Environment, Food and Rural Affairs Committee
Oral evidence: UK trade policy: food and agriculture, HC 162.
Tuesday 6 February 2024
Ordered by the House of Commons to be published on 6 February 2024.
Members present: Dr Neil Hudson (Chair); Steven Bonnar; Ian Byrne; Rosie Duffield; Barry Gardiner; Mrs Sheryll Murray; Selaine Saxby; Cat Smith; Julian Sturdy; and Derek Thomas.
Questions 87 to 183
Witnesses
I: Professor Christopher Dent, Professor of Economics and International Business, Edge Hill University; Shanker Singham, CEO, Competere, and Academic Fellow, Institute of Economic Affairs; Professor Fiona Smith, Professor of International Economic Law and Associate Director for Agrifood Supply Chains, University of Leeds.
II: Shubhi Mishra, Head of Food, Drink and Trade Promotion, UK India Business Council; Nick von Westenholz, Director of Trade and Business Strategy, NFU; Sarah Baker, Head of Economics, AHDB; Helen Dallimore, International Sales Manager, Coombe Castle.
Written evidence from witnesses:
– National Farmers Union (NFU)
– Agriculture and Horticulture Development Board (AHDB)
– Agriculture and Horticulture Development Board (AHDB) Supplementary
Witnesses: Professor Christopher Dent, Shanker Singham and Professor Fiona Smith.
Q87 Chair: Good afternoon, ladies and gentlemen. My name is Neil Hudson. Welcome to today’s session of the EFRA Select Committee, our second session on UK international trade policy. I have been asked by the Chair to chair this session on his behalf.
In this inquiry we have been looking at UK international trade policy. The focus today will be looking at lessons from the Australian and New Zealand deals. Also, as the UK is acceding to the CPTPP and is negotiating arrangements with Canada, various Gulf states and India, we will be exploring that through the course of this afternoon. Can I ask our expert witnesses to say who they are and where they are from? Then we will start with the questioning.
Professor Smith: I am Fiona Smith. I am at the University of Leeds in the school of law. I am also associate director for global food supply chains at the university’s global food and environment institute.
Shanker Singham: I am Shanker Singham. I am the CEO of Competere, which is a trade and economic policy consultancy. I serve as a commissioner on the Trade and Agriculture Commission, but my views here today are my own and do not reflect the views of the commission or any commissioner.
Professor Dent: Hello there. I am Christopher Dent, professor of international economics and business at Edge Hill University. I am pleased to meet you all. Thank you.
Q88 Chair: Thank you very much for being with us this afternoon. My first question is to the whole panel, asking to what extent the Government are taking a strategic approach to their agrifood trade policy.
Professor Smith: The most important thing to say is that, as the Committee will be aware, there is no trade strategy at present. What we can see is the development of a trade strategy through various documents. There is a global dimension, with a move away from the global Britain narrative in the integrated review refresh, which was in March last year, towards the idea of the UK shaping the international environment through trade. That is an interesting development.
The second thing in the agriculture context is the focus on export opportunities for UK producers and increasing consumer choice in the Government’s food strategy. Finally, we are seeing quite an innovative use of trade arrangements—so beyond the free trade agreements, things like memorandums of understanding between the UK and Washington state. This is interesting. It is very exciting, but what is missing is the connection to domestic policies. How do all these initiatives fit with the Government’s domestic agenda in terms of farming, UK values and using trade measures domestically, such as subsidies or trade remedies? That piece is not there.
Q89 Chair: Before I bring in the other two panellists, you are saying that there is no formal strategy per se, but it is evolving as we go. Do you think that there is scope in the future for a strategy to be woven in with domestic policy agendas?
Professor Smith: Yes, certainly. Maybe this is a question we will come to later, but the Labour Party has said that it will produce a White Paper if it is to get in office. We should be seeing a White Paper to connect all these parts. Referring the Committee back to a former Secretary of State for International Trade, Anne-Marie Trevelyan, she said that there was no need for a trade strategy when she gave evidence in front of the House of Commons International Trade Committee, but I think that there certainly is, especially as the Government’s thinking seems to be evolving at pace.
Shanker Singham: Trade strategy is revealed by what you do. If you look at the UK’s trade policy, we can see how the UK is doing by looking at these four different things that we can do, so the four different pillars on which you can have a trade strategy. This is true of any country, not just the UK.
Unilaterally, you have the global tariff that the UK has announced. How good is it? There was opportunity for being a bit more ambitious in terms of reducing tariffs where we do not make competing products. Most of that has been captured. Most of the nuisance tariffs have been captured, so it is not bad. There is the domestic regulatory piece, which Fiona mentioned, where we have not seen a lot of regulatory reform, which we perhaps could have seen. That is the unilateral piece.
Bilaterally, you have the TCA, which is an important agreement. It is a tariff-free, quota-free agreement, so it is a pretty extensive and liberalising agreement. It does not have a lot of what it could have in terms of mutual recognition and so on. That is what we need to be moving on. The EU was not particularly interested in that until the Windsor framework changed the EU’s mindset on that. That is now open for discussion, so improving the TCA is a priority.
There are other bilateral agreements, such as Australia and New Zealand. There is a negotiation with India now. It is quite a full agenda. The Australia and New Zealand deals have been done quickly and they are quite modern trade agreements. Fiona mentioned the MOUs with US states. There are things that you can do with those sorts of things, particularly market access things. Very specifically to agriculture, you can integrate UK farmers into global supply chains. There are protein summits and these sorts of things that you can do off the back of those kinds of arrangements.
The CPTPP is the plurilateral pillar and that has gone well. The UK has acceded to CPTPP.
Q90 Chair: We are going to go into each of these arrangements separately.
Shanker Singham: You are seeing that there is very much a revealed preference for a strategy. We must not forget the multilateral level though. The WTO is still the first best option for international trade liberalisation. The UK has shown a high level of commitment to that, and probably more commitment than many other members of the WTO.
Q91 Chair: Christopher, we are talking about the overarching strategy at this point in time. We are going to go into the individual arrangements. What are your thoughts about the strategy so far?
Professor Dent: Where I can perhaps add additional insight and knowledge would be to link the strategy issue to developing the UK Government’s or the UK’s capacity to be innovative and exercise leadership. I will tell you more about how that will be important and whether conditions are very conducive to that in the CPTPP.
Q92 Chair: That is helpful. There has been a lot happening in the world in recent weeks, months and years in terms of global shocks. What lessons can the Government take from their response to these recent global shocks when formulating their future approach, in terms of trying to future proof the UK resilience and trade policy when there is a lot going on in international affairs?
Professor Dent: In the early 2020s so far, we have entered into a profound and disruptive phase of trade policymaking globally. There has almost been a paradigm shift in trade policymaking around the world. I am more of a macro analyst on this and it is linked to a series of interlocking risks that are facing trade policymakers and policymakers generally around the world at the moment due to economic security risks, geopolitical volatility risks, climate environmental risks and technology control risks. I have recently done some research on this.
Also, linked to this, FTAs have possibly peaked. They are on their way out. They are no longer seen as the conventional norm of doing trade agreements or trade diplomacy. You are seeing a new wave of trade policymaking initiatives going on around the world, which are very much based on unilateral trade industrial strategies and a return to neo‑mercantilist trade policymaking that we have not seen for some time. We come at a very pivotal moment in our discussions today.
Shanker Singham: One thing I would add is that, in terms of shocks, we have discovered over the last four years that we really do not understand our own supply chains. The tier 2 we sort of get, but for tiers 3, 4 and beyond we have no idea. Management and diversification of supply chains is going to be really important.
Fortunately, there are trade tools. There is a lot of work being done on digital trade corridors and on these sorts of things that would give supply chains more visibility into who they are dealing with. This is going to be necessary because of all the environmental and other considerations that are needed. Supply chain management tools are going to be a priority.
Also, most recently, we have seen that we are highly dependent on two choke points, Panama and Suez, for global trade. That is not a viable position, so we need to diversify trade routes as well. Certainly big carriers such as Maersk and others are looking now to diversify routes and for alternative routes. The name of the game is to expedite flows of trade. My colleague Lars Karlsson and I have written about this and I am happy to share that with the Committee. You will see nodes emerging on global trade corridors and accelerated routes. If you are on one of those routes, you are going to do disproportionately well. If you are not, you are going to be ignored, basically, in terms of trade. That is a critical lesson that we have learned.
Q93 Chair: That is helpful. We have a subsequent question where we are going to talk a little bit about the Red Sea situation as well, but you mentioned Panama and Suez. Also, we should not forget the Ukraine situation in terms of what can come out through the Black Sea, in terms of energy and food. Fiona, do you have anything to add before I go on to the next question?
Professor Smith: One point is the interconnectedness of these shocks. Christopher and Shanker mentioned the impact on supply chains. At the moment, it is very easy to concentrate on the Red Sea problem because it is in the news, but the Panama Canal is very low. Not only are you going to get the increasing cost to consumers of the Red Sea problem, but it is going to be exacerbated by the Panama Canal drying up as well. The timeline of these shocks varies dependent on the nature of the legal contracts and freight. That is something that I do not think enough attention has been paid to.
Q94 Selaine Saxby: Good afternoon. My question is coming to all of you. The first part is whether the new free trade agreements are an opportunity or a risk for the UK agrifood sector. In particular, which potential agreements present the greatest opportunities or risks for the agrifood sector? Christopher, you are nodding along. Would you like to go first?
Professor Dent: I am nodding along because I think that this is best for Fiona to take. She is probably best to start.
Professor Smith: Did you want to go first, Shanker?
Shanker Singham: Like all free trade agreements, there are both opportunities and risks for all sectors. On balance, in looking at the Australia, New Zealand and CPTPP deals, we think that the risks are offset by the opportunities. One thing that people tend to focus on is export trade opportunities in a narrow sense. The reality of trade agreements and trade liberalisation in general is that it is about how you integrate into global supply chains and whether you can better integrate into global supply chains.
If you look at New Zealand coming out of the 1980s, New Zealand’s dairy sector managed to integrate into the most lucrative bits of the supply chain. It produced 2% of the world’s milk but controlled 30% of the world’s dairy. These are the sorts of things we need to be doing. If you are behind a big tariff wall, you do not necessarily feel the necessity to do that and to integrate into those supply chains. That is the big thing that the UK agrifood sector needs to do.
We have a lot of very good products that absolutely ought to have market opportunities in other countries. We have managed to eliminate the lamb ban in the US, for example, so there are opportunities there. Continuing to break down barriers for UK agricultural exporters will be very important.
