National Farmers’ Union (NFU) – (CPT0033)

Summary

1. The NFU represents 55,000 members across England and Wales. In addition, we have 20,000 NFU Countryside members with an interest in farming and rural life. We welcome the opportunity to respond to this inquiry on the UK’s accession to the CPTPP.

2. UK agricultural producers could benefit from increased access to the CPTPP market and if the UK were to accede to the agreement, we hope it will provide further opportunities for British farmers to sell more great British food overseas. There is potential to expand exports of high-quality UK produce, especially in the beef, sheep meat and dairy sectors. Food safety is a key consumer concern for many CPTPP members and especially the South-East Asian economies. In the UK we can demonstrate safe, traceable, and audited food supply chains, meaning ‘Brand Britain’ should have great potential to win market share if access is provided.

3. However, the CPTPP also includes major agricultural exporting countries such as Australia, New Zealand and Canada, who already enjoy preferential access to the UK market in the form of Tariff Rate Quotas (TRQs) for certain key commodities. The UK already has or is negotiating trade agreements with nine of the eleven CPTPP members and so there is an outstanding question about how much more membership of CPTPP can deliver above what has already been agreed bilaterally. We are also concerned that without careful sequencing of negotiations CPTPP members with whom the UK are engaging in bilateral FTA discussions, such as Australia and New Zealand, could get “two bites of the cherry” and may be able to negotiate market access twice, putting UK negotiators under greater pressure to grant additional market concessions. We have not yet seen any impact assessment or economic modelling from government which attempts to quantify what the additional benefit to agriculture would be from joining CPTPP over and above the concessions already negotiated bilaterally.  

4. The CPTPP has no provisions on animal welfare in the agreement which is concerning for UK farmers. The NFU believes that to enable and support a thriving British agriculture sector it is crucial that the UKs future trade policy respects domestic production standards. To do otherwise would contradict the government’s own stated commitment and would risk compromising our high animal welfare and environmental standards and would undermine British farmers.

5. The NFU has set the ambition for UK agriculture to reach net zero by 2040 and believes the government should be using policy levers, including trade policy, to incentivise higher standards of production and climate-friendly farming models. We therefore support the inclusion of a strong environment chapter in CPTPP but note that in many of these areas the UK goes much further than other members. As such, we remain concerned about the import of products which undermine are approach to protecting and enhancing the environment.

6. Diagonal cumulation, of originating product, between partners is often mentioned as one of the main benefits of CPTPP membership. However, the UK is unlikely to be able to act as a distribution hub for agri-food goods to benefit from such provisions in the same way as it has done with the EU for example. This is due in part because of the perishability of those goods but also the high financial and environmental costs caused by the UK’s lack of geographical proximity to other CPTPP members.

7. The NFU supports the multi-lateral phased reduction of average tariff levels for agricultural products, notwithstanding the issue of production standards mentioned above, but we believe that the protection of sensitive goods on a global market should be a priority when negotiating trade deals. We are confident, if UK farmers are allowed to compete on fair terms, that we can lead the way when it comes to sustainable, high welfare and climate-friendly farming. Ensuring UK Geographical indicators (GIs) receive protection in the CPTPP should also be a priority for the government.

What are the potential benefits of joining the CPTPP that go beyond those of bilateral agreements with individual member countries of the CPTPP? Are there any disadvantages? What are the potential economic impacts on the UK?

8. Trade is fundamental to farming, the value chain it services, and the consumers who buy our products. UK farmers are proud to produce safe, high quality and affordable food that the public trusts and enjoys. Along with growing the domestic market developing new markets abroad is essential. Market access can be afforded through removal of trade barriers, but for opportunities to be realised there must be proper investment in market development to ensure there is demand for British products, both for mainstream commodities and specialty products. More broadly, there is also scope for the UK Government to be ambitious and seek an outcome which allows the UK to leverage its high agri-food standards, which will have both domestic and global benefits.

9. UK agricultural producers could benefit from increased access to the CPTPP market and there is opportunity to expand our exports of high-quality UK produce. On average UK agri-food exports to CPTPP members accounted for 9% of total exports by value (2017-2019 average)[1]. The South East Asian economies present the most opportunity for UK exports. This is especially true for our meat and dairy products where opportunities are created due to the increasing middle class and urbanisation. In this context, global consumption of beef, lamb, pork and dairy products are expected to grow by 16%[2].

10.         The UK is a net importer of fruit and vegetables from the CPTPP and all tariffs on fruit and vegetables are eliminated within a few years on the agreement entering into force. Whilst this is useful for exotic varieties which the UK cannot grow it should be noted that there is some cross over with UK producers, for example New Zealand is a prolific exporter of apples.

11.         The Rules of Origin (RoO) chapter in CPTPP means that products can be moved around the members with greater ease and less cost. This could be of benefit to the UK where our products are used in combination with others to make less perishable products such as pet food, some meat preparations, bread and baked goods.

12.         The Sanitary and Phytosanitary (SPS) chapter in CPTPP provides for greater transparency regarding the contracting party’s SPS regulations and enhances practicability of trade between members. This could be of benefit to UK exports, enabling our farmers to access markets currently closed off to them due to SPS barriers. For example, despite having a bilateral FTA in place UK beef and lamb is still unable to enter Vietnam due to complex non-tariff barriers. Under CPTPP the UK can additionally request certification to ensure that goods reach our high SPS objectives, although only to the extent necessary to protect human, animal or plant life or health. In some cases, this is via certification schemes (mostly voluntary which deal with private standards as opposed to regulatory standards) which operate at an international level.

