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Exiting the European Union (Agriculture)

Exiting the European Union (Agriculture) – in the House of Commons at 3:57 pm on 1st October 2019.

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Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs 3:57 pm, 1st October 2019

I beg to move,

That the draft Import and Export Licences (Amendment etc.) (EU Exit) Regulations 2019, which were laid before this House on 23 July, be approved.

The purpose of this statutory instrument is to make changes to EU regulations governing the agricultural import and export licensing regime to ensure that they remain operable on our departure from the European Union. The instrument also revokes some obsolete and redundant regulations relating to the payment of export refunds in the dairy sector and on the administration of EU third country export quotas for cheese and skimmed milk powder.

I should point out that this instrument is rather different from the other three we are considering this afternoon, in that it does not relate to changes that are necessary due to transitional arrangements or dates. This is one of a small number of very minor SIs that were deprioritised in the run-up to the end of March, given that their applicability to the UK is quite limited and they were not judged to be sufficiently important to merit passing in time for the end of March. However, now that we have the luxury of time, it is possible to bring them forward.

This instrument seeks to make EU regulations governing the agricultural import and export licensing regime operable. In particular, the regulations make operability fixes to technical EU Commission regulations, providing for the issue of import and export licences for certain agricultural products; update EU regulatory cross-references to equivalent provisions in domestic legislation made under the Taxation (Cross-border Trade) Act 2018; and convert licence securities from euro values into sterling using the average annual exchange rate for 2018.

EU Commission regulations 2016/1237 and 2016/1239 provide for a licence system for the import and export of certain agricultural products and specific provisions for the import of hemp. Under those regulations, it is required that any import of husked, milled or broken rice, raw hemp and hemp seed or ethyl alcohol be subject to an import licence. Likewise, any export of husked or milled rice is subject to an export licence. The regulations also provide for specific provisions in relation to hemp seed imports other than for sowing, including the pre-registration of importers and requirements to prove the destination of goods.

The purpose of those common agricultural policy licences is primarily to provide a means of monitoring agricultural markets by having advance notice of goods entering and leaving the EU. However, given improvements in data collection at the border, the Commission has increasingly relied on real-time customs data as a means of monitoring markets, which has negated the need for licences. They are now limited to just a handful of products, for specific reason. That is why these measures are of declining importance and were not prioritised for passing by the end of March.

For example, rice import licences really serve only as a means of applying the EU’s variable import duty system, and hemp licences have been retained at the request of the directorate-general for migration and home affairs, apparently to support EU drug policy, even though the information provided does not really contribute to that effort. This statutory instrument specifically amends Commission delegated regulation EU 2016/1237 and Commission implementing regulation EU 2016/1239, both passed on 18 May 2016, by replacing references to the EU with references to the UK and references to the EU Commission with references to the relevant UK authority. It replaces EU regulatory cross-references with references to equivalent provisions in domestic legislation already made under the Taxation (Cross-border Trade) Act 2018 and converts licence securities from euro values into sterling using the average annual exchange rate for 2018.

EU Commission regulation 1187/2009 sets out detailed rules for the provision of export licences and export refunds in the dairy sector.

Photo of Greg Knight Greg Knight Conservative, East Yorkshire

Can the Minister confirm whether the cost of administering these licences is counterbalanced by the licence fees that are paid?

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

My right hon. Friend will be aware that we have always had a clear principle in this country of aiming for full cost recovery on licences, and these licences tend to be focused on very large traders and importers.

The provisions relating to the payment of export refunds are now obsolete, as they relate to rules that existed before the entry into force of the current common market organisation regulation. Under current rules, export refunds can be paid only in the context of crisis measures. The provisions covering export licences relate to the management of EU-World Trade Organisation third country export quotas of cheese to the United States of America and Canada, and of skimmed milk powder to the Dominican Republic, under the economic partnership with the CARIFORUM states. UK access to those export quotas once we leave the EU is obviously uncertain, since we will no longer be an EU member, although negotiations with those countries over future tariff rate quotas are ongoing. The Government will bring forward new legislation to manage any future UK access to third country quotas should that be necessary in the future. As the regulations in question are effectively obsolete or redundant in a UK context, this statutory instrument revokes Commission regulation 1187/2009, of 27 November 2009.