Professor Smith: The question is “good or bad for whom”, really. If you think about consumers, it is an opportunity to integrate global policy, the trade policy, with the domestic policy. One of the most important things is that consumers have healthy diets. A trade agreement that opens up the flow of maybe fruits and vegetables that we cannot grow here, or maybe we are vulnerable to growing here, would be very positive. The CPTPP vegetable quota is very positive in that respect, because hopefully we will get more asparagus, sweet potatoes and things like that in from other countries. That could be very positive in terms of integrating policy.
It will also mean that the UK is less vulnerable. We currently import 46% of the food that we eat and the market is very concentrated in the EU for historic reasons. As Shanker already said, if we can move that concentration, particularly in the light of climate change, that will be a very positive move, potentially, for the UK.
On the other side, for farmers it is very worrying if the implications of the trade policy are not properly integrated with domestic agricultural policy, which is not the case at the moment. I know that there is a worry about level playing field for farmers. In terms of the UK-Australia free trade agreement, the import potential of Australia into the UK of high‑quality beef went from 3,761 tonnes, I think, to 35,000 tonnes overnight when that agreement came in. That is a very difficult piece for farmers to adapt to in the short term, so it is good and bad.
It is very important to think again about the fact that some countries can be more problematic than others in terms of negotiating a trade deal with them. One example that came up in the Trade and Agriculture Commission report is that Malaysia, in the CPTPP, is a big palm oil producer. We would hope that one of the worries for the UK would be to import, potentially, palm oil grown on deforested land. I know that the Commission found that that was not going to be a problem in reality, but our domestic legislation is not finished yet on forest-risk commodities, so we need to make sure that we are fully looking at these trade agreements and seeing whether they align with our values domestically and whether our law can cope with it.
Professor Dent: If you look at the whole Indo-Pacific and Asia-Pacific agricultural-political economy, shall we say, you find a lot of diverse politics and cultural factors that play into how a country approaches trade negotiations on food and agriculture. Japan, for example, has a very militant and well-organised farm lobby, which is very protectionist of Japanese agriculture. Then you have Australia and New Zealand, which are very liberal, open, modern and forward thinking. It is quite a varied patchwork in the Indo-Pacific where I think we are trying to develop most of our current and future FTA links.
I was also going to say that 43% of our trade with the CPTPP countries is actually in services trade. This is more of a question for my two panellists on whether they are able to help us a bit more on this. Is there much foreign investment in agriculture?
Chair: We will ask the questions, if that is all right.
Professor Dent: That is relevant to later. Sorry to deflect your question.
Q95 Selaine Saxby: To what extent do you think that the Government are prioritising or sacrificing the agrifoods sector in the agreements it is seeking?
Shanker Singham: We have looked at this very closely on the TAC, and our report on the CPTPP, and Australia and New Zealand, are public, so I will not say anything more than we have already said publicly. We do not find, on any of those agreements, that there is a diminution in UK standards or anything like that. We continue to be able to legislate to protect our environmental and other standards. In fact, some of the agreements that we have negotiated actually improve our ability to protect our standards. For example, with the CPTPP, you have a very interesting—
Q96 Chair: I will interrupt again. Sheryll Murray’s question is coming up specifically on the CPTPP, so can you hold fire on some of the CPTPP for Sheryll, please, and keep it broad?
Shanker Singham: As a general principle, many of these agreements have pretty advanced environmental protections. Some of them have animal welfare chapters that we never had in trade agreements before. We have found that the UK has been quite effective in prosecuting its own interests in these agreements.
Q97 Selaine Saxby: Is there anything you would like to add, Fiona or Christopher?
Professor Smith: The TAC’s remit is restricted to mandatory standards. A lot of UK food production is done to voluntary standards, which are Red Tractor. They are something that TAC has referred to but not looked into, so it would be very interesting to see whether there were more studies done on the impact of the standards that food is actually produced to.
Selaine Saxby: Is there anything you would like to add?
Professor Dent: I have nothing else to add.
Chair: Barry has a quick supplementary.
Q98 Barry Gardiner: Mr Singham, you said that it has been quite successful in terms of animal welfare, but I think that the only free trade agreement that we have concluded with animal welfare standards now incorporated in it is the Australian one. You are right that that was a breakthrough, because it has not been part of an FTA before. I think that it is also the case that it was simply saying that there should be no derogation from standards either in the UK or in Australia. Would you say that to describe it in the way that you did was perhaps slightly overoptimistic?
Shanker Singham: Not really, because you have to look back at the WTO framework in which all of this sits. None of these free trade agreements is in a vacuum. The WTO has Article XX measures on things such as public morals, which is where animal welfare would typically fit. There have been cases such as the seals case and other cases where animal welfare is specifically considered in dispute settlement. There is a body of WTO law on this, so we are not building from nothing.
Q99 Barry Gardiner: No, indeed, but you held it as a success that our FTA had included it. It was a very minimal one. I agree with you that it was the first time it had happened, but it was no derogation from existing standards.
Shanker Singham: To even have that conversation with the Australians was an achievement, frankly. Is it the end of the game? I think that you will see that the UK will try to improve those provisions.
One has to be a little bit careful about this, because our trading partners are somewhat sceptical, I have to say, about this agenda. There is a very strong trade principle that you do not discriminate on the basis of how products are produced, but rather on the products themselves, so we are derogating a little bit from that general trade principle, and so has the WTO, in terms of some of its dispute settlement cases. It is a bit of a grey area.
The other point, of course, with regard to these sorts of issues is to make sure that, when you are doing it, you are not discriminating against other countries. There are lots of things that we might want to say about animal welfare where we ourselves do something, or we are buying products, or we have trade agreements with other countries that do not address this issue and we are therefore discriminating against, let us say, the Australians or the New Zealanders.
For example, there is something like hot branding where we do it ourselves to certain animals. That is an argument. If we tried to prosecute that case with a trading partner, we would not hold up in a dispute settlement proceeding because it would be discriminatory. Similarly, there are sow stalls where we buy product from other countries that do those sorts of things. It is a pretty complicated area and you have to advance fairly cautiously in it. Subject to that, the UK has done a pretty good job of pushing its interest.
Chair: We will move on. Now our audience has tripled in size ready for our CPTPP discussion, led by Sheryll Murray.
Q100 Mrs Murray: At risk of you having to repeat yourselves a little bit, Shanker, could I start with you, please? It is nice to see you again. What are the major long-term strategic opportunities and threats for the UK agrifood sector deriving from the CPTPP membership?
Shanker Singham: It is entirely fitting that we are spending a lot of time on the CPTPP because it is a very major trade development. It is a very major agreement. It is a very large plurilateral agreement. It is a very liberalising platform and one that is based on mutual recognition. It would have been bigger if the US had remained in it, but the US has withdrawn from it. Nevertheless, it is still a very big agreement for the world. It is a living agreement, so there are other countries that are acceding to it. Indonesia, Thailand and others will accede to the CPTPP.
One thing that former Obama Chief of Staff Rahm Emanuel said when the UK acceded is that this is a huge moment because now the Atlantic and the Pacific “are singular”. Those were his words and he is not a big supporter of the UK’s trade policy.
Q101 Mrs Murray: Do you think that there will be opportunities or threats with it expanding membership, for instance to Costa Rica or Ecuador?
Shanker Singham: It is not just the Asian countries. We have the western parts of Latin America that are part of the agreement as well. There is interest in Latin America to expand in that direction and interest in Asia to expand even more. I suspect that the UK will not be the only non-Pacific country that is a member. I suspect that now it is going to be many more countries that are looking for deeper liberalisation.
The biggest opportunity in trade terms is that it is a very liberalising agreement. If you compare it, for example, with the US’s IPEF—Indo‑Pacific Economic Framework for Prosperity—discussions, there is no market access component to that. Why developing countries would want to satisfy US labour and environmental requirements without any market access to the US is a mystery to me. I suspect that it will not happen. The CPTPP is different and that is why I think that that is going to remain a big challenge. As long as the WTO is not really very active, the CPTPP becomes the only game in town.
There is a review of the CPTPP this year, 2024, for all the members. The UK will be part of that process. It has to play its cards carefully because it is a new member and should be careful about how it prosecutes its interests. Nevertheless, there are opportunities there. There are opportunities, as was mentioned before, outside of agrifood specifically, but where there are services, investment and other areas that relate to the agrifood sector. They support the agrifood sector and there are big opportunities there.
We will look at each new member. The way an accession works is that, when Indonesia, Thailand or all these other countries accede, there will be a process for the UK to look at what they do. I am sure that the usual bodies in the UK will review those agreements, much as we did with the current CPTPP members, to decide what the UK’s position is with regard to that accession. We are in that process now and that is an opportunity for the UK.
International trade agreements that liberalise clearly create some level of risk for producers, but, as Fiona mentioned earlier on, there are significant benefits for consumers. We think of consumers as the end people who buy things—us—but every business is a consumer of something. Getting supply chains to be more efficient and generating GDP per capita growth for this region is really important, particularly at a time when GDP per capita growth in the G7 has been somewhat stalled.
Q102 Mrs Murray: You are right. Our inquiry focuses on agrifood and so I am asking these questions on that basis. Fiona, do you have anything additional to say?
Professor Smith: The CPTPP has 11 members and we have existing free trade agreements with all of them, apart from Malaysia. The major benefits for us at present are to do with the Malaysian free trade arrangements. That is an opportunity for high-end beef. I think that ADHB has statistics on the export opportunities. For example, I think that it is about a 19% increase in beef and a 23% increase in pork, but that is really the biggest opportunity we will be looking at.
Q103 Mrs Murray: Do you think that there would be opportunities as it expands?
Professor Smith: Certainly as it expands there will be countries that we do not have free trade agreements with at present, but it is difficult to know what the accession process will be like as countries have only indicated rather than formally gone through that process of accession.
Q104 Mrs Murray: How do precedents set in the CPTPP or Australia and New Zealand agreements affect our ability to negotiate new free trade agreements in the future?
Professor Smith: From a legal point of view, the UK is a sovereign country and therefore has the power to enter into trade agreements with whoever it wants on whichever basis. There are two constraints to that. The first is the World Trade Organization. Article XXIV of the GATT has rules on what those trade agreements should look like. Very simply, they should be trade creating, not trade restricting. The second potential restriction is that the CPTPP contains an article that specifically refers to the relationship between the CPTPP and other free trade agreements. The idea is that they will be read in harmony. I can get into the legal detail, but that is it in essence.
Q105 Mrs Murray: Shanker, do you have anything to add to that?
Shanker Singham: On that point, within the CPTPP there are specific provisions on good regulatory practice, for example, that the UK has now signed up to. I do not think that it is going to make a huge difference, because we probably satisfy those GRP standards anyway, but there are certain things like that.
There are areas where it presents an opportunity. There are some innovative things in the CPTPP on dispute settlement that developing countries have signed up to, Malaysia being one. The particular innovation is the ability to enforce that a country has to enforce its own law, which is a new development in terms of dispute settlement. Now that a developing country like Malaysia and others in the CPTPP have signed up to that, it is something that could be pushed around in our other negotiations.