13.         However, while the NFU supports the multi-lateral phased reduction of average tariff levels for agricultural products, we believe that the protection of sensitive goods on a global market should be a priority when negotiating trade deals. As such, CPTPP includes major agricultural exporting countries who already enjoy preferential access to the UK market in the form of Tariff Rate Quotas (TRQs) for certain key commodities, these include beef, sheep meat, sugar, and certain dairy products. This preferential access is provided for in the UK WTO schedule and will be maintained. As a result, the NFU is concerned that in becoming a partner in the CPTPP, the UK Government will be asked to increase market access for sensitive agricultural products. For example, all tariffs on sheepmeat in the CPTPP are eliminated immediately or over a phasing out process. This would be a significant concern to the NFU with access for Australian and New Zealand lamb a highly sensitive topic with our members.

14.         We note that there CPTPP does not preclude members from treating certain sectors sensitively. For instance, dairy is a sensitive product among many CPTPP members and TRQs are used to control imports into certain membersThere are also TRQs on poultry products used by Canada, Australia, and Malaysia. These TRQs would limit our export opportunities to those countries.

15.         Currently the UK has signed or is negotiating trade deals with nine of the eleven CPTPP members, with only Brunei and Malaysia remaining outstanding. We have not yet seen any impact assessment or economic modelling from government which attempts to quantify what the additional benefit to agriculture would be from joining CPTPP over and above the concessions already negotiated or being negotiated bilaterally.

16.         Of current trade volumes with the CPTPP the UK imports the most from Canada (31% share). Australia and New Zealand have the combined import value of 31% (see pie chart in Appendix A and B). However, they are also major exporters of beef, sheep meat and pig meat and do not offer much export opportunity in return due to their limited population size of 25.4 million and 4.9 million inhabitants respectively, compared to the UK population of 66.8million people in 2019. This difference in population means that there is potential for the current modest trade deficit in agricultural products[3] of £-1,484,282 for Australia and £-4,379,940 for New Zealand (Appendix B), to widen to the detriment of the UK agri-food producers.

17.         The future FTAs between the UK/Australia and UK/New Zealand are already seen as offering little direct financial benefit for the UK. The UK negotiating mandate estimated that GDP would increase at most by a very modest 0.01%[4] and 0.00%[5] (full tariff reduction and 50% of non-tariff barriers addressed) with Australia and New Zealand, respectively. DIT modelling produced as part of the scoping assessment showed imports from Australia under an FTA are foreseen to increase by 83.2%3 and by 40.3%4 from New Zealand. In converse UK exports are predicted to increase by 7.3%4 to New Zealand, primarily in semi-processed foods and agriculture.

18.         UK farmers and growers are proud of their high standards of production – whether in terms of food safety, environmental protection, or animal welfare and indeed many other factors of operation. Many of these standards are underpinned by law, but these regulatory requirements often result in comparatively high costs of production for UK farm businesses. Many of these costs are not borne by overseas competitors, which gives them a competitive advantage over UK producers, through production methods that fall below the expectations of the UK public. It is important that UK farmers are not put at an unfair disadvantage through the imposition of extra costs, both direct and indirect, that are not shared by overseas competitors who are exporting food to the UK. Equally, recent analysis by the consumer group Which? demonstrates that UK consumers have a clear desire that food imports adhere to the same high standards as UK producers. The research found that most people in the UK would feel uncomfortable eating food produced using methods not currently in the UK, with nearly three quarters (72%) saying that food from countries with lower standards should not be available here.

19.         The CPTPP has no provisions on animal welfare but mentions in the SPS chapter that equivalence on standards between members will be recognized. Animal welfare standards and food production standards in some members are lower than that of the UK’s agri-food producers and hence, the NFU would argue they are not always equivalent. For example, the British Veterinary Association[6] expressed concerns that Japan failed to meet UK standards in animal welfare, noting that the Animal Protection Index gave Japan an E rating for animal welfare in comparison to a rating of B for the UK. Secondly, there is different legislation in these countries that allow practices which are not legal in the UK, such as the use of growth hormones and production of genetically modified crops. At the very least, the UK should look to agree side letters between certain members to ensure that the UK standards are upheld.  

Is there any scope for the UK to renegotiate parts of the CPTPP agreement, or can it only seek derogations and exceptions?

20.         The CPTPP has already been agreed by its members and it is unclear how much room for renegotiation there will be. It is likely that the UK will only be able to negotiate carve outs through the use of side letters, rather than by seeking amendments to the main text of the agreement. Whilst carve outs are possible, they are of course subject to negotiation and it is likely the UK will be forced to make concessions to secure any side letters of priority. Given several CPTPP members are major agriculture exporters who will be seeking access to our highly prized market, we are concerned that these concessions may be detrimental to British farmers and growers.

21.         The Rules of Origin with the CPTPP are already set out in the main agreement. However, we could deviate on specific products through side notes by bilateral agreement, but this would have to agreed separately with each member. The Committee can find the legal document for Rules of origin and origin produces here and Product-specific rules here. The NFU provides further feedback on RoO later in this submission.

22.         Animal welfare: The CPTPP has no provisions on animal welfare but mentions in the SPS chapter that equivalence on standards between members will be recognized. Animal welfare standards and food production standards in some members are lower than that of the UK’s agri-food producers. The UK should take side letters between certain members to ensure that the UK standards are upheld.  

What is the relationship between bilateral trade agreements with individual CPTPP member countries and CPTPP accession? What engagement process should the UK undergo with CPTPP member countries during negotiations?

23.         We understand that the CPTPP Commission will determine when to start the accession process within a reasonable period of time after the date of the request. To help the Commission and Accession Working Group discussions, the UK will have consultations with each member, to address the member’s questions or concerns on interested areas (to note this does not amount to a negotiation).

