Dr Viviane Gravey, Dr Brian Jack and Dr Lee McGowan (ABR0021)

 

Submitted by academics from Queen’s University Belfast (Gravey, Jack & McGowan). Dr Viviane Gravey is a Lecturer in European Politics, and a co-author of an independent, ERSC-funded expert review of the scientific evidence of the potential effects of Brexit on the UK environment (including agriculture). Dr Brian Jack is a Lecturer in European Law. His research focuses on agricultural and environmental law. Dr Lee McGowan is Jean Monnet Chair and Senior Lecturer in European Politics at Queen’s University. His research centres on EU politics and policy making with special reference to devolution.

 

Short summary of evidence:

 

 

What are the key opportunities and challenges for UK agriculture and food arising from the UK exiting the EU? To what extent is access to labour from the EU an issue?

 

  1. The Common Agricultural Policy has applied in the UK in its various forms for the last forty-four years. Successive UK governments have expressed reservations about the design of the CAP but it has overtime become key to securing farmers’ incomes and also to shaping the rules and regulations under which agricultural products are produced, processed and marketed. Farmers themselves may often bemoan the red tape and regulation of the CAP but it has provided a degree of certainty, budgeting and planning over the EU’s 7-year financial cycle. In 2015 British farmers received almost €3.1bn in direct EU funding.

 

  1. UK governments have long been at the forefront of member states calling for profound reforms of the policy; pushing for agriculture that is ‘internationally competitive without reliance on subsidy or protection’ (DEFRA & HM Treasury 2005, p.3) while supporting ‘greening’ through an increase in the proportion of agricultural spending targeted on agri-environment payments (Gravey 2016). Brexit now offers an opportunity for the UK to decide how to provide future support to its own agriculture and agri-food sectors. Brexit has been presented as a ‘golden opportunity to develop a completely different agricultural policy’ and for a new ‘efficient agricultural sector which contributes to national prosperity’.[1]In seizing this opportunity, however, the UK will have to address a number of challenges such as: Securing access to European markets; ensuring that the UK market is not open to lower standard imports; developing a new British agricultural policy that is easier to comprehend and administer; agreeing new trade agreements with the rest of the world; having access to migrant labour and maintaining a focus on rural development.

 

  1. The first and most substantive challenge is agreeing policy contentThere is no current consensus on what makes agricultural policy fit for purpose’. The status quo is not uniform: the CAP is currently implemented very differently across the UK – for example, the share of the agri-environment-climate in terms of rural development programme expenditure, ranges from 15.71% in Scotland to 71.4% in England (Hart 2015a, p.54).

 

  1. DEFRA’s longstanding policy has been to reduce direct payments and increase payments for environmental services (DEFRA & HM Treasury 2005). Although DEFRA may not always have delivered on its promises to make greening a priority (Falconer & Ward 2000; Cardwell 2010), there seems to be a real possibility of policy change after Brexit, but the direction of change is uncertain. The current DEFRA minister, Andrea Leadsom, has promised farmers that their direct payments will be maintained at “the current level of support under a UK Agricultural Policy” (Leadsom 2016) and that cutting red tape would be a priority (Leadsom 2017). She has indicated that this would include environmental measures such as the “ridiculous, bureaucratic three-crop rule” (Leadsom 2017). Yet this is a flagship greening policy under the 2013 CAP reform (Hart 2015b). This approach puts DEFRA at odds with organisations, such as the National Trust, who see leaving the CAP as an opportunity to phase out direct payments and prioritise the environment.[2] It also overlooks the steps taken by DEFRA in recent years to reduce the administrative burdens imposed upon farmers by agricultural policy requirements, albeit within the confines of CAPs administrative requirements (DEFRA, 2014).

 

  1. A second challenge arises in relation to competence (Westminster v. Devolved regions). Agriculture is a devolved competence: over the last twenty years the four regions of the UK have taken advantage of discretions available within the CAP to develop discretely differing agricultural policies. This current divergence is symptomatic of the differing farming structures and practices that exist across the UK, as well as different political attitudes to farming. It has been made possible by the CAP’s increasing flexibility over time to accommodate varied farming structures across 28 member states. This flexibility is reflected in Article 4 of the Treaty on the Functioning of the European Union, which identifies agriculture as being an area in which legislative competence is shared between the EU and its Member States. 