I am sure that, when we look at negotiations with India and other players like that, these are good ways of ensuring countries enforce their own law. Quite often in developing countries there is nothing wrong with the laws on the books. Enforcement is where the problem is. That is actually very powerful. It does not sound like a very powerful discipline, but it is actually a very powerful discipline. That is one of the many innovations of the CPTPP.
Q106 Mrs Murray: I will stick with you Shanker. I apologise, Christopher. I will bring you in at the end, but these are specifically questions to Shanker and Fiona. Does the CPTPP prevent the UK from addressing agrifood trade barriers with the EU, such as through a veterinary agreement?
Shanker Singham: No, not at all. New Zealand has a veterinary agreement with the EU. We could absolutely have a veterinary agreement with the EU. The only thing we would have to be careful about is that we have to be in control of our regulatory system to satisfy the GRP provisions of the CPTPP. The New Zealand-EU and the UK-New Zealand, which is a mirror of it, are very powerful agreements, because we essentially agree mutual recognition, including of product market regulation, based on the outcome. In other words, “Have you satisfied the regulatory objective?” You do not have to have identical regulation. You have to objectively be seen to satisfy the regulatory objective. Those kinds of agreements are extremely good agreements to have and they are agreements we should pursue.
As a side note on the veterinary agreement, to be clear, they are very difficult to negotiate. They require a lot of back and forth with regulators. They take years to do. We are in a different position with the EU, because our laws are the same. They are starting off broadly the same and so it should be easier to do it than other countries, but it will not change the process requirement or the regulatory requirement that is associated with the process. It will lower the intensity of checks and open up other things that you might do. It will open up more trusted trader schemes and things like in-facility SPS clearance, the sorts of thing that expedites and promotes trade. Absolutely, it is very important to have, but we should not expect it to solve every problem in the context of our UK-EU trade. It will solve a lot, but not everything.
Q107 Mrs Murray: Fiona, do you have anything to add? No. Christopher, do you have anything to contribute to those questions?
Professor Dent: Are you going to come back to me later and ask about the CPTPP again?
Q108 Mrs Murray: I am not sure.
Professor Dent: Should I just say something?
Mrs Murray: I am just having a look to see whether we have other questions. We do.
Chair: Steven’s question has some CPTPP in, so we will get you in on that.
Mrs Murray: I would not want to tread on my colleague across the horseshoe.
Q109 Steven Bonnar: Chris, you were talking earlier about geopolitical volatility. We have seen the ongoing situations in Ukraine and in Gaza, and recent disruption to the Red Sea shipping lanes. That has highlighted vulnerabilities within the extended supply chains of the United Kingdom. Could you expand on what implications that may have for the UK’s global trade agenda?
Professor Dent: Where to start? We have been in a period of geopolitical volatility for some considerable time, mainly centring—we are going back many years now—on the systemic rivalry between an ascendant China and the United States. Then you have these other conflict zones, crises and shocks that flow into the mix. You have a revisionist Russia. This is creating a trade policy environment that is turning increasingly defensive.
Also, a lot of narrative now about trade policymaking, which the UK finds itself in of course, is around de-risking, friend-shoring and home-shoring. It is about developing stronger trade alliances with trusted countries, these being places where we can manage risk to high degrees of comfort, shall we say, and those that are untrusted countries, to use the vernacular that we now find ourselves with. The geopolitical waters of trade diplomacy and relations is becoming increasingly choppy and this is where the UK finds itself.
A lot of business associations, such as techUK, have said that the benefits of us joining the CPTPP are more strategic than maybe material. If it is only going to increase our GDP by 0.08% over the next 10 years, then, fine, I am not saying we should not do it, but what may become more important is that we are joining a large trade bloc that could become larger and more innovative. Most of the CPTPP text is almost 10 years old. It was basically founded on the Trans-Pacific Partnership deal, which is 49% text similarity to US FTAs. It is still essentially a US trade regulatory trade agreement, largely speaking, and, as Shanker confirmed, it is going to be reviewed.
This provides the UK with a very important opportunity here for leadership and innovation, notwithstanding we are relative newbies to the agreement. We have a long history of being trade policy innovators. We are joining a group that is not dominated by a large power. It is a set of middle powers such as Japan, Canada, us, Australia, Mexico, and so on. There is an opportunity here for us to work with other middle powers to create a very innovative and dynamic trade agreement going forward. I think that it will be increasingly compelled to show its value added in a time when a lot of trade policy is becoming more neo‑mercantilist and defensive. There are a lot of positives, but also risks to take into consideration.
Q110 Steven Bonnar: You mentioned managing the risk and we need the skills to be able to do that. Are there any other policy responses you think that we should be looking at or that might be necessary to ensure that we have that resilience between the UK and the CPTPP?
Chair: Again, focus on agrifood if you can.
Professor Dent: You just reminded me of a very important small point. We need a strategy to make sure we have that capacity to innovate and lead. It is important to have a strategy.
Shanker Singham: I agree totally with that in terms of the importance of this agreement in a wider context, where you have the US becoming much more protectionist and China with massive distortions of its own market that have big effects on global trade. The CPTPP, I think, is going to be a very important element of trade policy.
On the agrifood side, you have a lot of major agricultural producers within the CPTPP framework, and the opportunity to integrate UK farmers and the UK agrifood supply chain into those supply chain networks is huge, but you have to be a bit proactive about it. You have to create venues for UK farmers to come together with peers, colleagues, retail, wholesalers and so forth, and identify themselves the areas, as the New Zealanders did in dairy, where they think they can pick off the most lucrative bits of the supply chain.
The other point on CPTPP is that, when the US pulled out, there were certain areas, such as intellectual property protection, that were diminished. The UK has very significant interests in those areas and there is, I think, an opportunity to go back to that conversation and improve it. A lot of farming, as you all know, is very IP-intensive. We do not necessarily think of it that way all the time, but some of the technologies that are being used and developed in the UK will be protected by IP and will be great exports for the UK.
Professor Smith: On the agrifood side, what has not been done is looking at the cumulative impacts of all the liberalisation under these free trade agreements, including CPTPP. When we get an impact assessment that is done prior to a trade deal, it is just about that trade deal impact on the UK.
If I can give the Committee an example, under CPTPP there is a tariff rate quota for beef, which is shared among several members, including Canada. That is rising to about 13,000 tonnes of beef after 10 years of implementation, but Canada already has a tariff rate quota for beef under the UK-Canadian free trade agreement, and that is 3,869 tonnes. The problem is that Canada will then have the share of the CPTPP quota.
Chair: We are going to get on to this specifically in the next question, but I see where you are coming from.
Professor Smith: The point is that Canada has access to the UK under CPTPP and access under the Canadian FTA. When we look at the UK tariff rate quota schedule in CPTPP, it explicitly says that this is extra. That assessment of the cumulative effects of these quotas and these liberalisations is not happening. A little bit has been done in the Trade and Agriculture Commission report at the end, which is really helpful, but we need much more assessment about the cumulative effects of this liberalisation.
Q111 Steven Bonnar: I will just put one final question out there. There are other potential shocks that may be geopolitical or geo-economical, but also benefits. There might be benefits that can be got from geoeconomic or geopolitical situations. Does anybody have a view on that?
Professor Dent: There has been a lot of talk about the Taiwan issue. That is a complete gamechanger if China decides even to blockade the waters around Taiwan, where 70% of the world’s semiconductors are made—I will leave you to contemplate that—and where 30% of all world trade goes, which is twice the amount of trade that goes through the Suez Canal.
Steven Bonnar: That is a sobering thought.
Q112 Chair: Following up on that point, in terms of geopolitics, one of the things our Committee looked at closely with the Australian and New Zealand arrangements was seeking reassurances from the negotiators about beef and sheep meat quotas and the tariff rate quota mechanism coming in. The assurances were given that the Australia and New Zealand meat market is very much pivoted to south-east Asia. If something changes in south-east Asian geopolitics, what is to stop that pivoting over to Europe? When we asked those sorts of questions, people said, “It is unlikely”. Do you have any thoughts on that? That is something that certainly UK farmers have expressed concern about and this Committee looked at when we scrutinised the previous arrangements.
Shanker Singham: With Australia and New Zealand, unlike Canada, we were able to get a single agreement, so, in other words, no double bite at the apple for whatever they agreed in the context of their bilateral deals. That was the accession for the CPTPP. They were not going to get extra access. Those quotas are actually, in terms of overall trade flows, relatively low. We have to also think about the context of where their trade may go in the event that there are real problems with China, such as those that Christopher mentioned.
We also have a significant and much higher volume of beef and sheep meat, or beef and lamb certainly, coming from the EU on a tariff free and quota-free basis. When we talk to the trade negotiators from Australia and New Zealand, they will point that out. The elephant in the room is the EU beef and lamb access, which is tariff free, quota free and, until 31 January, without any barriers at all, including SPS controls. I do not think it, even in that situation, would have a huge impact, but something seismic that would cause that can be revaluated.
Chair: Is that something that the Trade and Agriculture Commission can keep a watching brief on, in terms of your viewing of these?
Shanker Singham: I believe we have said that we are looking at that.
Chair: Now we are going to move on to Canadian discussions.
Q113 Barry Gardiner: Before that, I wanted to ask Professor Dent a question. I understand that your research interest focuses also on the interaction between climate change, energy policy, and trade. On that, I was interested to seek your views on the water situation in the Panama Canal and the way in which desertification may be affecting the traditional agricultures and therefore the traditional exports from different parts of the world, which we are going to increasingly see changed. Will free trade agreements that once were seen as a liberalisation suddenly come to be seen as a straitjacket?
Professor Dent: A good starting point, perhaps, to provide a little bit of context, is that you can expect to see a greater nexus between trade and climate-making policy as we go into the 2030s and beyond. Trade is directly responsible for up to 30% of all carbon emissions. Trade represents around 60% of the global economy. That is twice the rate of the 1970s.
We are seeing some very important and impactful trends in trade and climate policymaking, the most important being the carbon border adjustment policy of the EU. Linking to the previous point, that could make beef and dairy exports from Australia and New Zealand to Europe generally more expensive because they will be carbon-priced, given that it is 13,000 nautical miles from Sydney to Felixstowe, for example. That would be taxed because you are using carbonised transport. The UK is following in that current because we are also thinking of our own carbon border adjustment mechanism policy, which will affect agriculture.
Q114 Barry Gardiner: It goes to the point—I cannot remember whether it was Mr Singham or yourself that was making it—about neo-mercantilism. Given the defensive nature of trade policy as we see carbon border adjustment mechanisms come into play, certainly in the global south, people look at that and say, “This is just another means of protectionism on your markets”. Unless the tax that is levied at the border is then redirected into international aid and development, it is increasing the imbalance here, is it not?