24.         We are concerned about the cross over between CPTPP membership and some of the bilateral negotiations the UK is already involved in such as Australia and New Zealand. We are concerned that unless managed carefully, there could be opportunity for ‘two bites of the cherry” whereby CPTPP members have two occasions to negotiate market access for the same products with the UK. We believe that UK officials have acknowledged this risk and are committed to approaching market access offers to countries such as Australia and New Zealand, which could be subject to both bilateral FTAs and CPTPP accession, as a single offer. Nevertheless, this is subject to negotiation and could well be a pressure point during negotiations.

What are the costs and benefits of joining the CPTPP to the nations and regions of the UK? We would be especially interested in detailed economic analyses on this point. What are the devolved nations’ specific interests and how can they be best protected?

25.         NFU would stress the importance of maintaining good lines of communication between the UK and the devolved governments with respect to the UK negotiation position, not least because many of the obligations that a concluded trade deal will give rise to will need to be delivered, implemented and overseen at a devolved level.  This is particularly true in relation to agricultural and environmental matters.  The UK economy is not of course homogenous. For example, the Welsh economy differs from the wider UK economy in that trade with the EU accounts for 60.3%[7] of its exports, compared to 43%[8] of the UK’s exports. Ensuring that devolved interests help inform the UK negotiating position should help identify, avert, and minimise negative impacts that could stem from proposed trade deals as regards their impact on regions of the UK.

26.         Whilst the UK government is responsible for international relations and treaty making, the devolved administrations and legislatures are likely to have at least some responsibility for the application, administration and oversight of the obligations that trade agreements give rise to. It is NFU Cymru’s view that the Welsh Government and the National Assembly ought to have an appropriate degree of involvement by being sighted of relevant documents ahead of such agreements being entered into, as well as the development and approval of implementing legislation which underpins concluded trade agreements. NFU Cymru also advocates a role for Welsh Government and the National Assembly for Wales in developing the UK’s negotiating mandate, and the scrutiny of trade negotiations. By extension, this approach should be reflected across the constituent parts of the UK.

How would CPTPP accession benefit small and medium-sized businesses, and to what extent may the significant geographical distance between the UK and CPTPP member countries be an obstacle to realising those benefits?

27.         The significant geographical distance between the UK and the CPTPP members and the associated additional costs  will limit the opportunities for the UK to become a distribution hub for products into the Asia-Pacific region. Transport costs effectively reduce the price competitiveness of UK exports; it is this rather than headline tariffs which currently act as a barrier to market access into many of the Asian-Pacific markets. Nevertheless, we believe there are opportunities for UK businesses to sell more agri-food products overseas, leveraging our reputation for high quality, traceable and safe products.

28.         As per the report from the Trade and Agriculture Commission (TAC) the government should put more energy and resource into export promotion and marketing. These are critical pre-requisites for growing UK agri-food exports beyond the negotiation of trade agreements. The UK’s food ‘offer’ is one of quality, traceability, heritage, safety and high environmental and welfare standards. A new, ramped up approach to exporting should identify systematically the UK’s domestic offer and opportunities overseas and target resources accordingly. The government should use its political leverage to open doors; businesses can build the supply chains and networks to trade. Collaboration between government and industry, across the whole of the UK, will allow us to maximise each opportunity for our agri-food sector to export and will enable opportunities to be taken up by an increased number of SMEs. The NFU believes that in line with the TAC, our ambition should be to make our collective impact greater than the sum of what might be achieved separately.

29.         In this regard the NFU welcomes the DIT “Open Doors” campaign which was launched at NFU virtual conference in February 2021. This campaign aims to offer advice and support to help businesses take advantage of new global opportunities. This sort of government support is helpful in enabling SMEs to take up the opportunity to export, as they often lack the expertise or funding required to make the most of these new markets.

Are there any relevant concerns about the implications of CPTPP for UK policy objectives on climate change and environmental protection?

30.         Environmental objectives are covered in Chapter 20 (here) of the CPTPP. It aims to promote sustainable development through mutually supportive trade and environmental policies, and to achieve higher levels of environmental protection in CPTPP countries. The CPTPP Environment Chapter promotes the effective enforcement of domestic environmental laws and lays the foundation for CPTPP parties to work together to address a range of trade-related environmental challenges. This includes requiring members to control production, consumption and trade of certain substances that can significantly deplete or otherwise modify the ozone layer, and  a range of commitments to promote the conservation of wild flora and fauna. CPTPP parties have agreed to work together to address potential barriers to undertake cooperative activities related to the implementation of the Chapter such as technical assistance and information exchange.

31.         UK farmers play an important role in managing the environment for over 70% of the UK’s land area and have an important role to play in tackling climate change and meeting the government’s climate targets. The NFU has set the ambition for UK agriculture to reach net zero by 2040 and believes the government should be using policy levers, including trade policy, to incentivise higher standards of production and climate-friendly farming models. We therefore support the inclusion of a strong environment chapter in CPTPP but note that in many of these areas the UK goes much further than other members. As such, we remain concerned about the import of products which undermine are approach to protecting and enhancing the environment.

32.         There is a huge amount of policy development underway in the UK in relation to environmental target setting, the creation of new agri-environmental schemes such as Environmental Land Management scheme (ELMs) and a whole new regulatory framework for agriculture. This includes a proposal for farmers to be incentivised to collect farm level data to establish reliable farm level baselines. This is alongside wider aims to deliver on biodiversity, soil, water and air quality, and our net zero ambition, while simultaneously complementing the wider farm business to enable innovation and recognise the importance of productivity improvements. It is imperative that these policies align with the approach taken to trade policy and government departments should work together to ensure compatible and joined up ambitions in these areas.

What are the offensive of the UK in trade in goods with CPTPP member countries?

