, give rise to novel challenges not only in terms of the identification of the ‘public good’, but also in terms of policy implementation and evaluation.Footnote 33
At the same time, as a perhaps inevitable consequence of the constitutional settlement, early indications of policy have revealed potential tensions between central UK government and the devolved administrations, with the architecture of support regimes again to the fore. By way of illustration, at the Oxford Farming Conference on 4 January 2017, the Minister for Agriculture made reference to a ‘UK framework’, while also emphasising that ‘[w]e need to work in cooperation with the devolved administrations’ – although this was not sufficient to prevent rejoinder by the Welsh Assembly Agriculture Minister that ‘[t]he frameworks have to be based on agreement between the UK government and devolved regions’ and that ‘[t]his isn’t a rewinding back from devolution’.Footnote 34 In addition, it is of note that the devolved administrations have in general been swifter than central UK government to provide a vision for agriculture post-Brexit: again by way of illustration, in January 2017 the Welsh Government issued its White Paper, Securing Wales’ Future, in which farming was accorded high priority, with appeal not only to the need to support the industry, but also to the preservation of languages, culture and traditions, which on several interpretations are regarded as ‘public goods’.Footnote 35
B. Extent of funding
As indicated above, the CAP accounts for just less than 40 per cent of the EU budget; and, in terms of expenditure specifically in the UK, the total figure for the EU 2016 financial year was €3,927 million. Of those €3,927 million, the substantial majority (€3,121 million) was devoted to ‘Pillar I’ measures (direct payments and market support), ‘Pillar II’ measures (rural development) receiving only €806 million, including national co-financing. Significantly, the Basic Payment Scheme, paid on an area basis and understood to be decoupled from production, accounted for as much as £2,568 million in 2016.Footnote 36 And it may be re-iterated that, with particular relevance to rural development measures, there were material differences between the constituent parts of the UK, with the focus of expenditure in England being on agri-environment schemes, as opposed to, for example, support for less-favoured areas in Scotland.
The continuation of this level of support post-Brexit would instinctively have appeared vulnerable. As noted, an antipathy to direct payments under Pillar I was evident in earlier policy documents: thus, in A Vision for the Common Agricultural Policy issued in 2005, it was stated that ‘EU spending on agriculture would be based on the current Pillar II and would support these objectives as appropriate, allowing a considerable reduction in total spending by the EU on agriculture and bringing this into line with other sectors’.Footnote 37 Further, the UK has not historically shown a great appetite for Pillar II measures which have required co-financing by the Member State.Footnote 38 Nevertheless, early comfort as to future funding was given in a letter on 12 August 2016 from the Chief Secretary to the Treasury to the Secretary of State for Exiting the European Union. This comfort extended to overall levels of expenditure, while also intimating that the legislative framework would, in principle, remain relatively unchanged, the exact wording being as follows:
The Treasury will therefore reassure the agricultural sector that it will receive the same level of funding that it would have received under Pillar 1 of CAP until end of the Multiannual Financial Framework in 2020, alongside considering the options for long-term reform beyond that point. The government will work closely with stakeholders to ensure that funding in the period immediately after exit is used to help the agricultural sector transition effectively to a new domestic policy framework. These funds will be allocated using the principles of CAP Pillar 1, and we will of course consider the opportunities post exit for making any short-term improvements to the way the system operates once we cease to be bound by EU rules.Footnote 39
Subsequently, reassurances have become even more expansive, at least as to the future horizon for the maintenance of a support regime and its scale. Most notably, there was a statement in the Conservative Party Election Manifesto that ‘we will continue to commit the same cash total in funds for farm support until the end of the parliament’.Footnote 40 This was re-affirmed in the Agreement between the Conservative and Unionist Party and the Democratic Unionist Party (DUP) following the June 2017 General Election, with express recognition of ‘the importance of the agriculture sector to Northern Ireland and the opportunities for growth that exist’; moreover, the Agreement went so far as to identify agriculture as ‘a critical policy area during the EU exit negotiations’.Footnote 41 Accordingly, it could perhaps be argued that a side-wind of the 2017 General Election, and the consequent reliance of the Government on the DUP, has been significantly to prioritise agriculture within the post-Brexit landscape. Nevertheless, a structural change in terms of agricultural expenditure will be that, subject to the reassurances mentioned above, budgetary decisions will as a rule be made on an annual basis, farmers no longer being able to rely on the extended EU programming period (with the present period running from 2014 to 2020). It may further be observed that neither the Conservative Party Election Manifesto nor the Agreement between the Conservatives and the DUP made mention of continued allocation ‘using the principles of CAP Pillar 1’.