Professor Dent: Yes, carbon pricing is increasingly affecting multiple sectors. It will affect trade. It may be viewed as green protectionism. Carbon pricing could be seen as a green import tariff, for example. The World Economic Forum met last week. On the global risk report for 2024, the top-ranked risk is extreme weathers for this year. Going back to what you were saying about what is happening to water levels and desertification, climate is increasingly changing the contours of how we do trade and it will only do so more as the long crisis of climate change deepens.
Q115 Barry Gardiner: Professor Dent, I hear mutterings to my right. While you and I might profitably continue this discussion at great length and, I hope, mutual enjoyment, it is probably not something that the Chair wants me to pursue much further at the moment. Mr Singham, you talked of the CPTPP deal as being a major trade treaty. Could you remind the Committee what the projected growth in UK GDP by 2040 from the CPTPP is?
Shanker Singham: I know that you are referring to the number that the trade committee—
Q116 Barry Gardiner: Do you recall what it was?
Shanker Singham: It was 0.08% or something. To Fiona’s point earlier on, it is notoriously difficult to predict the GDP per capita impacts of international trade agreements. In fact, the TPP was reviewed by the International Trade Commission in the US, which specifically said that we have a way of knowing the benefits of tariff reduction, but we are very bad at understanding the regulatory benefits and all the other things that come with a trade agreement. Countries have notoriously underestimated the benefits of trade. The New Zealand-China agreement was underestimated by the New Zealand Treasury by about a factor of 11.
It is very difficult to project these things and much more important to focus on some of the things that Professor Dent was talking about in terms of the nature of the agreement. It is a very liberalising agreement based on mutual recognition and that will set the pattern for trade agreements around the world. If you look only at tariffs, then, yes, basically because most tariffs have been lowered quite substantially over the last 60 years, you are not really going to see the change. What you do and what other people do domestically as a result of the agreement is where the big benefits come in.
Q117 Barry Gardiner: That was a very long answer for a very short question. Let us hope that it does increase from the projected levels that the Government hoped for by a factor of 11. If it does, it would then come in at just under 0.1% and that would be really good. Professor Smith, the UK recently paused its talks with Canada. It is beef. It is cheese. Tell us, in your understanding, what is going on and what its implications are?
Professor Smith: This is the renegotiation of the UK-Canada continuity agreement, which was, if you like, the agreement that came after the UK’s exit from the European Union, when we had the benefit of the EU‑Canada trade deal. The reason this is tricky is that there are high import tariffs into Canada for cheese.
Q118 Barry Gardiner: It is 245%.
Professor Smith: The EU had negotiated a tariff quota, which allowed preferential access into the Canadian market. Because of the speed with which the UK was trying to roll over a lot of these trade agreements, rather than negotiate a new tariff quota for cheese an agreement was made by letter between Canada and the UK that the UK would share the EU’s tariff quota for cheese. That agreement expired on, I think, 31 December last year.
That was fine but now Canada is seeking a completely different renegotiation of that. My understanding is now that the UK access was just over 14,000 tonnes worth of cheese we could export potentially to Canada. Now that has dropped to around 6,000 tonnes. That is a shared quota, not exclusive access, so it is a significant drop and impact on UK farms.
Q119 Barry Gardiner: One cheese manufacturer in the UK has said, “We have been trading for 40 years with our trading partner in Canada, but it is all at risk”. Another has said that it has “hit a stone wall”.
Professor Smith: With the cheese it is affecting at least, I think, £8.5 million worth of sales currently. I think that that is the figure.
Q120 Barry Gardiner: Take us through to the implications of that for the negotiations.
Professor Smith: In terms of the negotiations and where we are, it is a very positive step that the UK has walked away rather than take a bad deal. Certainly there is pressure on the UK.
Q121 Barry Gardiner: I have heard that phrase before, I think: “No deal is better than a bad deal”.
Professor Smith: I could not possibly comment on that. It is positive in a way because Canada is an exporter of beef and it uses growth hormones in the production of that beef. It is problematic and the UK does not allow the importation of hormone-treated beef. This pressure on the UK to allow access for Canadian beef and cheese is, if you like, a sacrificial lamb—excuse the agricultural analogy—for that access. It is very positive. Rather than give away access to the UK market for that beef, the negotiators walked away, and it is not unusual. I forget how long it took the EU to negotiate the Canadian deal, but there were several hiatuses during that time. It is not unusual, but the impact is significant.
Q122 Barry Gardiner: This is the balancing act, is it not, that any negotiation has to strike? They want something from us and we want something from them. How do you think that the UK can edge forward in these negotiations, accepting that it wants market access for hormone‑treated beef and that that is not something that, if you explicitly ask the British public, they are keen to give, and one trusts that the Government will also be unkeen to give it?
Professor Smith: A solution—I think that this is the EU solution—is to increase the amount of non-hormone-treated beef that is allowed into the market. Certainly that was a solution when the EU was taken to the WTO dispute settlement mechanism over the hormones dispute. That was the solution that was arrived at. Rather than allow access for Canadian hormone-treated beef, they said, “We will just allow more”.
Q123 Barry Gardiner: “We will give you a bigger quota of non-hormone-treated beef”.
Professor Smith: Yes, exactly, and maybe to look at certification schemes of Canadian beef and allow greater access that way. That may be a solution.
Q124 Barry Gardiner: What potential jeopardy does that pose for our beef farmers?
Professor Smith: I guess that it depends on the size of the quota and the interest in Canadians supplying to the UK market rather than the US market, which would be their traditional market under the USMCA agreement.
Q125 Barry Gardiner: Let us cast more widely to other potential agreements that we are hoping to engage in, such as India and the GCC. Are there potential agreements that we hope to get that might be jeopardised around similar issues of foods and standards? Discuss the trade-offs, in effect.
Professor Smith: Perhaps you would talk about values as well as food standards. Certainly animal welfare is a big issue in the UK-Gulf Cooperation Council discussions, particularly in terms of the treatment of animals at time of slaughter in some Gulf countries. That has been raised as a potential problem. We have very different standards of animal welfare at time of slaughter in the UK, so that is a significant problem.
Q126 Barry Gardiner: I know that my colleague Mr Sturdy will probably be asking you more specifically about that later on.
Chair: We are doing that in the second panel.
Barry Gardiner: Sorry, it is in the second panel, great, so launch away.
Professor Smith: This comes back to where we started in terms of the kind of trade strategy we have. How do we deal not only with food standards, which the Government has been very clear on, but with our values? Where are the UK Government’s red lines on values and culture? Are we prepared to trade those off against market access for things such as, with the Gulf countries, cereals—I think chocolate is another one, as is biscuits—that we would quite like to get more access into that market?
Q127 Barry Gardiner: There was an interesting programme on Radio 4 this morning that made me think that I did not want to eat anything because it was either child labour, sexual exploitation, hormone-treated or going to kill me in some other way.
Professor Smith: In terms of the values that we have, as Shanker raised before, there are these chapters in the Australia deal. We have trade and women’s economic empowerment chapters. We are thinking about those values that we have as the UK. It is really important for the Government to think about how those values are embedded in trade agreements going forward.
Q128 Barry Gardiner: We have not, have we? When we have been negotiating trade agreements, and internationally when others have been negotiating them on our behalf in the EU, it is been very rare that we have talked about International Labour Organization rights, workers’ rights, slavery and modern slavery. Why has that whole values agenda not come into our trade negotiations globally more than it has?
Professor Smith: At the end of the day, discussions about free trade agreements are a negotiation. If the other party will not discuss these issues, the UK cannot unilaterally impose them in a free trade agreement. One thing I would say is that the UK is extremely active on issues of women’s economic empowerment at the World Trade Organization. There is a lot of leadership on trade in Geneva with the UK, which is very exciting. There is an excellent team there. We are not quiet on the issues. It is just a question of getting these things into the agreements. Even when they are in the agreements, a lot of these chapters are aspirational and may not be subject to dispute settlement anyway, even if you would want to litigate them, which is a separate issue.
Q129 Chair: We need to get on to our second panel, so thank you very much to our first panel for being with us.
Examination of witnesses
Witnesses: Shubhi Mishra, Nick von Westenholz, Sarah Baker and Helen Dallimore.
Q130 Chair: You join us back for the second half of our trade inquiry session. Could I get the panellists in the room to introduce themselves? Could you say who you are and where you are from?
Sarah Baker: I am Sarah Baker, head of economics at AHDB. We are an agricultural levy board and represent the four sectors of beef and lamb, pork, dairy, and cereals and oilseeds.
Nick von Westenholz: I am Nick von Westenholz. I am director of trade and business strategy at the NFU, representing farmers in England and Wales.
Helen Dallimore: I am Helen Dallimore, international sales at Coombe Castle. We are a dairy exporter around the world.
Chair: We also have an expert witness online from India, Shubhi Mishra.
Shubhi Mishra: Hi, I am Shubhi Mishra. I head the food and drink sector of the UK-India Business Council. We are an advocacy and strategic advisory organisation that is not for profit and works with a mission to grow UK-India trade and investment.
Q131 Chair: Thank you very much for being with us today. We know that it is later in the day for you, Shubhi, so we appreciate you being with us.
Nick and Sarah, how effective and strategic do you feel that the UK’s approach to trade policy is and has been?
Sarah Baker: Our view is strategic. Is it strategic? How far is it looking ahead and how interconnected is it? There are several things to unravel there. I do not think agriculture is leading the strategy, by definition. It is incredibly important. It is one of the most difficult chapters to negotiate and agree, but I do not think that it can ever drive the strategy. That underlines a lot of the frustrations and nuances that come out of the trade deals for the agricultural sector.
It is really important to understand, as your previous panel outlined, that the UK is a trading nation in agriculture. We both import and export. The reason for that is limitations about what we can produce, for example due to seasonality, as well as carcass balance and preferences. It is very important to look at it from both sides.
The EU was and remains an incredibly important market for us, but post EU exit it is important that we cast our net. We would applaud the approach of increasing the number of agricultural attaches, increasing the Trade and Agriculture Commission’s work and starting up the TAG teams to start this collaborative approach. We would encourage more collaboration with the experts in the industry. I think that Nick will agree.
Nick sits on the TAG teams with me and I think that sometimes we felt we were a portal for the communication of what was happening in the trade negotiations, rather than asking for expert input at the time of negotiation. There is a wealth of experience out there in the industry that could be better utilised by DIT. We feed in a lot of written information to Defra. Again, the joined-up approach between Defra and DIT is something that could really help.
AHDB has a very good understanding and a very unique position. We will supply the unbiased evidence. We do a lot of economic modelling in this area and we can supply incredibly valuable evidence to those negotiations. We are really keen to do so. I will pass over to Nick at this stage.