33.         UK Offensive interests: UK agricultural producers could benefit from increased access to the CPTPP market. Areas in which there is potential to expand exports of high-quality UK produce include the beef, sheep and dairy sectors. Current trade values and volumes by sector can be seen in Appendix B. Asian countries have potential particularly for our meat and dairy products, due to the increasing middle class and urbanisation. ADHB projections for 2023[9] show fresh meat, followed by frozen meat have the greatest opportunity, followed by shelf-stable meat products such as tinned meat. Food safety is of great importance in many countries in the pacific rim and is a key consumer concern. In the UK we can demonstrate safe, traceable, and audited food supply chains, meaning ‘Brand Britain’ should have great potential in these areas.

34.         Ensuring UK Geographical indicators (GIs) receive protection in the CPTPP should also be a priority for the government. New Zealand has always been opposed to the recognition of GIs both within the WTO and as part of the wider TPP negotiations. In November 2016, the New Zealand Parliament passed legislation which offers some protection for GIs on wine and spirits, but this does not extend to other products. The UK has a number of GIs on agricultural products and this protection needs to be recognised in any future trade agreements negotiated by the UK.

35.         Dairy: The NFU recognises benefits of gaining access to CPTPP markets for UK dairy produce. The AHDB identify the Canadian market as a ‘high’ rated prospect for premium cheese, whilst Malaysia and Mexico are identified as ‘high’ potential markets for commodity quality butter and cheese. Singapore is also singled out as another market in which there is potential for high-value UK dairy produce. Popular dairy drinks such as bubble tea, fruit and milk tea, as well as cream cheese have helped to increase the dairy brand image by 29% and desire to buy 34%[10]. All of which has resulted in an increased demand for imported dairy products in the Asian region. There is also the opportunity to learn from others in this area. For example a New Zealand dairy exporter markets pasture raised products for specialised flavour and texture to other CPTPP members. This is something the UK could similarly look to do, using our high production standards and in many cases GI protected products into this niche market.

36.         Access to the Canadian market is provided for by the bilateral UK-Canada deal which rolls over the EU- Canada Comprehensive Economic and Trade Agreement (CETA). The UK-Canada deal almost fully replicates the trade preferences granted by CETA, with the main difference being access for UK dairy products. Whilst we recognise that the UK has agreed market access for UK cheese through alternative mechanisms for a temporary period, there is no long-term certainty, and it remains to be seen if it works in practise. In 2019 the UK exported c.1,800t of cheese to Canada worth £14.1m, meaning by value the Canadian market accounts for 2% of UK cheese exports. Although seemingly low volume, UK exports are usually high value premium or speciality cheeses making it an important outlet for the UK dairy sector. In joining the CPTPP, the UK Government should secure increased access to markets such as the Canadian market for high-quality dairy produce over and above the access afforded through bilateral trade agreements.

37.         There is also the potential for the UK dairy industry to export more premium cheese, especially high-end Cheddars, to Australia. Although the volume opportunity is small it could be at high price. Tariffs on Cheddar are typically 1.22AU$/ kg (£0.67/kg), so securing elimination of this duty must be a priority for UK negotiators.

38.         There are opportunities for high value dairy products to be exported to Japan. Since 2016 HMRC data shows that exports of UK cheese have expanded significantly from £326,004 to £2,233,900 in 2019, a six-fold increase. In the UK-Japan CEPA there are a number of TRQs relevant to UK farming whose roll-over has not been secured from the EU-Japan EPA. This includes quotas for butter, Skimmed Milk Powder (SMP), butter milk powder, whey and condensed milk. The UK-Japan CEPA does not provide for other preferential means of these products entering the Japanese market, meaning that it is difficult for UK exports of these products to compete on the Japanese market as out of quota tariffs are significant. Meaningful access for these products is something UK negotiators should look to secure as part of accession to CPTPP.

39.         Prior to Covid-19, the Provision Trade Federation estimated growth of the goat dairy sector to be 70% over the next five years. The Department for International Trade has supported some UK based sheep dairy businesses in projects in a contract development for a UK powder spray drying plant specifically for sheep milk, to service the growing demand in the Chinese market for this product and other export markets including the Middle East. Alongside the small buffalo dairy sector, these markets currently span EU as well as Australia and New Zealand and are expected to continue to grow. The UK is already moving some buffalo milk into the Asian sweet manufacturing market and anything the UK can secure through CPTPP to support this growing market would be welcome.

40.         Pigmeat: There is opportunity to expand UK exports of pigmeat across the CPTPP region. Pork is the most widely consumed meat in Asia with Vietnam being a key growth market. Despite the UK – Vietnam bilateral FTA being in place, UK pigmeat is still unable to access the Vietnamese market due to non-tariff barriers which relate to SPS and certification of product. UK negotiators should look to expedite the approval process as part of CPTPP membership. There is also opportunity for UK exports to expand into Australia but for this to be realised UK negotiators must seek to address the complex non-tariff barriers in place on pork imports to Australia, including specific requirements for the heat treatment and deboning of meat.

41.         Poultry: According to the FAO, global consumption of poultry meat is set to climb by 13%[11] between 2016 and 2026.  On the list of UK agricultural exports to CPTPP members, poultry is joint third highest by Net mass (averaged 2017-2019), with this sector covering 7% of exports of which 97% is exported to Brunei (see Appendix C). Vietnam is a potential export market for UK poultry as it is the second most consumed meat after pork. Due to food safety concerns many consumers (35% in Hanoi[12]) have cut pork out, and instead favour poultry meat. As with pork, UK poultry meat is currently blocked from entering the Vietnamese market due to SPS concerns, UK negotiators should look to address this. Carcase balance is a key concern for the poultry sector, the UK primarily imports white (breast) meat and exports dark (thigh and drumstick) meat. Some of the markets in the CPTPP offer opportunity to increase the export of dark meat which would add value to the entire UK carcase.

