TRQ deal agreed

Tariff rate quotas have always been one of the more difficult aspects of the negotiations between the UK and the EU over agricultural issues arising from Brexit. However, it looks as if an understanding about a deal has been reached. It may, however, not please third countries which could cause trouble down the line. The proposed deal would not expand overall quotas, and hence market access.

TRQs set the amount of goods that can be exported at low or zero tariffs, and are hence valued by agricultural exporters. The UK and the EU need to share out the quotas by the time Brexit takes place in 2019. Countries such as Australia and New Zealand have been pushing for an increase in combined UK-EU quotas after Brexit.

The deal would divide up quotas according to where goods were previously consumed. For example, the UK would take a larger quota for products such as New Zealand lamb. Consumption patterns would be measured over a three year period. This outcome would reduce additional competitive pressure on sheep farmers in particular.

Australia and New Zealand will challenge any outcome they think reduces their current levels of market access. Other major agricultural exporters such as Brazil and the US want more market access. However, if they decide they want to take matters to the dispute settlement mechanism of the WTO, they may be in for a disappointment. The US has been blocking the appointment of new judges and the quasi-judicial tribunal may soon have insufficient judges to function.

New Year Greetings

I had an interesting visit to Australia in February and March and met many people connected with agricultural policy. This llama on a property in Queensland did not seem too pleased to see me, probably having been told that there was about to be a CAP regime for camelids.

May I wish all readers a happy, prosperous and healthy new year. I would like to be also able to forecast that the momentum of CAP reform will be maintained, and that agricultural policy will increasingly be adapted to the needs of climate change mitigation and adaptation, but I am not optimistic on either point.

Australia re-thinks drought subsidy

Even in an irrigation district, conditions in Australia can be dry

Australia is re-thinking its subsidy to drought hit farmers. This has a wider relevance, both in terms of how one adapts agricultural policy to climate change and how a subsidy can grow almost unnoticed. Australia has pursued a policy of eliminating agricultural subsidies, other than in investment in knowledge and R and D which most commentators would support.

The drought income supplement was an exception and it is mainly that subsidy which has pushed Australia's PSE up to a (still low) 7 per cent. What was once a 1 in 20 experience is now more likely to be 1 in 5 calling in question the notion of 'exceptional circumstances'. This is no surprise as work by Linda Botterill at ANU showed that it was difficult to come up with an objective definition of drought and the definition used is largely a socially constructed one.

In an interview with Agra Focus top Australian agricultural civil servant Stephen Hunter discussed the challenges that his country is facing in relation to climate change. He noted that Australia has always tended to have a higher variability in climate than most countries. However, the available evidence on the impact of climate change suggests that the south of the continent will become much drier with a higher variability in climate and the north will face increased rainfall. He commented, 'We have always had droughts. It's just that Climate Change is making it more likely.'


Flood irrigation is a less common sight now

On a visit to the irrigation district around Griffith, NSW a few years ago I was surprised at the amount of rice, a water intensive crop, that was being grown. But Hunter reveals in the interview that this has fallen drastically in recent years to as little as 2 to 5 per cent of normal levels. On farm, there has been a marked move away from flood iririgation and towards drip irrigation rather than sprays. One major lesson for Southern Europe in particular is the desirability of having a system of water trading in place so that it can be used at its highest value.

Hunter admits that there are limits to the extent to which the commercial market can provide multi peril crop insurance. The approach being used is to equip farmers to understand their local climate better and to outline management changes they might make to respond better to those conditions, e.g., low tillage farming to deal with soil problems.

Another interesting arrangement which allows market smoothing without distorting interventions is the Farm Management Deposit Scheme. This allows farmers to even out their income by putting into deposit surplus funds in a good year that will help them in less good years. What is distinctive about the scheme is that it is attached to tax incentives.

Australia often has some interesting policy lessons. Anyone who is interested in what I learnt on my recent visit about the management of cattle diseases can E mail me for a Power Point presentation.