Q132 Chair: To reassure Shubhi and Helen, we will bring you in on subsequent questions, but we are targeting them initially, so over to you, Nick.
Nick von Westenholz: I would suggest that there has not really been a trade strategy thus far, certainly as it relates to the agrifood sector. Perhaps it ought not to just relate to the agrifood sector. If there is a trade strategy, it probably needs to look at the economy as a whole, but the agrifood sector is an important part of that. We are seeing improvement over the last few years in Government policy initiatives and approaches as they relate to trade and how it can support and promote sectors like agrifood in the UK, but it has been rather piecemeal.
If you take a strategy as being an agreement on what one’s goals and objectives are at a high level and what one’s strengths and weaknesses are, and then begin to work out what the building blocks needed to achieve those are, and try to tie those all together in a co-ordinated fashion, that would be a strategy. I do not think that we have seen that at all with trade. We are seeing blocks put in place slowly on a rather ad hoc basis. As I say, those blocks have been improvements in recent years, but they have not demonstrated a strategy.
One illustration of this is that, early on in the Government's independent trade policy, when they started to do those negotiations, particularly with Australia and New Zealand, they publicly said repeatedly that food and in particular farming were at the forefront of their trade policy and its trade strategy. Yet their own impact assessments ahead of those trade negotiations showed that the only sectors that were likely to be negatively impacted were food and farming sectors. One has to ask how that would happen if one had a comprehensive or coherent trade strategy.
Q133 Chair: On that point, from your perspective, in terms of the impact of UK trade policy—you have mentioned potentially some of the negative impacts on UK food farming and the agrifood sector—broadly, what are the impacts of the trade policy, both positive and negative, on the agrifood sector in this country?
Nick von Westenholz: We are at an early stage still. Even if you take those first two free trade agreements, they only came into effect halfway through last year. As we heard in the last session, we are already seeing trade flows change as a result of that, but it is early stages, so the impacts as yet remain unknown.
If you look at those first two trade agreements, they are very liberalising trade agreements with countries that are very effective exporters in food and drink—they are massive net exporters—that do not have large import requirements when it comes to food and that are already open economies. We already have tariff-free access to a lot of those agricultural markets anyway, so a trade deal for UK exporters does not open that many new doors. It is easy to see that the impacts, as showed by Government impact assessments, are likely to be negative.
Since then, we have seen slightly more balanced agreements where we have not totally liberalised but have given more access to trading partners, for example through CPTPP. At the same time, we have sought to secure better access for our own producers and exporters as well, so there has been a little pivot there. The pros and cons, or the risks and opportunities, of those deals are far more balanced by the look of it. It seems that that is probably where we will be going with the current negotiations as well, being a little bit more balanced between effective and defensive.
Q134 Chair: From a representative sort of body such as the NFU, I am sure that you were very positive when the UK announced suspending the talks with Canada on those red-line issues about importing hormone-treated beef and also, more widely, ractopamine in pork and poultry that had been chlorinated as well. You would welcome that from the Government. Do you detect that that is a change in the UK’s strategy in being a bit firmer to drive up standards internationally?
Nick von Westenholz: It is wrong to sort of describe it as a positive outcome, because it is a regrettable outcome. There are UK companies that will be badly impacted by the outcome so far of those negotiations with Canada and those being suspended. That is not in itself at all a good thing, but the fact that the Government decided to hold their line and not do a bad deal just for the sake of doing a deal was important and positive.
If we go back to last summer when we had the “Farm to Fork” summit in 10 Downing Street, the Prime Minister made very clear that we will not, in any of our free trade agreement negotiations, give ground or concede on our standards. That is what happened in those negotiations. It was, as I say, not a good situation to be in, but it was a good decision of the Government to walk away when much too much was being asked for.
Q135 Chair: We are going to come on to this later, but Helen, do you want to quickly give us your take on that development in the last couple of weeks from your perspective and the sector your represent?
Helen Dallimore: We are the dairy sector and we can understand the food standards. Absolutely, we uphold that across all agrifoods. That is no problem at all, but the threat to our business is massive when it comes to a third of our business going into Canada for dairy product. We represent 12 dairy producers into Canada. We are a dairy producer ourselves. I stand as one person, but I have 12 people on my side. Yes, it is a big threat to the business.
Q136 Chair: We will flesh out more of that later on when Cat explores that.
Nick, you are here from the NFU perspective, but you also sit on the Trade and Agriculture Commission. Over a number of sessions our Committee expressed some concerns when we had the TAC before us about the resourcing of that commission. The chair, in one of our sessions, actually said that he had to use his own university research moneys to provide some administrative support. We made the case to Government that this is an important group of people scrutinising and helping the Government develop their trade policy.
From your perspective—I know you cannot speak for the whole commission—is it match fit? Is it up and running? Is it well equipped? Is it adequately resourced to do the job we are asking it to do? Sarah, you are on it as well.
Nick von Westenholz: No, Sarah is not.
Sarah Baker: No, I do not sit on the TAC.
Nick von Westenholz: The commission is stood up whenever a trade agreement has been agreed but before it is ratified in order for the commission to look at it. At the moment, we are not meeting regularly.
We met very regularly in the run-up to CPTPP. That was really the agreement that gave us some concern about resourcing because it is not just a bilateral trade deal. There are 11 members of that agreement. We had to look at and examine them to see what their standards were. I am pleased to say that we were provided with some additional resource to help us through that process. We produced a pretty good report at the end of that process. There is no doubt that it was hard work and very intensive towards the end, but that additional resource was very useful. We can do the job that we need to do at the moment, as things stand.
Q137 Chair: That is encouraging to hear. Hopefully the work that our Committee has done has helped you to do your job better.
Nick von Westenholz: Yes, I think that is right.
Chair: Thank you for clarifying that.
Q138 Derek Thomas: Nick, I am going to create a hypothetical strategy. Let us imagine that we had an agrifood trade strategy, which you say does not quite exist. If there were such a thing, what role would trade agreements play in it? What role would they have within an agrifood trade strategy?
Nick von Westenholz: They would play an important role. As I alluded to, there are things that have happened that you could cobble together into something that approximates a strategy almost by chance.
Trade agreements clearly have a role, particularly in terms of opening up market access, reducing tariffs where those exist and creating forums for discussion in relation to reducing other non-tariff barriers. I also sit, as does Helen, on the Food and Drink Export Council, which was set up a year ago to look at ways of improving our export performance, opening up markets, reducing barriers, improving capability, improving promotion and all those sorts of things. That is critical as well.
We need to put some resource into improving our exports outside of free trade agreements. Somebody talked previously about the fact that we have reopened access for lamb into the US. Last year, I was lucky enough to be on a trade mission to Washington where we were served British lamb at the British Embassy in Washington for the first time in 20 years or something. That was great. That is what you can do outside a free trade agreement. There is no free trade agreement there.
The work of AHDB and others over many years in doing that is crucial. In fact, that might be more crucial than FTAs. The FTAs can provide a bit of a framework, but that needs resource. We need to make sure that bodies like the AHDB and the agricultural attachés who are going out to 15 markets overseas are supported and increased. All those things are really important.
Q139 Derek Thomas: Helen, do you want to comment at all on the role of trade agreements in an agrifood trade strategy?
Helen Dallimore: I completely agree with the points that Nick has put forward. Trade agreements enhance our ability to enter different markets. Every market that we deal with has its own form of protectionism. We have to navigate through that. As part of the commission, it is really important to understand the barriers to trade and how we can provide support to address those. Certainly, as a council trying to navigate businesses through routes to export, trade agreements certainly do help in that process.
Q140 Derek Thomas: Moving away from FTAs, what steps can be taken to benefit agrifood businesses? Do you have any ideas about what more could be done to support agrifood?
Sarah Baker: Yes, definitely. I know we are moving away from FTAs, but they are the end result of a very lengthy process. They are one small step in an incredibly complex set of events.
What can be done? First of all, we need to understand that trade takes place based on supply and demand, not trade deals. Trade is not created just because you have put a trade deal in place. It is the groundwork. It is about understanding where the key opportunities are.
We are working with limited resources. We identify where the growth markets are, where people are willing and able to pay for UK produce, and then we put the work in. You start establishing the supply chains. First of all, you have to have permission to export to these countries. You have to have export health certificates in place. You have to agree the SPS standards. You have to have that paperwork in place. The US is a perfect example. It takes a long time. It takes very lengthy negotiations.
Those non-tariff measures are, as Helen has alluded to, often more complicated to navigate than the tariffs. If you look at CPTPP or even GCC, some of the tariffs in those countries are relatively low, around 5%. Yes, it would be great to get rid of them, but 5% is probably within the normal variation of currency fluctuations. The challenges are the non-tariff measures. The agricultural attachés are really tasked with getting down to the nitty-gritty and removing some of those non-tariff measures, which is incredibly important.
As Nick said, AHDB has a role in hosting inward missions and making sure that, when premises are inspected and when people come and look at our standards, as Canadians will be doing fairly soon, they give us that certification. This is about building those relationships over years and years. The other major agricultural exporters understand the importance of that. They will have a presence in markets that they have no hope of opening up for 10 or 15 years. They will be putting the work in now. There are big lessons to be learned there.
Q141 Derek Thomas: Shubhi, can I direct that question to you? Parking the question of FTAs, what is needed to support the agrifood sector or agrifood businesses, from your perspective?
Chair: Shubhi, can you hear us still?
Shubhi Mishra: Yes, I can hear you now. Can you please repeat the question?
Derek Thomas: What can be done to support agrifood businesses, without necessarily opening negotiations around a free trade agreement, in order to support exports?
Shubhi Mishra: When we talk about trade with India particularly, there is a lot that can be done beyond FTAs. For example, Defra and DBT collaborated together to get a Defra-sponsored agri-counsellor on the ground to put a co-ordinated effort going forward.
Alongside this, we are seeing a lot of steps by the UK Government to grow F&D trade with India through trade promotion and engagement on FTAs. For example, the Great British Food Programme has an active team not only in India but at international food fairs as well. They are bringing together UK and Indian buyers and sellers.
We say that the idea is to engage, enhance your presence and then expand your market position in India. We are also seeing examples from a number of other countries’ Governments that are not even engaged in any trade negotiations with India, like the US or Turkey. They are looking at the global trade outlook and benefiting from those opportunities.
For example, India has restricted the entry of fresh apples from China and imposed retaliatory tariffs on the USA. That is an opportunity for us to feed into the system and benefit from opportunities of that nature. We need to watch the situation on the ground constantly and be aware of what is happening. We can benefit from the presence of on-the-ground teams from DBT and partners like us in order to expand on that entire situation.
Q142 Derek Thomas: Thank you for that. Can I ask the panel here? How well resourced are the Government support to your sector when it comes to agrifood businesses?