Over and above any such political decisions within the UK, consideration must also be given to the WTO legislative framework which has the capacity to restrain overall levels of funding to farmers. More specifically, the Uruguay Round Agreement on Agriculture (URAA) continues to impose ceilings on the provision of ‘domestic support’, with each WTO member obliged to maintain trade-distorting (Amber Box) domestic support within the Total Aggregate Measurement of Support as determined by reference to their respective schedules;Footnote 42 in this context, three aspects may be highlighted. First, the relevant schedule is currently in the name of the EU, without any distinct share in the name of the UK. Secondly, there would not seem to be clear rules as to how the UK, as an individual member of the WTO post-Brexit, might establish its own schedule, although the EU and the UK have already stated that apportionment between the future EU and the UK will take place ‘on the basis of an objective methodology’.Footnote 43 Since UK domestic support at the time of the URAA contributed to the permitted overall ‘Base Total Aggregate Measurement of Support’ for the EU, there is an argument that the UK should be entitled to the ‘return’ of that contribution.Footnote 44 On the other hand, practical difficulties have been identified as to how the precise calculation should be made, including problems in obtaining historic data.Footnote 45 Such historic hurdles would be circumvented if the UK entitlement were instead determined, as suggested by Bartels, by reference to UK receipts from the CAP, ‘calculated as the ratio of UK:EU CAP payments (over a representative period of three years) applied to the EU’s total subsidy commitments’.Footnote 46 A consequence, however, would seem to be an entitlement adversely affected by low levels of expenditure on rural development measures over the representative period, but calculation on the basis of current figures has also been foreseen by the Minister for Agriculture, who regarded the logical approach to be a UK entitlement ‘based on our allocation of the CAP budget’.Footnote 47 Besides, he also foresaw this to be no more than the exercise of ‘a process of technical rectification’ for WTO purposes, notwithstanding the possibility that certification of the new schedules of the UK (and the EU) might yet be required from other WTO members, and that such certification might not be forthcoming.Footnote 48
Thirdly, if the UK were to fail to secure a schedule or were to become entitled to a schedule which permitted only low levels of domestic support, the effects would be mitigated to the extent that funding to farmers was delivered through measures which were exempt under the URAA. In this regard, specific attention may be paid to: de minimis support; Blue Box support; and Green Box support. It is provided that the first-mentioned falls outside the calculation by a WTO member of its current levels of domestic support, but the de minimis thresholds are not set high for developed country members, such as the UK: in their case, any product-specific domestic support must not exceed 5 per cent of the total value of production of a basic agricultural product during the relevant year; and any non-product-specific domestic support must not exceed 5 per cent of total agricultural production.Footnote 49 Nevertheless, this exemption would seem to offer some scope for potentially trade-distorting measures, including measures which have the capacity to boost production.Footnote 50 By contrast, support would only be exempt within the Blue Box where direct payments were made ‘under a production-limiting programme’, as under earlier set-aside schemes and livestock quota schemes.Footnote 51 For that reason, the Blue Box exemption would not sit easily with a key purpose identified for the Agriculture Bill to implement Brexit, namely to ‘[s]upport our farmers to compete domestically and on the global market, allowing us to grow more, sell more and export more great British food’.Footnote 52 Indeed, in the Conservative Party Election Manifesto there was express advocacy of a new framework ‘for supporting food production’.Footnote 53
In consequence, the greatest opportunity to secure WTO compatibility for UK domestic support post-Brexit is likely to be Green Box exemption under Annex 2 to the URAA. All Green Box measures must meet the ‘fundamental requirement’ of having ‘no, or at most minimal, trade-distorting effects or effects on production’; and, accordingly, all such measures must meet two ‘basic criteria’, together with policy-specific criteria and conditions, the ‘basic criteria’ being as follows:
(a) the support in question shall be provided through a publicly-funded government programme (including government revenue foregone) not involving transfers from consumers; and