42.         Beef: Japan is a major importer of beef; it has a high value market and despite the declining population consumption is forecast to marginally increase to 2026[13] Japan covers the highest annual UK export of 58% of Net Mass share out of all the CPTPP member (averaged 2017-2019, see Appendix D). The AHDB note that there is potential for increased sales of high value premium cuts of beef, offal and some lower-value cuts. Alongside this, there are opportunities for some branded added value manufactured products such pies and cured meats. The UK has already secured access to the Japanese market for British beef through the bilateral UK-Japan agreement, but UK negotiators should look to increase the speed at which trade preferences phase in. Alongside Japan, Vietnam offers opportunity for beef and in particular for parts of the carcase we do not use such as beef bones, tongue, and other offal parts which are in high demand for use in a variety of traditional Vietnamese dishes. This provides an opportunity for a greater proportion of the carcass to be utilised hence delivering better returns for producers. However, it should be noted that within CPTPP Australia and New Zealand are dominant suppliers of beef to the global market and both have much lower cost of productions that the UK. Australia and New Zealand combined only constitute 0.27% of UK exports to CPTPP members (Appendix D). For any opportunities for UK beef to be realised, the UK Government must be prepared to invest significantly in market promotion and marketing.

43.         Sheep meat: there is opportunity to expand UK exports of sheep meat to CPTPP members. Although it must be noted that UK sheep meat exports would have to compete against Australia and New Zealand who are the dominant suppliers in the region and have much lower cost of productions than UK producers. Malaysia presents an opportunity for mutton as it is widely used in Malaysian diets and the country is currently almost completely reliant (90% consumption) on imports[14]. It is also one of the CPTPP members the UK does not already have a bilateral deal with, making securing market access a genuine win for UK negotiators. The majority of the population in Malaysia is Muslim and imports require halal certification through the Department of Islamic Development Malaysia (JAKIM). There are logistical issues with getting a fresh product out to Asian markets and air freight volumes are limited, with the sheer cost pricing UK product out of the market. Frozen/chilled container freight requires much larger volumes which is possible, but this is balanced against greater risk of rejection (i.e., if rejected the financial risk is much greater) and there are challenges of shortened shelf life. Leaving logistics aside with a market of 32m Malaysian consumers there is opportunity for British lamb and the government should not only look to secure market access but should also help industry secure the certification it needs to make the most of this opportunity.

44.         Horticulture: The UK has potential market opportunities for exporting frozen potatoes to the Asian market, as they are used for processing fast-food style products and potato crisps which have growing value in the urban market, especially in Japan, which could provide opportunities for specialist British produced crisps, such as Kettle. There is less demand for imports of fresh table potatoes, as there is enough supply by domestic production. Secondly vegetables are greatly part of the Asian diet, as they are part of the popular hot pot, which consists of raw vegetables or thinly sliced meat, submerged in a broth. There is opportunity for asparagus and mushrooms being exported to Australia, as they import $21.6million and $13.8million[15][16] respectively of each, presuming we can transport them without serious impacts on quality, and shelf life. There is also potential to export more British fruit as fruit is largely used in popular dairy drinks, teas and bubble teas, which are all major products on the Asian market, with AHDB estimating that Asian teahouses sell on average 200 million drinks a year. Currently the UK imports 85% of our fruit and vegetables from the EU. The UK food sector see value in the liberalisation on traffic for exotic fruit, which are not grown in the UK, therefore the risk of direct competition is low. Chile and Peru are the main suppliers of fruit to the UK from the CPTPP and on average have an import share, of 38% and 33% by net mass respectively. Exports of ornamentals products were worth £76 million in 2019[17]. The UK could use the accumulation rules of origin to import the coir fibre, plant bulbs in them, then re-export to CPTPP members.  The UK produces 90% of the world’s daffodil bulbs and produces lots of bulbs for planting which is an exciting opportunity for UK exports in the CPTPP, as bulbs are less perishable and small therefore they have a long shelf life and are cheaper to transport.

45.         Sugar: Japan has granted limited tariff-free TRQs for sugar in the CPTPP agreement. The UK–Japan agreement did not replicate the provisions for sugar that were in the EU-Japan deal and hence, UK growers now have limited market access. Japan is a premium market for sugar, for which preferential access offers genuine opportunities for UK sugar and UK negotiators should look to secure access to the relevant quotas. The CPTPP agreement also eliminates, within five years, all tariffs on Canadian sugar imports. This is a great opportunity as previously, Canada has imposed both anti-dumping and countervailing duties on UK sugar since 1995, which together amount to a tariff rate of approximately 150% at current values. Since these were first imposed, the UK beet sugar sector has undergone multiple rounds of liberalisation, with production quotas and minimum prices the final elements of the sugar regime dismantled in October 2017. This justifies the review of these duties by Canada, which otherwise jeopardise the liberalisation of sugar trade foreseen by CETA. The NFU would seek for these Canadian anti-dumping and countervailing measures to be reviewed and removed if the UK were to join the CPTPP.

46.         Crops: whilst the UK is unlikely to export bulk processed cereals to CPTPP members, in part due to the transport costs versus better located competitors, there is opportunity to increase exports of UK malt, malt products and baked goods such as cakes and biscuits. Since 2016 UK malt exports to Japan have continued to expand alongside the increasing UK acreage of spring barley, as farmers seek to diversify their crop rotations. The UK-Japan agreement contains a side letter that guarantees that the UK will be able to access an existing Japanese Autonomous TRQ that has been in place for many years covering malt. This quota is not UK specific and is something Japan offers on an erga-omnes basis and given it is autonomous (i.e. sits outside of Japan’s WTO schedule) it is theoretically possible that access could be removed. The UK should use CPTPP negotiations to secure meaningful and guaranteed access to the Japanese market for UK malt.