Nick von Westenholz: From a trade perspective it is improving, but it is still small. Sarah alluded to what the other countries with big export ambitions are doing. Look at the number of staff that some countries have over here just working on market access, doing the jobs that our attachés are doing in those countries overseas. They will have four, five or six people working on that alone. We have just placed 15 attachés in individual markets overseas. You can see that we are a long way behind, but that has improved.
We have talked about Government matched funding on what farmers pay through their levy to the AHDB, for example, so the AHDB can beef up the work it does on exports. As I said before, we could increase the number of attachés that we have in overseas markets.
I do not want to ignore the fact that there are other people in our embassies overseas who can and do work on some of these issues. If you look at those other countries, they have big resources just on agrifood market access in their embassies overseas.
Q143 Derek Thomas: Sarah, hearing what Nick has just said, when new opportunities arise, are agrifood businesses in the UK slightly disadvantaged because we do not have the equipment or resources that others have?
Sarah Baker: It is one of those legacy issues, as Nick has alluded to. This was something that was previously done for us by the EU. We are finding our way and developing a strategy as we go.
We have to be mindful of the importance of agriculture in the UK in terms of GDP and therefore the resources that will be directed to it accordingly. You cannot just look at GDP. You also need to look at the importance of agriculture in terms of land use and in terms of offering solutions to environmental issues, climate change and everything else. That is a better reflection of the importance of agriculture in the UK rather than just looking at the percentage of GDP.
Are we at a disadvantage? As Nick says, it is going in the right direction, but there is a huge amount more that AHDB could do if it were to get that matched funding, for instance. We are already devising plans for the extra money that has been contributed for dairy exports and creating a strategy around that. We would very much welcome that sort of backing in other areas.
It is not just about putting in the money. The money and the resources are incredibly important, but it is about putting the right people in place, having the right knowledge networks and having the right support systems for those people once they are in post. That means you can really leverage that impact. We are never going to have the spend of USDA—let us be realistic about it—but we can use our people to maximum effect if we take a joined-up approach.
Derek Thomas: I suspect I have run out of time.
Q144 Ian Byrne: I will go to you Nick and Sarah first. Will CPTPP advantage or disadvantage the agrifood sector? Which products or sectors are likely to benefit or lose out?
Sarah Baker: CPTPP was an example of a strategic trade deal. This goes back to question one. It is playing the long game. We all saw the figures in the impact on UK GDP. They were small. They were quoted in the previous panel. They were very small, but for agriculture it was a really welcome relief to have an accession negotiated that was more positive than negative. It is more positive.
In the previous panel we spoke about having a foot in that Indo-Pacific region, which is incredibly important. Pork consumption in that region is going to increase by 19% by 2031; beef consumption is going to increase by 16%. That is incredibly important. It is going to be a huge trading region. It is huge now, but it will be even bigger by 2031. Therefore, being on the inside and joining early on is a crucial strategic step.
In our analysis, the sectors that can benefit immediately are beef, cheese and butter. The percentages are a little bit misleading. They are in the report—I am happy to provide the panel with it—but be aware that the percentages are from a very small base and therefore they will grow.
At the moment, we are facing fierce competition in those sectors. A lot of that is being supplied from Australia and New Zealand. Given the USDA’s forecasts on growth and the FAO’s forecasts on growth, demand and the emergence of a middle class that is willing and able to pay, there is room for more than just Australia and New Zealand to play in that space. There is definitely room for UK produce to go in that space.
There has been extensive consumer insight in the region. Our products are well regarded. They are definitely poised to take advantage of that market. It was incredibly important to us. There will not be an immediate impact, but it is a long game. In the long game, it will be advantageous to our sectors.
Q145 Ian Byrne: That is a very positive answer. Nick, would you like to add anything to that?
Nick von Westenholz: I agree with Sarah. It was slightly overegged and oversold when the agreement was done. We already have bilateral agreements with nine of the 11 countries in CPTPP. As Sarah has pointed out, because of the nature of the geography, in the agrifood goods trade it is easier for those countries that are closer to each other geographically to benefit from CPTPP compared to the UK, from which all those countries are significant distances away.
I certainly would not want to overblow it, but I absolutely agree with Sarah that it opens the door for us, over a very long period of time, to improve our trade and our exports with a growing and increasingly economically important bloc of countries, one which itself will grow in terms of numbers. There are a number of important countries that are now looking to accede to CPTPP as well.
Ultimately, is it better to be in CPTPP rather than not? Yes, I would say it is. It is good that we are there. We can try to get the benefits from that important trading bloc, but I would not overegg it as somehow going to revolutionise the UK agricultural sector.
Q146 Ian Byrne: That is a fair answer. Helen, I will go to you. What impact will the CPTPP have on the UK’s geographical indications? What lessons can be learnt on GIs for future FTA negotiations?
Helen Dallimore: I just want to home in a little bit on the CPTPP when it comes to Canada specifically. I have a slight warning of caution when it comes to Canada in particular. I need to have some clarity, but I believe that ratification from Canada has to allow UK accession to the CPTPP, which would allow us access to the quota for import into Canada. That is my understanding, but I stand to be corrected.
We need to be very careful because the allocation mechanism of the quota is held by Canada. In the CPTPP allocation of dairy quota, 85% of that goes to the dairy producers of Canada. On the maths that we have done, the 15% equal share is then divvied out to anybody who applies for the allocation. Currently, our allocation of that quota would be less than one container, less than 20,000 kilograms. For us as a business, CPTPP is not an answer in Canada. It is just not going to work. I need to see proof that something better can resolve that situation.
The dairy producers of Canada are multinationals. They also have direct purchase of UK dairy businesses. They are in a very good position. Small businesses, small dairies and the 12 dairies that I represent are not in a very good position at all as an outcome of CPTPP. That is the negative nanny in the room on that for you.
When it comes to CPTPP in other countries, as Nick and Sarah have said, we already had trade agreements with Australia and New Zealand. Those are probably our strongest market areas. We were quite low tariff prior to that. By the nature of how far the goods have to travel, we are not going to see much improvement in those areas. They are probably the largest market areas for us to focus on.
Fiona was talking about Malaysia. We have already had some trade in Malaysia. It is small. When we are talking about some of the Asian markets, we need better education in those market areas on dairy products and how to utilise them. There is a huge education system that needs to be put in place to support the dairy sector.
Q147 Ian Byrne: Your experience is an interesting contrast.
Helen Dallimore: I am a devil on the detail because I am within it. I am a small business and I am the exporter.
Q148 Ian Byrne: Yes, you can see the impact. That is a really good piece of evidence.
Touching on GIs, Nick, the NFU has put together quite a bit of evidence and been quite strong on what it believes. Do you want to outline what the NFU believes from a GI perspective?
Nick von Westenholz: As a general principle, geographical indications or GIs are very important across a whole range of sectors. Across all our FTA negotiations, we have urged the Government to make sure that GIs, as much as possible, are included and therefore recognised in those markets. In truth, we have had fairly limited success.
Going back to the discussion around strategy and the benefits of some of these FTAs, when it comes to GIs the benefits have been pretty limited. Looking at some of the FTAs coming down the line, it continues to look quite limited. In many other countries and trading partners it is a difficult issue because countries do not tend to like them.
Q149 Ian Byrne: Are the UK negotiators taking on board how important they are and what you are feeding into them? Are they giving them the importance that they deserve?
Nick von Westenholz: I would like to think so. They know how important they are. The problem is that many other countries, particularly the countries where maybe GIs are less important, including in Europe, although not the EU. In general, the countries with a very long and rich history of food production tend to have more of those GIs.
Q150 Ian Byrne: Somebody watching this evidence session might well be thinking, “What is a GI?”
Nick von Westenholz: It is Melton Mowbray pork pies, Welsh lamb and these sorts of things. It is lots of cheeses.
Sarah Baker: It could be West Country cheddar or Scotch whisky.
Nick von Westenholz: For a product to be called and promoted as such, it has to meet the requirements of that GI in terms of where it has been produced and often how it has been produced. You cannot have producers in those countries producing a product there and calling it a Melton Mowbray pork pie or Welsh lamb. That would be an infringement of the GI.
Q151 Steven Bonnar: In the previous deals that we struck with Australia and New Zealand, GIs were distinctly missing. The Scottish and Welsh Governments have put on record their disapproval of that. We have had industry leaders here. We have heard from devolution experts, who have chided the Government on how they are interacting with the devolved Governments.
In relation to CPTPP, the Government have stated, “CPTPP does not provide for new protection for our GIs but enables new dialogue on standards of GI protection with members, which we will use to further the protection of our GIs abroad. As such, the UK Government’s GI schemes will continue to protect GIs to high standards”.
We know that is not the case for the two previous deals. Will it be different for this deal?
Nick von Westenholz: If it is all right, I will come back to you on the exact details of that. I do not know whether Sarah has anything to add on GIs and CPTPP. In my understanding, it will not be different. It is a complicated issue, so I am happy to just double-check. I do not want to put anything on the record here. I will write to the Committee.
Chair: That would be really helpful.
Sarah Baker: I do not have anything to add on what Nick said. Again, I will research it and come back to you. I would point out, as you have, the importance of GIs particularly in the devolved nations. That is a critical issue.
Q152 Barry Gardiner: I just have a very simple question. What happens when it is something like Aberdeen Angus beef? The Aberdeen Angus is a breed.
Sarah Baker: That is not a GI.
Q153 Barry Gardiner: You could have Canadian Aberdeen Angus beef, then.
Sarah Baker: If it were genetically an Aberdeen Angus, yes.
Q154 Ian Byrne: Sarah, I will go to you. How could precedents from the CPTPP and the Australia and New Zealand agreements affect our ability to negotiate future FTAs?
Sarah Baker: They will not. They are separate. The CPTPP is not a trading bloc like the EU was. It does not preclude us from making trade agreements outside that agreement. As can be seen, we already have bilaterals with some of those members and rollover continuity agreements with others. It does not preclude us from negotiating FTAs.
Q155 Ian Byrne: I just want to ask a quick supplementary on animal welfare standards. The RSPCA said something that jumped out at me. It said that the CPTPP extended the lack of equivalence with UK animal welfare standards from the beef and lamb quota deals that were done with Australia and New Zealand to include eggs, chicken and pig meat, which has the potential to create a much larger impact on the agrifood sector than the previous three FTAs and set a precedent. Is that something that you would recognise?
Nick von Westenholz: In the Australia trade deal, there was no preferential access given to eggs, poultry and pig meat. The tariffs on those exports—they do not export very much of them, so in practice it had very little impact—remain where they were. It was stated that that was because the UK Government were not satisfied with animal welfare standards on those products.