(b) the support in question shall not have the effect of providing price support to producers.Footnote 54
For the present, the vast majority of support under the CAP is understood to be Green Box exempt by reason of its conforming to both the ‘basic criteria’ and the policy-specific criteria and conditions governing ‘decoupled income support’.Footnote 55 As early as 2011 the European Commission affirmed that ‘[t]oday more than 90% of direct payments are decoupled and qualify for WTO green box (with no or limited trade distorting effects)’;Footnote 56 and, in its recent notification to the WTO (relating to the 2013/2014 marketing year), the EU declared total Green Box support of €68,697.8 million, in respect of which some €31,845.4 million were attributable to decoupled income support, as opposed to total trade-distorting support, counting towards the Current Total Aggregate Measurement of Support, of only €5,971.7 million.Footnote 57 In consequence, if the UK does refocus agricultural support on the delivery of ecosystem services and higher standards of environmental protection and animal welfare, then there would be a demonstrable shift away from current reliance on decoupled income support payable to farmers on the basis of the number of hectares which they farm, with recourse instead to different Green Box policy-specific criteria and conditions. Compatibility with these different policy-specific criteria and conditions will be addressed below.Footnote 58
C. Environmental protection and animal welfare
As has been seen, current central UK government preference in terms of agricultural support post-Brexit would appear increasingly directed towards the promotion of high levels of environmental protection and high standards of animal welfare. In this respect, it may be considered to continue longstanding traditions: as highlighted in the House of Commons Research Paper, Leaving the EU, the UK enjoys ‘a heritage’ in habitats protection, while a leading role in policy development is perhaps even more pronounced in the area of animal welfare.Footnote 59 For example, the UK banned the use of closely-confined sow stalls in the pig sector as from 1 January 1999, whereas it was not until 1 January 2013 that such a ban was imposed by EU legislation, and then only partially.Footnote 60 Further, the UK has been the source of (in the event, unsuccessful) attempts before the Court to bolster standards of animal welfare on export;Footnote 61 and a notable feature of the Conservative Party Election Manifesto was that it regarded as a post-Brexit dividend the ability to ‘take early steps to control the export of live farm animals for slaughter’.Footnote 62
That having been said, it must also be recognised that the use of agricultural support mechanisms to promote both environmental and animal welfare standards has already become embedded in the EU regulatory framework for the CAP. In the case of Pillar I, as indicated, the cross-compliance regime now extends to cover a range of statutory management requirements under, inter alia, the Nitrates Directive, the Wild Birds Directive, the Habitats Directive and the EU legislation providing minimum standards for the protection of calves and of pigs, while farmers must also observe a range of standards for good agricultural and environmental conditions established at national level.Footnote 63 Moreover, since the 2013 CAP reforms, farmers are now subject to obligations which go beyond cross-compliance in order to secure receipt of the ‘Greening Payment’ for agricultural practices beneficial for the climate and the environment’, this payment accounting for 30 per cent of the national envelope for Pillar I direct payments of each Member State.Footnote 64 More precisely, they must observe rules relating to crop diversification, permanent grassland and ‘ecological focus areas’.Footnote 65 It is a matter of note that the detailed provisions in respect of crop diversification rules were singled out as an early target for repeal post-Brexit.Footnote 66
Further, specific support for the environment has long been available under Pillar II. Thus, the current regime includes within its six priorities for rural development the promotion of animal welfare and ‘restoring, preserving and enhancing ecosystems related to agriculture and forestry’, with three specific measures which fall within the latter category being: agri-environment-climate schemes; organic farming schemes; and Natura 2000 and Water Framework Directive payments.Footnote 67 Importantly, all three of these measures are understood to go above and beyond the baseline of good agricultural practice which is inherent in cross-compliance obligations, with express provision also to prevent farmers receiving funding for the same actions under both the Greening Payment and rural development regime.Footnote 68 On the other hand, it may be noted that the 2013 CAP reforms did not see any substantial advances in terms of elevating animal welfare standards.Footnote 69