 

  1. Looking to the future, how will a British agricultural policy reflect the divergent interests of each UK region? Wales and Scotland have made clear in their own Brexit plans that they want to retain their competence on agricultural matters (Scottish Government 2016; Welsh Government 2017). This is partially due to their desire to protect their own powers as devolved administrations. But additionally, it again reflects their desire to tailor agricultural policy to the needs of their farming sector. For example, the First Minister of Wales Carwyn Jones has argued that DEFRA’s “impression of farming is large arable farms, large units. It does not really get, for example, sheep farming, and that has been true regardless of the party running the department.” (House of Lords EU Select Committee 2015, p.10). The Northern Ireland Executive has identified the vulnerability of the agri-food sector which represents a ‘much more important component of our regional economy’ than for the UK as a whole. Moreover, it stressed that 10% of UK receipts from the CAP accrue to Northern Ireland.[3] Will these be maintained?

 

  1. Payments such as the current basic payment are currently funded from the EU budget, whilst rural development spending also benefits from a major contribution from the EU budget. (Jack, 2009) Any future savings from not having to contribute towards the EU budget will be made by the UK Treasury. To what extent will those savings be made available to the UK regions to help fund payments to support agriculture? Alternatively, will regional agricultural policies have to be funded from the existing monies allocated under the Barnett formula?             
     
  2. A third challenge is administrative capacity. The UK civil service is smaller than at any time since World War II (UK in a Changing Europe 2016) and DEFRA is particularly affected – with its ‘headcount down two thirds in a decade’.[4] This raises major questions regarding the ability of the UK civil service (both centrally and within the devolved administrations) to develop bespoke agricultural policies and to manage policy priorities after Brexit. Although the current payments system has been guaranteed by HMG until 2020, there are really important questions to ask about what a new British agricultural policy will look like after 2020 and how widely it may differ across the UK?

 

  1. A fourth challenge is the collateral impacts of other parts of the Brexit deal on the agricultural sector. Terms of trade with the EU and with the rest of the world, changed access to the UK market for products from countries such as the USA and Latin America, and access to labour from outside the UK are all decisions which go beyond agriculture but will have profound impacts upon UK farmers. Crucially, within the EU, UK farmers benefitted from the larger political power farmers enjoyed in other member states – this will not be the case anymore (Grant et al. 2016, p.14). Within the UK, farming groups are likely to have limited influence in influencing the direction of a centralised UK policy determined in Westminister. However, they are likely to enjoy more influence in shaping policy measures at the regional level. Again, the question arises of the extent to which future UK agricultural policy will facilitate regional divergence.     

 

  1.                     A fifth challenge is the continued shadow of the Common Agricultural Policy. While the CAP will not apply to UK farmers, it will apply in their principal export market and to their closest competitors. UK farmers are likely to oppose any changes that would limit their access to EU markets or put them at a competitive disadvantage compared to their European peers (Nielsen et al. 2009). For example, further greening of the CAP is less likely without UK campaigning for greening from within the EU (Gravey 2016).

 

What are the implications of leaving the Common Agricultural Policy for the UK, UK farmers and the rural economy?

 

  1.                     Leaving the Common Agricultural Policy means increasing uncertainties for UK farmers and the rural economy. While the current CAP is only guaranteed until 2020, the long and controversial history of CAP reform has shown that when deeper changes to policy are agreed, they have been phased in gradually and been accompanied by compensation mechanisms (Daugbjerg & Swinbank 2015). No such guarantees can be assumed at the UK level after Brexit.

 

  1.                     The importance of farming in the rural economy, the type of farming and the type of agricultural policy and level of support are very different across the UK. This means that the implications of leaving the CAP and the EU more broadly will be felt in different ways and to varying degrees across the UK.