What are the defensive interests of the UK in trade in goods with CPTPP member countries?

47.         While the NFU supports the multi-lateral phased reduction of average tariff levels for agricultural products, notwithstanding the issue of production standards, we believe that the protection of sensitive goods on a global market should be a priority when negotiating trade deals. As such, CPTPP includes major agricultural exporting countries who already enjoy preferential access to the UK market in the form of Tariff Rate Quotas (TRQs) for certain key commodities – these include beef, sheep meat, sugar and certain dairy products. This preferential access is provided for in the UK WTO schedule and will be maintained. As a result, the NFU is concerned that in becoming a partner in the CPTPP, the UK Government will be asked to increase market access for sensitive agricultural products. Similarly, joining the CPTPP could mean increased competition for current LDCs exporting to the UK. This should be assessed as part of any economic impact assessments produced to accompany trade negotiations.

48.         A primary interest for the UK agri-food sector is ensuring its long-term domestic success by ensuring it is not undermined by the import of cheaper goods which have benefitted from a less rigorous regulatory environment and therefore lower costs of production. The cost of doing business in the UK can be high, certainly for farm businesses. In many cases this is due to regulatory requirements mandated by government. These may relate to environmental or animal welfare regulations our high standards of production or labour and planning laws.

49.         Dairy: The UK is self –sufficient in fresh liquid milk but is a net importer of dairy products. The extent of this trade deficit varies each year and is impacted by several factors including manufacturing capacity, availability of raw materials and consumer product preference. The dairy sector is subject to highly volatile markets and producers are often tied into restrictive supply contracts with processors, giving them limited space to manage price volatility. We are concerned that if the UK joins CPTPP and potentially liberalises the market there is a risk that markets would become more volatile and without the right tools to manage this, farmgate margins would be put under severe pressure. It is worth noting that within CPTPP membership, New Zealand is a global powerhouse on the dairy market and has a self-sufficiency ratio of 880% in milk and is responsible for almost a third of global dairy trade. The New Zealand dairy industry is highly concentrated and since 2014 there has been over $2bn capital investment in the dairy processing sector. NZ are global exporters of cheese, butter, SMP and have the potential to increase supplies to UK undercutting domestic producers. In this context we would also be concerned about the impact rules of origin could have, as if rules related to dairy are too liberal it could give New Zealand a back door to accessing the UK market. Many other members of CPTPP use TRQs to manage access for dairy products and we would encourage the UK to take a similar approach.

50.         Sugar: In May the UK government announced an Autonomous Tariff Quota (ATQ) of 260,000 tonnes of raw cane sugar to be imported at 0% tariff. This would almost certainly increase the amount of sugar imported into the UK from developed nations such as Australia at the expense of developing countries who currently export sugar to the UK under preferential arrangements for LDCs. Australia is a major sugar exporter to the world market, and Australian sugar currently has reduced-tariff access to the UK via several TRQs held at WTO level alongside the ATQ. Australia is one of the most competitive sugar producers in the world and there are over 25 active substances permitted for use on sugarcane in Australia that are illegal for any use in the UK. These include products such as Paraquat that have been banned in the UK on the grounds of environmental impacts. The UK homegrown sugar industry is the third lowest cost sugar producer in the world[18], but growers in the UK cannot compete on the same terms as sugar growers elsewhere who have access to state support or technologies that are illegal in the UK.

51.         Cereals and oilseeds: the UK already trades with many of the CPTPP members and imports a significant volume of wheat from Canada for use in the milling industry (Appendix A and B). Australia is also a very competitive crop producer and compared to the UK, farmers in Australia have access to a larger crop protection toolbox - including active ingredients and biotech – when managing pests, weeds and diseases in their crops. For example, since the ban on using neonicotinoid seed treatments, the UK has lost its net export status and has become a net importer of Oilseed Rape (OSR). This is due to UK farmers inability to control Cabbage Stem Flea Beetle (a pest which eats OSR and limits yield) and this year the UK is expected to import half of its OSR requirement.  Although trade can be sporadic, in the 2016/17 marketing year the UK imported 120,000 tonnes of OSR from Australia which would likely have been grown using the same neonicotinoid seed treatments which UK farmers are banned from using. These Australian imports undercut UK prices putting further pressure on farm margins.

52.         Beef: the UK is a net importer of beef but domestic self sufficiency is growing. Total UK beef production is forecast to increase in coming years as the UK dairy industry increases beef production. It is forecast that this could bring around an additional 100,000 animals into the beef sector amounting to an extra 60,000t of meat. This amounts to a 6% increase on UK production which could, with enough support from retailers and food service sectors, displace imported beef. The UK beef and dairy industry is working to adapt and enhance breeding practices which in turn will drive efficiency, for example through greater use of sexed semen or beef genetics in the dairy herd. We know Australia and New Zealand would like to increase their market access for beef into the UK market and with lower cost of productions, would be highly competitive. It is likely both would target the UK food service market where provinance is not as highly valued or readily displayed as in the retail sector. In the case of suckler cow herds, the UK cost structure is at least twice as high as that of Australian producers. The key reasons for higher costs for British producers are due to a smaller British herd size, resulting in higher labour costs, and greater machinery and building investment by British farmers. In many cases, the fragmented nature of both livestock production and livestock processing reduces competitiveness even further[19]. There is also the cost of complying with regulation and despite the UK having one of the highest beef prices in the world many UK producers still have extremely tight margins. The NFU believes any market access given for beef in CPTPP should be strictly controlled through the use of limited TRQs.