This statutory instrument concerns only reserved areas of competence regarding import and export controls, but the Department for Environment, Food and Rural Affairs has engaged with the devolved Administrations on its approach to CAP legislation under the European Union (Withdrawal) Act 2018, including this instrument, to familiarise them with the legislation ahead of its being laid. I therefore commend the regulations to the House.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs) 4:05 pm, 1st October 2019

In rising to respond, at least I have the satisfaction of knowing that we have not debated this measure before. I have been trying to find the one that was the missing thread among all the ones we have debated. At least I have put my mind at rest, knowing that I have not missed this in the great mists of time.

I wish to pick up on a couple of things with the Minister. Paragraph 2.10 of the explanatory memorandum states:

“These technical amendments, designed to provide operability ‘fixes’”.

Is that a legalistic term? Is it a Department for Environment, Food and Rural Affairs term? Is it some other term? I know what it is trying to tell me but it is interesting that we talk about “fixes”. This is about trying to look at currency exchange, which is not unimportant, because one reason why British farmers have done less badly is because they have been paid in euros up to this moment in time. That has meant they have done slightly better, because the euro has risen in euro against the pound. So there will be some “losers” here in the sense that they will not have that security and protection.

That was just an interesting comment, but now I come to a genuine question. It is about the way in which, certainly through the transitionary arrangements, export refunds will be paid. I accept that they will be paid in pounds, but does this refer both to the UK farmers receiving exports refunds and to EU farmers, who clearly at the moment will have seen this as a seamless operation? It is not now going to be, because it could be occurring in the context of a hard border. These are important aspects. The Government decided that this was not worthy of any priority whatsoever, but it is an important issue about currency conversion, because that can and does mean that the way in which payments are made can be beneficial. That will not be the case in the future because payments will always be in pounds. I would welcome the Minister’s clarification and willingness to look at the economic consequences of that, because in the short run at least British farmers could stand to lose out because of it.

Photo of Deidre Brock Deidre Brock Shadow SNP Spokesperson (Devolved Government Relations), Shadow SNP Spokesperson (Environment and Rural Affairs), Shadow SNP Spokesperson (Wales) 4:07 pm, 1st October 2019

The explanatory memorandum points out that there is little impact from this statutory instrument, yet here we are. The Minister also said that it is not very important, but as it is about imports and exports, will he tell us whether tariff requirements will change some of the provisions in it? Has DEFRA done any analysis of how the licence regime will impact on businesses exporting and importing agri-products? What costs will industry have to bear?

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health) 4:08 pm, 1st October 2019

First, let me thank the Minister for bringing this measure forward. In his introduction, he said powdered milk was one of the products he is referring to. My constituency has a large number of agri-food companies, which depend on their export and important licences. One of them is Lakeland Dairies, which employs some 270 people in my constituency and is involved in the milk product coming in as a liquid. It has two factories in Northern Ireland and two in the Republic of Ireland—the company is in a unique position. I am encouraged by what its chief executive officer, Michael Hanley, has said, which is that whatever happens in this process of Brexit, be it a deal or no deal, we have to work with it. I am glad when the CEO of a major company has that attitude and that interpretation of what is happening.

Along with the approximately 2,500 agri-food sector jobs in Mash Direct, Rich Sauces and Willowbrook Foods, my area also has a number of farmers who feed into the process. I wish to talk particularly about the farmers who feed into Lakeland Dairies. Mine is the second-highest milk-producing area in the whole of Northern Ireland—second only to East Antrim—and we have a high-quality product and a number of committed farmers. I declare an interest: I live on a farm. It is not a milking farm—it is not a dairy farm—but my next-door neighbour takes the land and milks it, and I suppose that is ultimately used for dairy. My neighbours depend on the process being easy to take forward. The milk product provided by Lakeland Dairies comes across the border, the powdered milk goes back across the border to the Republic of Ireland, and it then comes across once more in a processed form, because of the way the factories do it down south. Ultimately, the product is packaged in Newtownards in my Strangford constituency and then sent overseas.

The former Minister for exports, Liam Fox—I cannot remember his constituency—was responsible for ensuring the export of the product from Northern Ireland, and ultimately from the Republic of Ireland as well, to China. He secured a contract for £250 million over five years. We are externally grateful to him and his Department for ensuring that that happened, but I want to make sure that everything goes forward in the right way.

Earlier, the Minister said—I think I caught what he said correctly—that his Department had contacted the regional Governments. Unfortunately, we do not have a functioning Assembly; I presume that contact was made with the Department of Agriculture, Environment and Rural Affairs, which is the equivalent of DEFRA over here. Has that contact been made, and has contact been made with the Ulster Farmers’ Union, which represents the majority of the milk producers throughout Northern Ireland? Indeed, has contact been made with the likes of Lakeland Dairies and others that depend on the powdered product and the milk product that cross the border on a number of occasions? They are high-quality, great products.