 

  1.                     No part of the UK is likely to be more affected following Brexit than Northern Ireland. Agriculture is one of Northern Ireland’s most important industries in terms of both an annual turn-over of some £4.5 billion and a workforce of some 47,700 people (2015 Agricultural Census). In terms of employment and GDP Northern Ireland is more dependent on the agricultural sector (including the agri-food business) than any other area of the United Kingdom. The average farm in Northern Ireland is smaller than its counterparts in Great Britain. There are some 24,000 farms and one in every four businesses are in the agri-food, forestry and fishing sectors. According to Phil Hogan, the EU’s Commissioner for Agriculture:

 

‘CAP Single Farm Payments to farmers in Northern Ireland is worth in excess of £2.3 billion from 2014-2020. To put that figure into perspective, annual payments from the European Union account for 87 per cent of annual farm incomes, compared to 53 per in the UK as a whole … in other words, for every £10 sterling that Northern Irish farmers earn, the Common Agricultural Policy accounts for £8.70 of that total.’[5]

 

Without such support, it is widely expected that many smaller farms would not be able to survive

 

  1.                     Agriculture operates on an all-Ireland basis and there is considerable movement of agricultural goods and produce across the island. Questions have to be asked here about the degree to which such trade might be affected with a UK outside the single market. Are tariffs a possibility? Futhermore, farmers in Northern Ireland are likely to oppose any policy changes that place them at a competitive disadvantage to their counterparts elsewhere in Ireland. 

 

What are the implications of Brexit for the supply of affordable and good-quality food in the UK?

 

  1.                     The implications would depend on the terms of trade with the EU and the rest of the world. For example, Dairy UK argues trading with the EU under WTO rules would lead to a sharp rise in price for dairy products and drop in UK demand:

Imposition of the WTO schedule by the UK would make EU imports into the UK much more expensive. For instance, the price of cheddar from Ireland could rise from its average price over the past three years of around £2,600 per tonne to round £4,000 per tonne. The price of imported product would therefore rise dramatically. Demand for EU imports would fall whilst prices for domestic product would rise to a new market clearing equilibrium. Rising prices in the UK market would affect UK demand for dairy products. Consumers could reduce their consumption of dairy and seek out substitutes such as soya or other plant based products (Dairy UK 2017)

 

  1.                     Increase in the price of food in the UK – as EU imports become more expensive and internal production cannot fully keep up with demand – may have knock-on effects on trade deals, making it more likely for the UK government to increase market access to US and South American products which may not meet the same standards regarding welfare and the environment.

 

What are the critical policy decisions the Government must consider and/or implement before the UK leaves the EU?  Do any particular issues or challenges arise from the proposed Great Repeal Bill for agriculture?

 

  1.                     A first critical decision will be constitutional: how will the UK share its competence regarding agriculture policy: what will be done by the devolved administrations, what will be done centrally and how will these be coordinated (e.g. to avoid misfits between UK trade and agricultural policy in the devolved administration).  Equally, decisions will need to be taken as to whether additional funding, and if so how much, is made available to devolved governments to meet expenditure arising from the implementation of regionalised agricultural policy measures. Critically, at least Scotland will vote on a legislative consent motion on the Great Repeal Bill.[6] Equally, the United Kingdom government has acknowledged that, as a matter of convention, the United Kingdom Parliament should not normally legislate on devolved matters without first obtaining the consent of the devolved parliaments/ assemblies (Memorandum of Understanding, 2013). Although this convention is not legally binding its political significance increases the likelihood that issues of competence will need to be carefully considered in drafting the Bill.

 

  1.                     A second critical decision regards policies impacting farmers beyond agricultural policy. A critical example is immigration and rules regarding migrant workers. It is argued that ‘a lack of non-British labour would have a huge effect on many farming sectors, potentially forcing businesses to locate to other parts of the world, and import produce back into the UK’ (NFU President Meurig Raynond).[7]  A NFU survey has established that nearly a quarter of seasonal farm workers quit their jobs in the third quarter of 2016 (after the referendum) – a six-fold increase compared with the first quarter (before the referendum). Of the 80,000-seasonal workforce in horticulture alone, 98% are migrants from elsewhere in the EU. The issue of labour extends also to the agri-food sector; 65% workers in meat processing in NI are EU citizens from outside the UK and Ireland (Northern Ireland Affairs Committee 2017a).

 

  1.                     Another critical example of non-agricultural policies  is environmental policies. Farmers have to implement a large numbers of EU environmental policies – there is currently high levels of uncertainties on which of these policies will be carried over seamlessly, which will struggle. Andrea Leadsom has argued that a third of environmental policies would face problems but ‘was unable to confirm which third’ (Environmental Audit Committee 2017, p.17). This increases uncertainties for farmers and the rural economy more broadly and needs to be addressed.

