Market and trade effects of the next CAP reform

It is not possible to be definitive about the market and trade effects of the next CAP reform, for two reasons. One is that the Commission’s legislative proposal published in June 2018 is just that, a proposal, that may well be altered, even quite radically, before the new CAP regulations are agreed. The other is that, under the Commission’s proposal, Member States are given significantly more flexibility than they have at present to craft their own agricultural policy interventions in the context of their CAP Strategic Plans. Until these Plans are approved, it is not possible to predict, inter alia, the level of environmental and climate ambition that EU farmers will be asked to meet after 2020, the extent of targeting and redistribution of Pillar 1 direct payments, or the use that will be made of coupled payments.

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Implications of Brexit for developing countries’ agri-food trade

Back to Brexit, I’m afraid, but I thought readers of this blog might be interested in a recent working paper I have written on this topic. Brexit (the UK’s exit from the European Union) will have important repercussions for the agri-food trade of developing countries because of the UK’s size (it is the sixth largest economy in the world) and its important role as an importer of agri-food products (it accounts for 12% of the EU’s imports from developing countries). These effects will occur through a variety of different channels.

Some of the key conclusions of the paper are:

• There will be higher trade costs for UK-EU27 trade.

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The Brexit negotiations on the future trade relationship

On 23 March 2018, the European Council in its Art. 50 formation welcomed the agreement reached earlier last week by the negotiators on parts of the legal text of the Withdrawal Agreement covering citizens’ rights, the financial settlement, a number of other withdrawal issues and the transition. Prime Minister May wrote following that agreement to European Council President Donald Tusk giving her full support to the draft Agreement and highlighting, in particular, her support for efforts to solve the Ireland border issue. The European Council was therefore willing to set out its guidelines with a view to the opening of negotiations on the overall understanding of the framework for the future relationship, which will be elaborated in a political declaration accompanying and referred to in the Withdrawal Agreement.

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Brexit Withdrawal Agreement forwarded to UK

The EU Commission yesterday forwarded a draft Withdrawal Agreement to the UK authorities for negotiation. This draft builds on the initial draft submitted by the Commission for approval by the Council (Art.50) and the Brexit Steering Group of the European Parliament on 28 February last. To accompany that initial text, the Commission published a helpful Q&A as a guide to the withdrawal process which still remains valid today. Press reports have highlighted that governments tweaked the initial text in some minor ways but retained the broad thrust of the document.

Negotiators are expected to work on the draft over the weekend and in Brussels on Monday and Tuesday next week.

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Pitfalls on the way to a Brexit transition period

Most of the attention around the European Council meeting on 14-15 December 2017 last focused on the implications of the Joint Report agreed between the UK and EU negotiators on 8 December for the three key Phase 1 issues – citizens’ rights, the financial settlement, and the border between Ireland and the North of Ireland. Sufficient progress on these issues was the prerequisite for the European Council to agree to move to the second phase of the negotiations. Both the European Council in its conclusions and the European Parliament in its resolution of 13 December 2017 agreed with the Commission recommendation that sufficient progress had been achieved.
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UK publishes proposals on customs arrangements with the EU

In her keynote Brexit speech at Lancaster House in January this year, the Prime Minister outlined:

“I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends.”

In the White Paper that followed in February, the Government stated that it would prioritise securing “the freest and most frictionless trade possible in goods (…) between the UK and the EU“.

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Avoiding the ‘cliff edge’: Immediate trade arrangements post-Brexit need to be given higher priority in Article 50 negotiations

The European Union, under the Commission’s lead negotiator Michel Barnier, has proposed to begin Brexit negotiations with the United Kingdom on June 19th next following the latter’s general election. Based on the European Council’s guidelines on the EU’s objectives for these negotiations, detailed negotiating directives have been agreed by the General Affairs Council. The Commission’s Task Force on the Article 50 of the Treaty of the European Union (TEU) negotiations has also begun to prepare draft position papers, beginning with two on essential principles of citizens’ rights and essential principles on financial services.
This level of preparedness on the EU side for the forthcoming negotiations contrasts sharply with the impressions we have of the UK side.
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How external influences have shaped the CAP

When the external impact of the Common Agricultural Policy (CAP) is discussed, it is often in the context of evaluating the CAP’s impact on world markets and third countries. For example, there is a substantial literature which looks the coherence of the CAP with the EU’s development co-operation objectives by examining its impact on developing countries (see my 2014 review chapter here).
In a new study for the AGRI Committee of the European Parliament, Professor Alan Swinbank of the University of Reading turns this traditional focus on the impact of the CAP on world markets on its head. His study The Interactions between the EU’s External Action and the Common Agricultural Policy instead looks at how the external dimension of the EU – including trade policies pursued through the WTO and other international obligations and its development co-operation activities with neighbouring states and developing countries – have influenced the evolution of the CAP.
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UK Brexit and WTO farm support limits

Today, we are pleased to present a guest post by Lars Brink who is affiliated with the Global Issues Initiative at Virginia Tech University and a leading expert on domestic support issues in the WTO Agreement on Agriculture.
Background
Domestic support and Bound Total AMS (Aggregate Measurement of Support) may not be high priority items, compared to market access, in terms of analysing trade distortions. Still, anything that touches on farm support and limits on such support attracts attention. This may apply also in a case of Brexit negotiations. This note is about the WTO domestic support commitment of the United Kingdom in case of a Brexit.
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Agriculture in the debate over Brexit

The European Council meets this Thursday in the hope that it will agree on a package of measures that will satisfy the UK’s demand for a renegotiation of its relationship with the EU. The details of the package and the main stumbling blocks are spelled out in the Council President Donald Tusk’s invitation to leaders to the Council meeting. The mood music leading up to the summit meeting is constantly changing. Whether this is a careful choreography to persuade voters back home that what will be achieved is a significant deal, or whether the continuing objections will derail a deal will be clearer by the end of this week.
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