Finally, with special reference to daily export, is the Minister aware of the onerous added administrative burden? Is there not only support but funding to help with an interim change over a period? My local company has a number of questions, and I have written to the Department. To be fair, I think the Minister met the company—indeed, I remember the day that he did—on a separate occasion when he had a different responsibility. I just want to make sure that Lakeland Dairies, an integral economic factor of progress in my constituency of Strangford, can retain the jobs it has. We need to ensure that the milk producers can feed into the process and that, when it comes to import and export licence regulation and those companies that create so many jobs and so much in the economy, we can make my constituency of Strangford a stronger economic base for that, so that everything will be in place for them.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs 4:13 pm, 1st October 2019

Let me turn first to the points made by the shadow Minister. He highlighted the use in the explanatory memorandum of the term “fixes”, which he even put in quotes marks. In DEFRA, we like to fix things that are broken, and the truth is that in this case, as in many other cases, it was always recognised that simply to bring across retained EU law would require changes for the purposes of operability. The types of fixes that are commonplace throughout this instrument and all the others simply replace the words “European Union” with “UK” or replace the European Commission as the competent authority with the relevant authority in the UK or with the Secretary of State.

The shadow Minister mentioned the issue of export refunds for dairy, which links to a point that was made by Jim Shannon. Let me say that, when it comes to these export refunds, we are simply deleting provisions that have already disappeared from EU law, so we are revoking something that became redundant and obsolete anyway under EU law in—I think—2007.

EU thinking on export refunds has evolved in recent years. There is a general consensus that they can be used only in extreme circumstances—when there is a particular crisis—and there are other provisions in law to enable that to happen. Therefore, they would not be able to be used anyway, because the other associated legislation that would enable us to do that does not exist, so this measure is really little more than a good housekeeping measure.

The point raised by the hon. Member for Strangford goes somewhat beyond the scope of the measure, but I will touch on it briefly. Let me reassure him that the Government are absolutely fully aware of the problems that the Northern Ireland dairy industry in particular could experience in a no-deal scenario. It is the case that it exports around 30% of its liquid milk to be processed in Ireland. That would be a problem if there were a requirement for export health certificates, or, indeed, if full tariffs were applied. It would also be a problem for those cheese processers in the Irish Republic, who would no longer have their supply of milk. Obviously, we hope that this is something that can be resolved through negotiation, but I can reassure him that we are working very closely with DAERA in Northern Ireland to identify all sorts of contingency arrangements and interventions that we would instigate if they were required.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

I thank the Minister for that explanation and for all the hard work that he does in his Department. It is good to see him in his place doing things that he did in the past and doing them well. It is important that the Republic of Ireland is aware very clearly of the benefits of having a good working relationship with Northern Ireland in the United Kingdom. It is for the mutual benefit of everyone: for the mutual benefit of the other producers; for the mutual benefit of the factories; and for the mutual benefit of the workers.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

I could not agree more. There is a mutual interest for all EU members and the UK to reach a sensible resolution to the current discussions. That is why the Government are redoubling their efforts to try to get a sensible withdrawal agreement with that backstop deleted and alternative arrangements put in place instead.

I turn now to the point raised by Deidre Brock, which also links to a point raised by my right hon. Friend Sir Greg Knight. I am aware that my right hon. Friend has raised with me this issue of cost recovery and charges in a different context, which I am looking into. However, in this particular context, I can confirm that it is licence security that is offered, and it is returned once a licence is utilised within the specified criteria. There are no costs to operators if they use the licence as specified and therefore no economic implications. The hon. Lady should be aware that the impact assessment highlights the fact that any costs would be well below the threshold of £5 million, but I hope that, in this additional information, we are talking here about a licence security that is returned. She must also bear in mind that we are doing nothing that is not already currently done. As I know that she and others would ideally like us to remain in the European Union, she would face those costs anyway. We would be forced to have those costs and would never have the chance to be able to repeal them should she want to. We, at least, as a country about to become a properly independent, self-governing country again, would have the opportunity, at a future date, if we felt it necessary, to repeal these particular provisions and save everybody the bother.

I hope that I have been able to address the points that have been raised, and I commend these regulations.

Question put and agreed to.