 

How will the future trading relationship with the EU affect the UK’s agricultural policy after Brexit? To what extent could, or would, WTO rules affect policy decisions about funding for farmers and the environment? To what extent would it affect the regulatory regimes regarding agricultural goods, environmental protection, food standards, animal welfare or food quality?

 

  1.                     The Northern Ireland agri-food industry is already exporting to the EU and beyond. Terms of trade with the EU, with countries with whom the EU currently has agreements and with other countries are all uncertain. The Northern Ireland Food & Drink association have described this uncertainty as meaning “£1.3bn or 28% of our sales will be subject to trade agreements that have yet to be agreed(Northern Ireland Food & Drink 2016).

 

  1.                     Baring (or until) agreement on a free trade agreement, the UK and EU would have to revert to trading under the WTO ‘most favoured nations’ rules. The EU would then impose its Common External Tariffs on UK products, while the UK would apply its Most Favoured Nations tariff to EU products. Levels of tariffs under WTO rules vary widely, but they are particularly high for meat and dairy, both key to Northern Irish agriculture. Thus Grant et al. (2016, p.33) explain this would mean a tariff of ‘12.8 per cent plus €1,713 per tonne’ for UK lamb exports to the EU and ‘€1,896 per tonne on Irish and Danish butter’ imported into the UK. 

 

  1.                     The question of tariffs and more broadly any new barriers to trade is particularly important for Northern Ireland, as it is currently part of an all-island value chain in which live animals, semi processed and fully processed products move freely between North and South. According to Dairy UK,the dairy industry on the island of Ireland has evolved such that there is free movement of milk, free movement of dairy products and free movement of people (Northern Ireland Affairs Committee 2017, p.19). The mere introduction of border controls alone, without even considering customs tariffs, would have a significant impact on the agri-food industry on the island of Ireland. The cost of producing the necessary paperwork has been placed at €20 to €80 per border crossing (Northern Ireland Affairs Committee, 2017b). Efforts to avoid such costs are likely to result in a restructuring of the industry across the island. 

 

  1.                     Beyond tariffs, the World Trade Organisation agreement also contains rules on how agriculture can be supported, with an aim to reduce market distorting subsidies. The EU as a whole has been allocated a certain volume of market distorting subsidies[8] – how much of that share is demanded and obtained by the UK will constrain future agricultural policy choice, notably the use of coupled direct payments linked to production.

 

  1.                     Trading with the EU will also not only, or even primarily, be about tariffs. In order to export products to the EU, producers will need be prove that they meet key EU product and process standards – the so called ‘Brussels effect’ (Bradford 2012), evidencing the ‘global reach’ of EU law (Scott 2014). These demands may prove far-reaching and constrain the government’s ability to roll-back certain standards – for example the European Parliament is discussing vetoing any EU-UK deal unless the UK fully commits to maintaining EU environmental standards.[9]

 

To what extent, and how, could the provision of public goods and ecosystem services be promoted or protected through the agricultural sector after Brexit?

 

  1.                     There is no simple consensual definition of what constitutes a public good, or whether providers of public goods should be paid just because they provide them, rather than using the payments to incentivise the production of sufficient levels of public goods. The last CAP reform thus centred on a debate between on the one hand shifting subsidies away from direct payments to the provision of specific public goods (‘public money for public goods’) to, on the other hand, justifying keeping high levels of direct payments because farmers were already providing public goods (Erjavec & Erjavec 2015; Gravey 2011).

 

  1.                     There is furthermore no agreement within the UK as to what is a public good from agriculture (Cooper et al. 2009). While England and Wales appear to favour narrow environmental goals in their use of rural development funds (principally through agri-environment-climate schemes); Scotland and Northern Ireland favour a more ‘multifunctional’ approach (Potter & Tilzey 2007), encompassing social and cultural aspects as well (making payments to farmers in Areas with Natural Constraints) (Hart 2015a).