My understanding is that that has not been changed by the market access agreements within CPTPP. Under CPTPP, Australia does not suddenly have tariff-free access to the UK for those products. They are still excluded. That is my understanding. I am not quite sure whether that is what that statement was referring to.
Q156 Ian Byrne: The NFU echoed these concerns about the “unenviable position of not being able to reinsert any core equivalency in standards”. It went on to talk about how “the Canadians and Mexicans were able to obtain tariff-free trade”
Nick von Westenholz: That is an extension of the same point, but it is slightly different. For example, Mexico will have now tariff preferences for eggs or egg products, such as liquid egg, and they will be able to export to the UK in greater quantities because of that. There is no requirement to restrict imports because that is very difficult under WTO law, as was talked about a little bit in the previous session.
Very briefly, tariffs serve a purpose in many instances. They restrict products from entering in the UK that we otherwise would not be able to restrict. It is very difficult to restrict a product from coming in because you do not like how it has been produced.
Take the example of stocking density standards in poultry production. You cannot stop it because you do not like it or it is not equivalent to your own standards unless you have a bilateral agreement specifically on that, which is very rare. Once you remove the tariffs, you have removed any obstacle to those products coming in, even if they are produced to lower standards than your own produce. That is the concern that is raised there.
In practice, it is not likely, certainly in the short term, that we will see a lot of egg product exports from Mexico to the UK, but it is certainly feasible. It is more feasible now than it was previously. If those products are produced to lower animal welfare standards that would be illegal in the UK, they will still come in. It is more likely that they could come in now, even if the likelihood remains small.
Q157 Chair: As a follow-up to that, in terms of chronology, the CPTPP started before we had the negotiations with Australia and New Zealand on those bespoke deals into which animal welfare chapters were inserted. That has come afterwards. Is there any scope for animal welfare discussions, chapters or your work on the TAC to come into this wider group?
One of the key issues is that we are standing firm on our animal welfare and environmental standards. The UK has an opportunity to use its soft global power to try to get other friends and allies to bring up their standards to the standards that, say, the UK consumer would like. Is there is any scope for that or is the timeline just wrong?
Nick von Westenholz: It is difficult. Firstly, you are right. We joined the agreement as it was. There is no opportunity to change that, although this year there is a review. Every five years, CPTPP members will review the agreement. The UK will be inputting into that review. It is certainly open for the UK to make the case for it. In reality, is it likely? Probably not, no.
It is one thing negotiating an animal welfare chapter into a bilateral deal, which, as we have seen, is hard enough. It has happened, but we do not have them in all the deals we have either negotiated or are negotiating. When you have 11 countries, many with very different views about animal welfare standards, it is going to be a tricky one to land.
Q158 Barry Gardiner: Shubhi, India takes great pride in having resolved the problem of famine that once plagued India and the rest of the subcontinent. One now has to go back to 1943 for the last major famine in Bengal. Food security is still something that is highly politically sensitive in India, though. Do the negotiations that are currently underway on the FTA appreciate that, when looking at the export bans on agriproducts from India?
Shubhi Mishra: I would firstly divert to a recent statement made by the Indian Finance Minister when she was presenting the interim union budget of India. During her speech, Minister Sitharaman said in particular that between 2014 and 2023 the inflow of FDI was $596 billion, marking a golden era. It was twice the inflow between 2005 and 2014. For encouraging sustained foreign investment, we are negotiating bilateral investment treaties with our foreign partners in the spirit of “first develop India”.
That resonates the sentiment that is sitting on the table. We recommend that the UK Government continue their negotiation in the same spirit as the Government of India, while they are complementing Government of India initiatives like self-reliant India or Make in India.
Notably, I will also underscore one of the findings from the UK India Business Council’s annual ease of doing business survey. During the survey, we posed direct questions to UK businesses that are active on the ground in country. We have asked them for their perspective on topics like self-reliant India and how that impacts their businesses. The majority of respondents affirm the positive impact of the campaign. This underscores that businesses not only view India as a market for their products but also recognise it as a manufacturing hub capable of incorporating their input for further value addition and consumption.
To your specific point, India definitely is an agrarian economy. While on one hand they are assuming the role of partner and advocate for the global south, this unique positioning is becoming particularly sensitive when it comes to matters related to the agriculture sector.
While stakeholders such as participants from the dairy sector remain cautious about international players gaining access, they are mindful of the global trade outlook. As I clearly said, we are predominantly an agrarian economy. Over 50% of our population is engaged in the agriculture sector directly or indirectly.
The Government’s approach to the agricultural sector is deeply ingrained in our historical, economic and social considerations. I firmly believe that will remain the case for any decisions relating to FTAs that are deliberated or taken.
Q159 Barry Gardiner: Thank you for that. I heard in your answer that these are very serious political considerations for any Indian negotiators when they are conducting these negotiations, certainly in relation to agribusiness. How effective has the UK’s approach to securing an FTA with India been? What opportunities are there for our own agrifood sector?
Shubhi Mishra: The UK Government’s approach towards the free trade agreement has been quite enthusiastic since the beginning. It has been quite strategic as well. The UKIBC served as the secretary to the Joint Economic Trade Committee working group.
Q160 Barry Gardiner: Am I asking you to mark your own homework? I am sorry; I interrupted you. Given that you provided the secretariat, am I asking you to mark your own homework?
Shubhi Mishra: No, you are not. During these deliberations, there were over 20 round tables during the pre-negotiation round. The UK Government have done a lot of homework before jumping into the real negotiations at the table.
The headlines generated by the food and drink sector since the initiation of FTA negotiations underscore its significant role for both economies. While non-disclosure agreements have been executed, there remains optimism that the Government are attentively considering the substantial feedback provided by businesses and industry bodies.
Coming specifically to the agriculture and food sector, there have been particular asks, especially from the Scotch whisky corridor, for example, requesting for a phased reduction of basic—
Q161 Barry Gardiner: Why would anyone in India want to drink Scotch whisky when they produce Amrut, which is one of the finest whiskies in the world?
Shubhi Mishra: I would bring you back to the GI topic, which we were just deliberating a few seconds ago. There are over 600,000 people who are employed by UK businesses in India. A majority of that proud share is taken by F&D stakeholders. That is why we want to drink a Scotch while also enjoying our Amrut.
Q162 Barry Gardiner: I would join them in that. Let me ask you about some of the trickier parts of the negotiation. The UK has an odd sugar sector, as I am sure you are aware. Our National Farmers Union is very concerned about the potential sugar exports from India. The WTO found that India had contravened WTO law in 2021. The case made by the National Farmers Union is that we should not be doing anything to reward, as it were, a country that is already breaking the WTO rules on this matter. How are we going to proceed with these glitches in the negotiations?
Shubhi Mishra: That is something I am not equipped to answer right now. If the Committee would like, I would be happy to provide written evidence on that.
Q163 Barry Gardiner: Just going back to whisky for a second, I understand that only 2% of whisky consumed in India is Scotch whisky. What is the potential market? How could we grow that as a percentage? If you have a cash figure for what that might mean, it would be good to know.
Shubhi Mishra: We have been deliberating the figures, but, as Mr Singham stated during the first panel, it is too early to comment on how much volume impact a trade negotiation can have in reality on the ground.
Q164 Barry Gardiner: I want to go to the access and standards question or, as one of our previous panellists, Professor Fiona Smith, spoke of it, the values question. What trade-offs are we looking at in terms of values and access with India?
If I can perhaps prompt you, we do not at the moment automatically test rice coming from India, for example. Many countries in the world habitually preclude rice from India on the basis that it is so high in pesticide residue and there are issues around agricultural workers and child labour. How are these going to play into the free trade negotiations? How do you see us resolving the question of access and standards?
Shubhi Mishra: My information might be a bit dated, but what I am given to understand is that Indian businesses face certain challenges in accessing the UK. For example, they see that there is a disparity in the standards regarding pesticide residue levels, leading to broad rejection of products like teas, spices, peanuts and vegetables such as okra. With this ever-evolving list of new pesticides, as they say—
Q165 Barry Gardiner: We only test for four: curry leaves, okra, peppers and sesame seeds. The others are not ones that we test for. Some people in the UK might say we do not test enough, given that the rice is so contaminated.
Shubhi Mishra: I echo your sentiment here. That is one thought process. However, sitting on the other side of the ground, this was something that came up time and again during our JETCO discussions and related interactions with food and drink businesses in India.
They recommend that, to improve knowledge about standards, labelling and intellectual property matters, both Governments should collaborate to organise and host a series of workshops or industry interactions to educate each other, share best practice, exchange ideas and build a common approach. They foresee that workshops or industry interactions of this nature can help them meet with the relevant requirements on the ground. That is the submission that comes from the India side as a possible solution to the query that you have just posed.
Q166 Barry Gardiner: That seems a very positive input to the conversation and perhaps something that we might pick up as a recommendation as a Committee. Thank you.
How do you assess the Indian Government’s receptivity to those objectives and the potential reciprocal levels of market access? What are the other domestic factors that the Indian Government might be concerned to press?
Shubhi Mishra: Lately, the Government of India have been supportive of the ease of doing business. That has been a progressive development. In fact, we see a lot of notifications coming from GOI bodies that clearly have the objective of supporting the ease of doing business environment in India.
Q167 Barry Gardiner: Much of that, though, would not be in the agrifood sector, if I am right.
Shubhi Mishra: That is for the agrifood sector.
Barry Gardiner: You are saying it is in the agrifood sector. That freeing-up is happening there as well.
Shubhi Mishra: Yes. When we speak with Government bodies, we are also talking about vision 2030. Both countries have talked about a comprehensive strategic partnership accompanied by a 2030 roadmap. We have talked about strengthening bilateral trade and investment collaboration. Agriculture, food and drink have been subjects under that.
The UK-India relationship is comprehensive with a strong trade and investment partnership across a broad range of sectors. I foresee that the Government of India will be pretty receptive to the idea of knowledge sharing, sharing good practice, et cetera.
Q168 Barry Gardiner: I have one final question for you. When do you think we will conclude this FTA?
Shubhi Mishra: That is a great question.
Q169 Barry Gardiner: You have elections and we have elections. Does that rule out 2024? How soon thereafter might we be able to resume business?
Shubhi Mishra: We can see a situation in which, yes, we have to rule out 2024. On the other hand, we can also see that an approach could be taken to seek a resolution. How do I put it? If the negotiations are not concluded before the UK general election, we recommend that the UK Government prioritise completion of the negotiations. The parliamentary ratification, which is a vital part of it, can follow. That could also be a good strategy to attain the FTA, if both the Government of India and the UK Government have elections.
Q170 Chair: Thank you, Shubhi. It would be great if you could write to us with further information. The same goes for the rest of our panel in terms of some of the earlier questions.