Accordingly, the current CAP legislative framework delivering support to farmers does contain a considerable range of measures addressing concerns in relation to both environmental protection and animal welfare. Yet there remains a real sense that scheme design could be materially improved post-Brexit and that, in particular, the detailed rules of agri-environmental regimes could be tailored more effectively to conditions pertaining within the UK, while there is also a strong perception that the UK enjoys ‘thought leadership’ in this area.Footnote 70 Moreover, before the House of Lords European Union Energy and Environment Sub-Committee, Professor Ian Hodge argued that ‘we do not really need an agricultural policy; we need an ecosystem services policy’, adding that ‘[w]e need to set out thinking that our aim should be to deliver the maximum social value from rural land rather than to recreate an agricultural policy’.Footnote 71
At the same time, studies into the current CAP regime have revealed scope for more responsive measures. For example, Hart et al have identified as one possibility the re-design of the CAP ‘as a single integrated set of measures structured in a tiered hierarchy’, since this ‘would provide considerable opportunities to look at agricultural land in a more integrated way than has been the case to date and pursue more sustainable management in a synergistic and streamlined way, whilst giving due weight to targeted approaches’.Footnote 72 Moreover, such an initiative would offer the opportunity to build upon experience with ‘hierarchy’ regimes already gained in England under the earlier Environmental Stewardship Scheme (with its entry level and higher level) and the current Countryside Stewardship Scheme (with its mid-tier and higher tier). On the other hand, the more targeted the approach, the greater is likely to be the administrative burden, which may not sit easily with perceptions that Brexit will generate a lighter-touch regulatory environment.
What would seem to be clear, in any event, is that post-Brexit the UK will not be obliged to observe EU rules which dictate the proportion of expenditure on, respectively, direct payments under Pillar I and rural development under Pillar II. This will potentially allow funding to flow towards more specific environmental protection and animal welfare measures, effectively privileging what are currently ‘Pillar II-type’ measures, but at the expense of pre-existing entitlement to the area-based Basic Farm Payment and Greening Payment. An important question, therefore, will be whether the more targeted measures will be available to all farmers, who might otherwise face the loss of Pillar I direct payments without compensatory access to alternative support. In this context, it is also interesting to note that such redirection of funding could in fact be regarded as an extension of developing EU policy, in that for some time Member States and their regions have been able to transfer a proportion of funds from Pillar I to Pillar II.Footnote 73
In this context, when implementing the 2013 CAP reforms, the constituent parts of the UK took divergent approaches. Although all opted for transfers from Pillar I to Pillar II, they have done so in different proportions (the maximum proportion permitted being 15 per cent). In England, the initial decision was to make a 12 per cent transfer, with this percentage being in large part determined by the demand for funds for agri-environmental schemes.Footnote 74 In Wales, the preferred option was an immediate transfer of the maximum 15 per cent, on the basis that the rural development regime in Wales provides ‘essential business support for farming through advice, training and through agri-environment schemes’ and that ‘[i]t supports rural businesses and communities and it is to be developed as a tool for farming and the wider rural economy’.Footnote 75 By contrast, in Scotland, the transfer was limited to 9.5 per cent, a rate considered to strike ‘the right balance of support for our farmers and rural development’, while in Northern Ireland there was no transfer at all, albeit by reason of a procedural error.Footnote 76 Accordingly, there is again evidence that funding levels are liable to be driven by a range of regional priorities, with the emphasis on agri-environmental schemes being the greatest in England. This would also suggest that a ‘one size fits all’ approach to the implementation of an ecosystems services model may not prove particularly attractive to the devolved administrations, as will be explored further below.