 

  1.                     There would thus need to be a system to allow divergence in how public goods provisions are rewarded, while providing (as EU law currently does) some minimum standards across the UK to avoid a race to the bottom. Equally, regional policy makers should also be able to draw upon the UK National Ecosystem Assessment in utilising future agri-environmental measures to better target support for prevalent ecosystem services.

 

In repatriating agricultural policy, should the Government review and diminish or strengthen regulations that affect the agricultural sector? What are examples of legislation that merit de-regulation? To what extent could, or should, the UK to pursue a different approach to the legislation of pesticides, chemicals, plant protection, environmental regulations and animal welfare than the EU?

 

  1.                     The optimum levels of regulations (sanitary, welfare, environmental) of the agricultural sector can be looked at in different ways. First, what do UK consumers want – was a vote to leave the EU a vote to reduce environmental or welfare standards in the food they eat? Second, how it would impact on future trade and the competitiveness of farmers.

 

  1.                     Looking towards US trade, past negotiations between the EU and US have raised wide-spread concerns about agriculture – in particular facilitating the access of genetically modified foods, chlorine washed chickens and beef from cattle treated with growth promoting hormones. This is a logical objective for US negotiators in future UK-US deals, and were it to succeed parts of the NFU have already called for rolling back UK standards to avoid putting UK farmers at a competitive disadvantage.[10]             
     
  2.                     Outside of the EU, the UK government would have the power to roll-back key sanitary and environmental standards, some of which, such as the Nitrates Directive, have been criticised by UK farmers for years. But what farmers want will have to be balanced out with consumer demands and with the influence of the UK environmental movement, which is already campaigning for a ‘Greener UK’.[11] Any dilution of environmental standards would also sit uneasily with the restrictions imposed by the GATT Agriculture Agreement on the UK’s ability to introduce support payments for farmers. These restrictions may result in farmers receiving payments for providing environmental services, at the same time as those environmental standards are being reduced.

 

  1.                     There is furthermore a risk that, were the government to diminish regulations on the agricultural sector, this would create additional barriers to trade with the EU – the EU would require UK producers to show they comply with EU requirements, so as not to create an unfair advantage for UK producers. Similarly, any failure to uphold internationally defined sanitary standards would also place UK exporters at risk of trade barriers in export markets beyond the EU.

10 February 2017

References

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Cardwell, M., 2010. Rural development in the United Kingdom : continuity and change. International Journal of Land Law and Agricultural Science, 4(November), pp.1–12.

Cooper, T., Hart, K. & Baldock, D., 2009. Provision of Public Goods through Agriculture in the European Union. IEEP report prepared for DG Agriculture and Rural Development, Contract No 30-CE-0233091/00-28, pp.1–396.

DAERA, 2015. The Agricultural Census in Northern Ireland, Results for June 2015 https://www.daera-ni.gov.uk/sites/default/files/publications/dard/agricultural-census-ni-june-2015.pdf

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[1] http://www.nfuonline.com/news/latest-news/an-eu-referendum-message-from-nfu-president-meurig-raymond/

[2] https://www.theguardian.com/environment/2016/aug/04/national-trust-calls-for-complete-reform-of-british-farm-subsidies

[3] https://www.executiveoffice-ni.gov.uk/sites/default/files/publications/execoffice/Letter%20to%20PM%20from%20FM%20%26%20dFM.pdf

[4] http://www.endsreport.com/article/53346/defra-headcount-down-by-two-thirds-in-a-decade

[5] http://www.irishtimes.com/news/ireland/irish-news/cap-payments-critical-to-n-irish-economy-phil-hogan-1.2641493

[6] http://www.telegraph.co.uk/news/2017/01/26/scottish-parliament-get-say-great-repeal-bill-will-repatriate/

[7] http://www.thefarmersclub.com/news/NFU-President-briefs-Farmers-Club

 

[8] http://capreform.eu/wto-dimensions-of-a-uk-brexit-and-agricultural-trade/

[9] https://www.theguardian.com/politics/2017/jan/31/european-parliament-force-uk-meet-environmental-regulations-after-brexit?CMP=share_btn_tw

[10] http://www.thegrocer.co.uk/buying-and-supplying/categories/meat/nfu-slammed-over-hormone-and-chlorine-washing-comments/

[11] http://www.green-alliance.org.uk/greeneruk