Before we get on to our final line of questions, I wanted to touch on one particular product, which is sugar. To follow up on Barry’s comments, today there was an event in Parliament with representations from the NFU and British Sugar. Nick, could you give us your perspective, from the NFU, on the sensitivities related to that sector in terms of a potential FTA with India?
Nick von Westenholz: Mr Gardiner explained very well what our concerns are.
Chair: I would like to hear from you as well.
Nick von Westenholz: Yes, absolutely. The context of this is quite a difficult number of years for UK sugar beet growers. Producing the crop itself has been challenging, mostly through pest pressure. At the same time, the Government have continued to liberalise access for cane sugar into the UK market. It is a different product, but it is the same end product. There is one major cane refiner in the UK. What it produces is a direct competitor of the refined beet sugar that British Sugar produces.
There is sugar access in the Australia trade deal. It is a big producer, but the Government have also given an autonomous tariff-free quota of 250,000 tonnes from anywhere in the world. A considerable amount of access has been given to sugar recently.
This issue with the Indian negotiations comes against that background. As we heard, we have a particular concern because of the way that the domestic support for sugar growers works in India. That has been found to be in contravention of WTO subsidy rules. We should not be providing access to sugar that has been found to receive support that UK farmers do not receive.
Q171 Chair: Thank you for expressing the sector’s view on that. Is the Trade and Agriculture Commission live to this issue in terms of the impact of negotiations?
Nick von Westenholz: To a degree, yes. The Trade and Agriculture Commission looks closely and exclusively at the issues around standards. It looks at how our FTAs will potentially impact the standards of production in the UK. We also look at what the standards of production are in countries from which we are importing, but we do not look at the purely economic impacts.
Q172 Cat Smith: As the only Lancashire MP on the panel, Helen, it might not surprise you that my question is aimed at you because it is about cheese. The UK has walked away from negotiations with Canada. You have touched on many of these issues in your previous answers. I wanted to give you an opportunity to say what this tells us about our trading relationship with Canada, what challenges there are for the sector and how we could potentially rectify this.
Helen Dallimore: Just to paint the picture, prior to Brexit, prior to coming out of the EU, the UK was part of the WTO EU pool. Fourteen million kilograms is the access to that market area. As part of CETA, of which we were a part until 2020, we were allocated 16 million kilograms at the end of 2023. Had we still been in the EU at the end of 2023, we would have an allocation of 30 million kilograms with the EU. The cheese letters, to which Fiona alluded previously, allowed us continuity of trade through the WTO EU pool. With CETA, that gave us good access because we had 14 million kilograms and we were in a very good position.
Unfortunately, without the continuity agreement being rolled on, we have now gone into the non-EU pool, which has dropped us down to just over 6 million kilograms. We could have had 30 million kilograms and now we have just over 6 million kilograms. The non-EU WTO pool is 98% utilised year on year. It has no movement for activity.
We have come out of a situation that allowed us access to the marketplace and into one where payment transfers, which are physical transactions of funds to transfer quota from business to business, are the only way in which we are going to gain access unless we pay 245% entry, which is highly unlikely.
We are looking at an immediate impact on the cost of goods over and above the normal high rate of dairy product in the marketplace. We are already in a really good position. We have been marketing dairy products in Canada for nearly 45 years. We have been across the marketplace in marketing British dairy and getting that import status. Everybody is looking for our product, and now we are limiting our access. Of course, we have issues with CPTPP. If we go into that, our allocation to that is one container. That is not sufficient.
It is hard to give you an answer as to how we could have done a better job. Firstly, the cheese letters should never have been part of the negotiation tool. When we first went into negotiations, when they knew there was no way they were going to finish negotiations by the end of 2023, they should have secured a roll-on period.
We started to request that back in 2022 because we could see how things were planning out. We said, “Please roll over those cheese letters. Continue our access. Let business continue to trade while you have your Government-to-Government negotiations”. We have become the political football in this game. We are really disappointed that that has not continued because now we find ourselves in a higher‑price game.
Moving forward, the halt of negotiations is a very strong point that the UK has made to Canada, but the UK is saying that Canada needs to come back to the table and the Canadians are saying the UK now needs to come back to the table. There is a stalemate situation. Who is going to start talking to the other again and at what point?
A business like ours is very threatened. It is a third of our business. With the greatest respect, we export to around 50 countries. We probably would have already found the golden nugget somewhere else within our 45-year business. We are going to have to do transactions in many more business areas to build up what we are going to potentially lose as a business. We have no resource to do that. Is there any compensation for the threat to our business and the lack of access to that market? We have been told that there is no access to that.
Q173 Cat Smith: Are you briefly able to say what this means in terms of UK jobs? I am certainly aware that I have many constituents who work in the cheese manufacturing industry. What is the potential implication on UK jobs?
Helen Dallimore: We are a business with 40 employees, but we represent 12 dairies. Those dairies have up to 1,000 employees. Everybody and their family has heard this news. They know that their product goes to Canada. They are immediately threatened and feeling very vulnerable. We have no way of protecting them, in a sense. We have no way of giving them the reassurance that we still have market access and we will continue to be able to trade. Quite honestly, employment could be lost as a result.
Cat Smith: Thanks for your evidence.
Q174 Julian Sturdy: I want to move on, if we can, to the UK-GCC bilateral agreement, which was touched on by the previous panel. We will start with you, Sarah. In negotiating an FTA with the GCC, is there an opportunity for the UK to prioritise access to agrifood products? If so, which sectors would you look at most closely?
Sarah Baker: At AHDB again, we have looked quite closely at GCC. We see it as a key opportunity. The GCC countries have a growing and very wealthy population in which UK produce is highly regarded. There is a strong demand. We see the key opportunities in lamb and cheese: cheese in hospitality and food service, and lamb universally across those countries. Do you want me to elaborate on the “but”?
Q175 Julian Sturdy: Yes, please, if you can. Helen might like to come in on the cheese sector.
Sarah Baker: We were speaking about non-tariff measures earlier. The elephant in the room on this one is the halal requirements to access lamb. At the moment a proportion of lamb in the UK is slaughtered to halal requirements, but the Government’s stance is that that is for religious reasons for the domestic population and that it should not be expanded for export.
We have a resident expert in halal, who is called Dr Awal Fuseini. You have probably seen him present at Oxford Farming Conference. He has presented to your Committee on several occasions. AHDB would argue that it is time for an informed debate in that area.
At the moment, there is rapid growth and we are not able to tap into this very lucrative market. There are advances that do not compromise animal welfare, which would mean we could take advantage of those markets.
Q176 Julian Sturdy: I am sorry to interrupt, but, if nothing changed, we would not be able to access that market because we would not have the correct certification and criteria in place.
Sarah Baker: Yes. As it stands, we do have access to certain countries in that market, but we are hampered by that inability to expand the certification process for halal. There is a wealth of information that I can send you on that from our expert.
Q177 Julian Sturdy: You are saying that you believe now is the time to have that debate.
Sarah Baker: We need to have an informed debate and follow the science, yes.
Q178 Julian Sturdy: Before moving on to Helen, is there anything you want to say on that, Nick?
Nick von Westenholz: I agree. If you look at the other countries that are big producers and exporters of sheep meat, such as New Zealand, they have taken a very proactive approach around halal certification and export well to halal markets. The industry has done quite a lot of work on this, but, as Sarah says, we now need Government involvement and commitment to move it along a bit and discuss exactly how we can increase access to halal markets.
Q179 Julian Sturdy: When you say “the industry”, do you mean the capacity within abattoirs to do that?
Nick von Westenholz: Yes, and we have also worked with AHDB and others on the demonstration of life protocols. You can look at ways to meet religious slaughter requirements in a way that satisfies the animal welfare concerns as well. That is what you are trying to do here. There has been lots of work done around that, but, as Sarah says, we now need to take that forward, particularly with the potential to open up GCC.
The countries in the GCC import 90% of the food that they eat. They are the opposite of the early trade deals that we prioritised, where we did deals with countries that export 90% or even more of the food they produce. Countries that enjoy the food that we can produce and rely on imports for domestic consumers are exactly the sorts of countries that we should be trying to send Great British food to. This is an important aspect of that.
Q180 Julian Sturdy: The potential is quite large, but there are roadblocks that need to be looked at closely to get there.
Nick von Westenholz: Yes, absolutely. There are roadblocks. They run different SPS regimes. They can be very bureaucratic and complicated. Just doing a trade deal is not going to suddenly open the floodgates. As we have discussed with other FTAs, it opens that door. It creates the space for us to work further, to increase the demand and to meet that demand where before that might have been difficult simply because of lack of market access.
Q181 Julian Sturdy: Sarah mentioned the opportunities for cheese. Helen, do you want to comment on that?
Helen Dallimore: We are navigating the halal certification on cheese. We do not have a huge number of dairy partners that are fully halal-certified, but we are working closely with them to see how we can help with certification through to export documentation. We lean on AHDB and PTF in that regard in order to help us navigate through that.
Q182 Julian Sturdy: Sarah, just to finish on this part about lamb and cheese, are there any other areas where there are potential prospects?
Sarah Baker: Out of sector, the key ones are chocolate and confectionery. The Food and Drink Federation has its sights very firmly set on GCC. From our sector’s point of view, cheese and lamb are the main ones. At the moment, beef is not a realistic prospect in the short to medium term.
Q183 Chair: In your discussion with Julian, you have touched on halal meat and the work that is being done with you, Sarah, and the AHDB. Nick, you mentioned what is going on in New Zealand as well. The British Veterinary Association has talked a lot about this demonstration of life protocol.
Without going into too much of the details in a public forum, the principle behind this is that the animals are stunned prior to slaughter so they are rendered insensitive to pain. That is a positive benefit for animal welfare in the whole slaughter process, but the New Zealand market and system is ahead of the curve on that. It has gone through this demonstration of life protocol and that meat is then acceptable for the halal market.
Is that something that we can be looking at here in terms of benefiting animal welfare while also respecting people’s religious observances?
Nick von Westenholz: Yes, absolutely. That is what we are trying to achieve. We want to tread that fine line. As I say, lots of work done has been done, but there are political concerns around these issues. We totally understand that. As Sarah has said, we now need to have a science and evidence-based conversation so we can try to move things along.
Chair: There is also a live political debate around the world in terms of the live export of animals for fattening and slaughter. The UK Parliament is now putting legislation through to ban that. There is a big debate in the southern hemisphere about the live export of animals for slaughter. Discussion, dialogue and the sharing of best practice will help animal welfare around the world.
That brings us to the end. Can I thank all our panellists this afternoon? Thank you to Shubhi in India and to Sarah, Nick and Helen for this afternoon. Thank you to our panellists from the first half of today. It has been a very rewarding session looking at UK trade policy, what lessons can be learned from the existing arrangements and what we can do to improve and help UK trade policy moving forward. Thank you again for your attention.