WTO could rule against subsidies

The UK Government will face significant challenges in its attempts to “take back control” of farming legislation once the country leaves the European Union, an expert on trade regulation has warned.

Fiona Smith, Leeds University professor of international economic law, said plans to maintain subsidy levels and redirect payments towards the delivery of public goods are likely to come under pressure from World Trade Organisation (WTO) rules which aim to stop trade distortion.

And if the WTO decides to flex its muscles, it could leave UK farmers at a significant disadvantage, she said.

Speaking at the N8 Agrifood Conference in Liverpool, Professor Smith said that, as an EU member state, the UK had been insulated from WTO rules which dictate the size of subsidies, as well as what they are received for.

But as of March 29 next year it will become an independent WTO member – putting it at the mercy of international rules around trade.

This could have direct implications on a number of the government’s plans for UK farm policy, particularly the maintenance of farm support until 2022, and its plans to direct payments towards farmers and crofters who provide public goods.

Prof Smith said that under WTO rules, developed countries can only pay direct support to farmers to a maximum 5% of its total value of agricultural production.

While the EU holds an exemption to the rule which means it can pay farmers above the threshold, the UK would no longer enjoy the same protection, meaning it may not be able to maintain current payment levels after March 29, 2019.

What’s more, greening payments and plans to direct support towards the provision of public goods could be viewed by the WTO as trade distortion.

“Under WTO rules, environmental subsidies can be part of a conservation scheme, but cannot be used to have an effect on production,” she told delegates at the conference.

“So, for example, if you create welfare regulation which incentivises livestock farmers to change production methods, you can’t do that under WTO rules.”

Subsidising producers to farm in a particular way could also be tricky, she added, as the WTO doesn’t allow discrimination against products for the way they are produced — potentially reigniting the debate over cheap chlorinated chicken entering the UK.

“If the government moves forward with its high welfare, niche grant approach, it has to be the farmer’s choice and not through regulation,” she said.

“If agricultural tariffs are dropped and we get imports of products that don’t reach the same quality standards, then you’ve not got a level playing field, and competition with niche products is very tricky.”

“Competing with niche products is very tricky”

LOSING CONTROL: Once the UK leaves the EU, WTO rules on payments will kick in