53.         Sheep meat: In 2019 the UK was 109% self-sufficient in lamb[20] making it a net exporter. The UK currently exports 34% of its lamb production and of that 94% goes to the EU. UK lamb production remains relatively firm and as domestic consumption continues to drop back year-on-year, the exportable surplus of UK lamb continues to grow. In particular, Australia and New Zealand pose a significant threat to the UK industry and when combined, supply 70% of total global exports of sheep meat. The country specific TRQ for lamb which New Zealand holds at WTO level is a highly sensitive issue for UK livestock farmers. The trade in sheep meat from New Zealand has materially changed over the last 20 years, with New Zealand now sending primarily fresh cuts as opposed to frozen carcases. This switch to high value cuts is particularly distorting especially at certain times of year when UK lamb is in season (June – Dec). We recognise that New Zealand has not filled this quota in recent years as product has been redirected towards China and it must be noted that Australia is also major suppliers into the Chinese market. However, the Chinese market is not always driven by supply and demand fundamentals and can be politically charged. As Chinese pork production recovers from African Swine Fever (ASF) and consumers switch back to pork from other proteins demand may dampen. This in turn will likely put more Australian and New Zealand lamb back looking for a home on the global market. AHDB calculates the AUS cost of production is over 55% lower than a UK producer - $188 /100kg lamb liveweight verses $419/100kg liveweight (UK lowland). This is because of cheaper land, fuel, labour cost alongside much lower breeding costs which are about a third of those borne by British farmers[21] (lower breeding costs due to climate and economies of scale). In this context the NFU is very concerned about what CPTPP membership would mean for the UK sheep industry. Under the CPTPP tariffs on sheep meat are eliminated immediately or are phased out over time. We strongly believe that access for sheep meat is an area the UK should look to minimise with CPTPP partners.

54.         Horticulture: The UK only exports 23% of fruit and 6% of vegetables. The export markets are mainly focused on nearby markets like the EU, due to geographic limitations (perishable and expensive to ship). Under the agreement, all members of the CPTPP have the tariffs on these products eliminated within a few years on the agreement entering into force. Whilst much of the imported product is non-indigenous tropical products which the UK cannot grow, there is some cross over with products grown domestically by our members and there is a risk that domestic growers could be undercut. For example, New Zealand is a major exporter of apples and according to FAO data New Zealand apples are typically $400-$500/tonne less than UK apples, making it cost effective for them to be imported and stored well into the UK season, which directly compete with the UK’s apple sector. FAO data also shows that New Zealand is significantly more productive than the UK, due to greater access to seasonal labour and plant protection products. Of the vegetables we import from the CPTPP 68% comes from Canada. Some countries in the CTPP have similar climate conditions to the UK meaning the same crops can be grown but to different regulations, for example on plant protection products and environmental standards. UK products which have a small but increasing domestic production base, such as British cherries, apricots or blueberries, could be outcompeted by South American or Canadian growers whose products may encroach on UK produce when in season.  

55.         Poultry: Under the CPTPP there will be immediate elimination of World Trade Organization (WTO) and CPTPP “within-access” tariffs for poultry and egg products. In 2019 the UK was 65% self-sufficient in poultry meat, making it a net importer[22]. More than half of the meat consumed in the UK is poultry and the sector continues to see growth. Between 2007 and 2017 UK poultry meat consumption per capita increased by 2% per annum. As in other livestock sectors carcase balance is an important dynamic in poultry meat markets. The UK consumer prefers white poultry meat (chicken breast) to dark poultry meat (legs and thighs), meaning we tend to export dark meat and import white meat. The UK is 89% self-sufficient[23] in egg production and the majority of eggs imported into the UK are from the EU and are consumed in the food service and egg product sections of the market. UK broiler and egg producers are proud to produce to high standards of food safety, animal welfare and environmental protection. The UK negotiators should ensure that there are provisions within the CPTPP which ensure no poultry products are imported which would be illegal to produce here.

How should the UK approach agricultural market access negotiations with CPTPP members?

56.         The CPTPP has already been agreed by its members and as such it is unclear how much room for renegotiation there will be. It is likely that the UK will only be able to negotiate carve outs through the use of side letters, rather than by seeking amendments to the main text of the agreement. Whilst carve outs are possible, they will involve challenging negotiations and it is likely the UK will be forced to make concessions. Given several CPTPP members are major agriculture exporters who will be seeking access to our highly prized market, we are concerned that these concessions may be detrimental to British farmers and growers.

How might the rules of origin in the CPTPP benefit UK manufacturers, considering that the UK’s supply chains are more closely intertwined with EU member states than CPTPP signatories?

57.         The Rules of Origin within the CPTPP are already laid down in the agreement. However we could deviate on specific products through side notes by bilateral agreement, but this would have to agreed separately with each member. The CPTPP has different methodologies for calculating regional value content (net cost, build-down, build-up, focus value) which allow for greater use of non-originating content. The Product Specific Rules in the CPTPP tend to be quite liberal and are very liberal when compared to those agreed between the UK and EU. For example, the rules under CPTPP related to meat allow product to either be wholly obtained (i.e. animals born, raised and slaughtered) or to have a change of chapter within the CPTPP territory. This chapter change would allow the importation of live animals with slaughter conferring origin. The rules associated with processed meats (e.g. sausages, burgers and pies) are even more liberal and allow the use of imported meat in certain processed products. Under the EU-UK TCA all meat, whether processed or not, must be wholly obtained from either the EU or UK. The NFU supports an outcome on RoO which incentivises and promotes the use of domestic raw materials over imports. If preferences are secured for UK products then they will be at the price of concessions, this “cost” will not be borne by parties outside of the CPTPP agreement and so they should not be able to benefit from it. For example, any market access won for UK beef should only be of benefit to British beef producers. Currently over 50% of the UK beef market is controlled by Irish owned companies, and the UK is 75% self-sufficient[24] so we would be very concerned if the RoO chapter allowed animals originating in the EU and in this example, Ireland, to qualify as UK originating.