In addition to overall levels of domestic support, WTO rules may constrain the ability to use subventions specifically to promote higher standards of environmental protection and animal welfare. Under paragraph 12 of Annex 2 to the URAA, exemption is conferred on ‘payments under environmental programmes’, but it may be noted that the detailed rules would seem consistent with targeted measures, since eligibility is dependent upon participation in ‘a clearly-defined government environmental or conservation programme’. Besides, the extent to which such payments can operate to transfer resources to farmers may be affected by the requirement that ‘[t]he amount of payment shall be limited to the extra costs or loss of income involved in complying with the government programme’.Footnote 77 In consequence, there is arguably some difficulty in offering an incentive element; and it is of note that the EU legislation no longer provides such an element in the case of agri-environment-climate payments, although this had once been available in the case of agri-environmental payments.Footnote 78 Further, Annex 2 does not as yet contain an express category of exemption for animal welfare payments, notwithstanding efforts on the part of the EU for its inclusion.Footnote 79 This potential hurdle has been recognised by the Minister for Agriculture, in the following terms:
Ironically, the single farm payment [now Basic Payment], which is ultimately an area-based, distorting subsidy, technically at the moment qualifies as Green Box, whereas the types of policies that would be more modern, more progressive–payments to get animal welfare outcomes, risk management measures, those types of things–we understand, at the moment, would probably be deemed under the WTO rules as amber box’.Footnote 80
More generally, the provision of support to promote high standards of environmental protection and animal welfare would be all the more vital if the UK were to permit the importation of agri-food products which had been produced to lower standards than those applicable domestically. And definitely there has been a body of opinion to the effect that Brexit offers the opportunity to reduce costs to consumers by lowering or even removing not only tariffs, but also non-tariff barriers of this kind.Footnote 81 However, such an approach has met with opposition from both non-governmental organisations and the industry: for example, in its 2017 Manifesto, the NFU affirmed that ‘UK farmers want new markets that exploit their proud record of welfare and environmental production standards’, but with an expectation that the central UK Government would recognise ‘these same standards when negotiating new agreements with countries outside the EU’.Footnote 82 More recently, such arguments have revolved around concerns that a free trade agreement with the United States could see the importation of chlorine-washed chicken and hormone-treated beef;Footnote 83 and there is every indication that agri-food production standards will prove to be a contested area both during the Brexit negotiations and long thereafter. Indeed, the House of Lords European Union Committee concluded in its Report on Brexit: Farm Animal Welfare:
Our evidence strongly suggests that the greatest threat to farm animal welfare standards post-Brexit would come from UK farmers competing against cheap, imported food from countries that produce to lower standards than the UK. Unless consumers are willing to pay for higher welfare products, UK farmers could become uncompetitive and welfare standards in the UK could come under pressure.Footnote 84
In this context too, world trade considerations enjoy salience in that there has long been debate whether members are entitled under WTO rules to shelter their own farmers by insisting that imports meet domestic environmental and animal welfare standards.Footnote 85 Further, the debate has been all the more intense where the importing member seeks to introduce measures which distinguish between products based upon process and production methods which leave no trace in the end-product itself (‘non-product-related process and production methods’ or ‘NPR-PPMs’).Footnote 86 To provide a pertinent illustration of a measure within this category, a member might seek to distinguish between meat from livestock raised extensively on grass in the uplands and meat from livestock raised in feed lots, in which case it would be no easy matter to find physical differences in the end product, notwithstanding that the manner of rearing would have the capacity to influence consumer preferences.Footnote 87
Such issues resonate strongly across the WTO legal order. To consider just the General Agreement on Tariffs and Trade (GATT), Article III provides that a member shall not discriminate between its own products and ‘like’ imported products;Footnote 88 and the WTO Secretariat has itself acknowledged that a determination of likeness for this purpose may be ‘particularly challenging’ in the case of NPR-PPMs, offering as an example circumstances where governments seek to discriminate between wood products derived from sustainably grown forest and wood whose production method is unknown.Footnote 89 At the same time, higher environmental and animal welfare standards are expressly engaged by Article XX, which grants general exemption from GATT rules in the case of, inter alia, measures:
(a) necessary to protect public morals;
(b) necessary to protect human, animal or plant life or health; …
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption’.
The jurisprudence of the Dispute Settlement Body in respect of this Article illuminates not only the extent to which it offers members latitude in principle to condition imports, but also the extent to which this latitude is closely circumscribed. Thus, in US – Shrimp/Turtle, the Appellate Body found that measures to restrict the import of shrimp and shrimp products with a view to reducing the incidental take of sea turtles could, prima facie, be justified under Article XX(g);Footnote 90 and, in EC – Seal Products, it found that an EU prohibition of the importation and sale of processed and unprocessed seal products could, prima facie, be justified under Article XX(a).Footnote 91 However, in both cases, it also found that the measures concerned failed to satisfy the chapeau to Article XX which requires that they should not be ‘applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade’.Footnote 92
In consequence, there would seem to be good grounds for believing that the UK could, in principle, impose general conditions on imports in respect of environmental and animal welfare standards without breaching WTO rules. Definitely, the Minister for Agriculture has exhibited confidence that such conditioning would be WTO-compliant, affirming that, while ‘[t]here have been disputes about the degree to which reliance can be placed on animal welfare standards in trade negotiations’, there are also ‘legal precedents and case law to support the use of ethical bans on certain practices and the reflection of animal welfare in trade agreements’, with the result that he did ‘not believe that anything along the lines that we would propose will cause any difficulty whatever with WTO rules’.Footnote 93 But domestic standards would need to be at least as high and there would also need to be a very carefully crafted regime so as to avoid any form of arbitrary or unjustifiable discrimination, or any disguised restriction on international trade, which WTO jurisprudence suggests is no easy task. At the same time, there would seem to be scope to include such high standards as part of a negotiated free trade agreement;Footnote 94 yet, as already observed, there are indications to the effect that political pressures, at least for the present, are not all in that direction.
D. Devolution
There is without doubt general consensus that devolution will impact significantly on the development of post-Brexit agricultural policies.Footnote 95 To provide just one illustration, it will be necessary to consider the operation of the Sewel Convention (as now enshrined in statute under the Scotland Act 2016 and the Wales Act 2017).Footnote 96 In this regard, it is significant that, as soon as the European Union (Withdrawal) Bill was presented to the UK Parliament, the Scottish and Welsh Governments indicated that it required legislative consent from Scotland and Wales.Footnote 97 Moreover, with agriculture being not only a devolved matter, but also economically, socially and culturally important across the devolved territories, any steps to determine centrally the course of its future direction are likely to prove controversial.Footnote 98 Accordingly, with specific reference to agricultural support policies, two aspects may be examined: first, the financial implications for the devolved territories which may flow from Brexit; and, secondly, the extent to which the devolved administrations have already sought to differentiate their post-Brexit regimes from that being articulated by central UK government.