58.         Diagonal cumulation between members is often touted as a benefit of CTPP. However, due to the geographical distance between the UK and the CPTPP members, it will be unlikely that the UK would be a favourable distribution hub for the cumulation of raw materials into finished products.

59.         The NFU urges a government to seek an agreement on RoO which means only goods which are truly originating from the parties can benefit from any negotiated trade preferences. The chapter should preserve any established supply chains that already exist between the UK and CPTPP members (although we estimate these to be limited) and should not enable the substitution of UK raw materials for imported materials more than is encouraged today.

What scope is there for the UK to promote international standards through the CPTPP and how might it do that?

60.         There is a real opportunity for the UK to become a global leader in agri-food standards through its trade policy. It will require effective mechanisms to appropriately price in externalities such as environmental impact, worker rights and animal welfare – and there should be an ongoing debate about what other policy aspirations need also to be accommodated. One of the challenges for post-coronavirus economies will be to build back better, to ensure our models of production and consumption are sustainable, environmentally, socially and economically. This must be driven by quality data which supports domestic ambitions and global comparisons, thus helping the advancement of global standards.

61.         The UK is in a unique position in developing a new, independent trade policy and is therefore well placed to ensure that this policy is innovative and fits contemporary needs, rather than being rooted in outdated principles of free trade based solely on who can produce the cheapest goods. The UK government should be proud of what UK agriculture has delivered in terms of both sustainable and efficient production which balances affordability with high production standards. In safeguarding these standards the UK will not only secure the future of our domestic agricultural sector, but also help level up global agri-food standards and develop new markets for our producers.

62.         Environment: The environment is covered in Chapter 20 of the CPTPP agreement (here) aims to promote sustainable development through mutually supportive trade and environmental policies, and to achieve higher levels of environmental protection in CPTPP countries. UK farmers play an important role in managing the environment for over 70% of the UK’s land area and have an important role to play in tackling climate change. The NFU has set the ambition for UK agriculture to reach net zero by 2040 and believes the government should be using policy levers, including trade policy, to incentivise higher standards of production and climate-friendly farming models. As it currently stands the UK goes much further than other CPTPP members in many of the areas governed by this chapter. In this context we remain concerned about the import of products which would be illegal to produce here, and which would undermine the domestic steps we take to protecting and enhancing the environment. We therefore support the inclusion of a strong environment chapter and believe the UK should use this opportunity to show global leadership on the issue.

63.         Animal Welfare: The CPTPP has no provisions on Animal welfare but mentions in the SPS chapter that equivalence on standards between members will be recognized. Animal welfare standards and food production standards in some members are lower than that of the UK’s agri-food producers. The British Veterinary Association expressed concerns that Japan failed to meet UK standards in animal welfare, noting that the Animal Protection Index gave Japan an E rating for animal welfare in comparison to a rating of B for the UK. Secondly, there is different legislation in these countries that allow practices which aren’t legal in the UK, such as the use of growth hormones. The NFU would encourage the UK to negotiate side letters with members to ensure that the UK standards are upheld.  

64.         Labour: Building on internationally recognised labour rights Chapter 19 (here) sets out that  CPTPP parties are required to have laws governing acceptable conditions of work relating to minimum wages, hours of work and occupational health and safety. Areas identified for cooperation include job creation, sustainable growth and skill development, promotion of equality and the elimination of discrimination against women, and protection of vulnerable workers. The Chapter also promotes initiatives to discourage the importation of goods produced by forced or compulsory labour, including child labour. UK farmers and growers are proud of their high standards of worker welfare and support the UK Governments aim of ensuring labour standards and protected and promoted in the agreement.

65.         Sanitary and Phytosanitary (SPS): UK is now operating its own independent SPS regime and in any trade negotiation should maintain the right to regulate. The NFU believes that the UK approach to SPS and more generally to regulation, should be driven by science and be risk-based rather than hazard-based. However, it would be wrong of the UK to compromise and risk exposing its citizens to anything which does not meet our high standards of food safety, animal welfare and environmental protection. Equivalence is an important concept within CPTPP and the NFU is not opposed to the principle of establishing a mechanism by which parties can agree equivalence. However, we believe any agreement on which regulations are deemed equivalent should be agreed on a case-by-case basis with individual partners and not up front in a trade negotiation.

What implications do the intellectual property provisions in the CPTPP agreement have for the UK? Should the UK seek an exclusion for the audio-visual sector?

66.                      The Intellectual property (IP) chapter (here) in the CPTPP includes rights for protection and enforcement for Geographical indications (GI), builds on present international IP agreements, such as the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and certain treaties administered by the World Intellectual Property Organization (WIPO). There are rules on transparent and fair administrative systems for the protection of GIs, including rules on opposition and cancellation of future GIs. Ensuring UK Geographical indicators (GIs) receive protection in CPTPP should also be a priority for the government. New Zealand has always been opposed to the recognition of GIs both within the WTO and as part of the wider TPP negotiations. In November 2016, the New Zealand Parliament passed legislation which offers some protection for GIs on wine and spirits, but this does not extend to other products. The UK has a number of GIs on agricultural products and this protection needs to be recognised in any future trade agreement negotiated by the UK.

March 2021

Appendix

1. Percentage share of total annual import value of agricultural products from CPTPP countries into the UK, averaged 2017-2019.

2. Trade values (£) and volumes (tonnes) by commodity averaged 2017-2019.

3. Percentage share of annual UK exports by Net Mass to CPTPP members, averaged 2017-2019.

D. Percentages share of annual UK exports Net Mass by CPTPP member, averaged 2017-2019.