Consistent with the profile of the sector in Northern Ireland, Scotland and Wales, CAP receipts in these territories have been proportionately higher than in England: thus, in 2016, total direct payments amounted to £323 million in Northern Ireland, £532 million in Scotland and £269 million in Wales, as opposed to £2,024 million in England.Footnote 99 In consequence, the devolved territories are inherently more vulnerable not only to any overall decrease in agricultural expenditure, but also to any redistribution of that expenditure. Indeed, before the House of Lords European Union Energy and Environment Sub-Committee, Fergus Ewing MSP of the Scottish Government was of the belief that ‘moving to a population share of this essential support could result in Scotland losing around half the current CAP allocation’; and, according to the evidence of NFU Cymru, ‘[i]f EU funds lost to Wales upon Brexit were replaced by the UK Treasury according to a population based Barnett calculation, then compared to the current mechanism for dividing up EU funds among the home nations, it is likely that Wales would be looking at an allocation reduction of 40%’.Footnote 100 Further, as highlighted by Dr Alan Greer, the mechanisms by which funding will be dispensed have the capacity to affect the degree of policy latitude enjoyed by the devolved administrations:
What will also be crucial is the relationship between funding and flexibility, which is likely to be uneasy. In the past (for example in relation to devolution in Northern Ireland between 1921-1972), a limiting factor on differentiation was that if ‘national’ funding was provided through the UK Treasury, then it wanted relatively uniform policy and regulatory measures in return, limiting the scope for differentiation.Footnote 101
For the present, emerging agricultural support policies already reveal a substantial degree of differentiation, even if details remain to be finalised. Thus, as already noted, DEFRA has shown a preference for promoting higher standards of environmental protection and animal welfare and it would be a reasonable assumption that this would be the preferred option for England, not least because agri-environment-climate schemes are already the focus of the Rural Development Programme for England 2014–20. Nevertheless, as also noted, there has been demonstrable reaction against a ‘one size fits all’ approach, with differing priorities becoming evident across the devolved administrations. In Wales, the social and cultural dimensions of agriculture have received express recognition, with emphasis also placed on the competitive advantage of Welsh agriculture in terms of exports.Footnote 102 For example, 30 per cent of Welsh lamb is estimated to be consumed in the EU;Footnote 103 and Wales has the benefit of a number of distinctive agricultural products, such as Welsh Black Beef. Accordingly, although in Wales too there has historically been considerable enthusiasm for agri-environmental measures, including the Glastir Scheme designed to deliver specific environmental goods and services, a broader support regime would seem to be preferred: as recommended by the National Assembly for Wales Climate Change, Environment and Rural Affairs Committee, any future framework should be ‘more aligned to sustainable outcomes whilst producing high quality food’.Footnote 104 Such a preference would seem at least as strong in Scotland, where likewise the importance of Scottish brands has received emphasis;Footnote 105 and where the contribution of agriculture to the social fabric of the country has also consistently been lauded.Footnote 106 In this light, the First Minister has been particularly firm in her advocacy that any agricultural powers repatriated from the EU on Brexit should be destined for the Scottish Parliament rather than Westminster, this being ‘the best way of ensuring that future decisions on farming reflect Scotland’s distinct priorities’.Footnote 107 Similarly, in Northern Ireland concerns have been expressed as to the extent to which a regime tailored to local conditions may be possible in light of financial constraints imposed at UK level.Footnote 108
Some comfort that regional differentiation can be accommodated post-Brexit may be found in the substantial variation in focus which is evident in the current Rural Development Programmes applicable across the UK. For example, during 2016, agri-environmental measures attracted the lion’s share of funding in England, whereas support for less-favoured areas was the main destination of expenditure in Scotland.Footnote 109 Significantly, less-favoured area support has by tradition been regarded as enjoying a social as well as an environmental dimension, being directed, inter alia, to maintaining the viability of holdings which face natural challenges and, thereby, the prevention of land abandonment.Footnote 110
On the other hand, even if the devolved administrations continue to be entitled to a considerable degree of flexibility in terms of the design and implementation of agricultural support policies, there is not yet full clarity as to the location post-Brexit of decision-making on matters of finance and international trade. As has been seen, this may resonate strongly in any future determination of the allocation of funding for agriculture (including determination of whether or not such an allocation should be conducted in accordance with the Barnett formula). At the same time, there would seem to be a broad level of agreement that, as in other sectors, the implementation of any new legislative framework for agriculture should at least be co-ordinated across the UK so at to ensure policy coherence, together with the effective working of a single market: as stated by the House of Lords European Union Committee, ‘maintenance of the integrity and efficient operation of the UK single market must be an over-arching objective for the whole United Kingdom’.Footnote 111 Moreover, the Scottish and Welsh Governments have similarly acknowledged that ‘common frameworks’ may be necessary across the UK in some areas.Footnote 112
Significantly, tensions of this kind between ‘one size fits all’ governance at UK level and separate regimes within the devolved administrations have already surfaced in the context of agricultural support. Thus, it may be recalled that in Horvath an English farmer challenged before the Court (in the event, unsuccessfully) the imposition of a more onerous direct payments regime than that applicable in Northern Ireland, Scotland and Wales, while it may also be recalled that farmers in Scotland currently enjoy specific payments targeted to the livestock sector, unlike those operating immediately South of the border.Footnote 113 Brexit may see such issues acquire still greater prominence and their resolution will need to be achieved without the ability to have recourse to an overarching EU legal framework.
IV CONCLUSIONS
For the present, only the outlines of agricultural support policies across the UK have become evident and this ongoing uncertainty has given rise to concerns in the farming community.Footnote 114 Nevertheless, there is apparent general acceptance at the level of both central UK government and the devolved administrations that a bespoke support regime will survive Brexit and, in this sense, agricultural ‘exceptionalism’ will continue. Further, there has now been reassurance both in the Conservative Party Election Manifesto and the Agreement between the Conservatives and the DUP that the current level of subsidy will be maintained until the end of the current Parliament (as opposed to the earlier reassurance that it would be maintained until 2020). In this respect, there are good grounds for believing that farmers have been beneficiaries of the June 2017 General Election.
On the other hand, the precise contours of post-Brexit agricultural support remain to be defined. What would seem tolerably clear is that there is no strong commitment to a regime based upon Pillar I principles; and, in particular, the Basic Payment Scheme may be facing a relatively short shelf-life. At the same time, there would appear to be a degree of consensus around promoting high standards of environmental protection and animal welfare, but different priorities continue to pertain across the constituent parts of the United Kingdom and even central UK government has shown a more varied appetite, with interest also in measures to promote technical innovation, for example.Footnote 115 Further, in light of more radical options currently circulating, such as the use of public funds on the purchase of ‘public goods’, farmers may yet be encountering a quite different regulatory landscape within a relatively short horizon, at least by the standards of an industry accustomed to a pace of regulatory change largely dictated by the elapse of EU programming periods.
In any event, over and above political considerations, decision-making as to future agricultural support regimes will need to take into account a complex range of factors which enjoy legal basis. In this context, WTO rules and the constitutional rights of the devolved administrations are very much to the fore. Thus, as has been seen, WTO rules have the capacity not only to impose overall limits on the amount of domestic support to farmers, but also to shape the design of individual measures. And, if preference is for support to promote higher standards of environmental protection and animal welfare, then specific difficulties may be encountered. For example, it is uncertain whether under current WTO rules there is scope to secure exemption for an incentive element to environmental payments, while there is as yet no express category of exempt support for animal welfare measures.Footnote 116 Any such limitations on domestic support would prove the more profound if future free trade agreements were to permit imports produced to lower environmental and animal welfare standards. Further, if the UK were to seek to condition imports on the observance of high standards as applied domestically, the position is not completely free from doubt as to the legitimacy of measures of this kind in WTO law; and, even if they are legitimate, they would need to be closely crafted so as to exclude, inter alia, any discriminatory treatment.
As has also been seen, the devolved administrations are already entitled to a degree of policy latitude in agricultural matters, which has found expression in, for example, demonstrably different Rural Development Programmes to reflect individual priorities within their territories. And, significantly from the legal viewpoint, such policy latitude has been expressly endorsed by the Supreme Court and Court in the agricultural context.Footnote 117 A challenge will be to provide a post-Brexit legislative framework for agricultural support which accommodates all parts of the UK, while simultaneously meeting the ‘over-arching objective’ of maintaining the integrity and efficiency of a single UK market, with this challenge being all the greater in that the precise location of powers post-Brexit is not only unresolved, but already subject to dispute.
In light of their complex legal geometry and the strong emotions which they generate, there is every reason to believe that agriculture generally and agricultural support more specifically will continue to attract a high profile during the Brexit negotiations and long thereafter. Just as the sector has commanded the greatest proportion of the EU budget and proved a stumbling block in numerous WTO negotiations, its ‘exceptional’ status is likely to continue.Footnote 118 Definitely, in the case of vast majority of the institutional actors, the present debate is not so much whether support should be provided for farmers, but how it should be provided. Yet the combination of the competing interests of those institutional actors, WTO rules and the constitutional settlement within the UK, make the second question a rather difficult one to answer.
