Culture, Tourism, Europe and External Affairs Committee - 4 February 2021

Culture, Tourism, Europe and External Affairs Committee - 4 February 2021

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The Convener (Joan McAlpine): Good morning. Welcome, everyone,   to the fourth meeting in 2021 of the Culture,  Tourism, Europe and External Affairs Committee.   Our first agenda item is the EU-UK trade and  co-operation agreement. I welcome Charlie Adam,   vice-president of NFU Scotland, and James Withers,   chief executive of Scotland Food & Drink.  Thank you for coming to give evidence.

The NFUS gave a number of warnings before  1 January, when Brexit started, and its   helpful briefing suggests that a lot of what it  warned of has indeed come to pass. In particular,   I was concerned to read about the effect on  meat products. The briefing gives an example   of the amount of paperwork that is  required to export pork to the EU.   I ask Charlie Adam to share that for the record. Charlie Adam (NFU Scotland): Thank you, convener, and good morning, committee. I checked that example this morning with Andy  McGowan of the Scottish Association of Meat   Wholesalers. The particular examples that he gave  were of a load of pig meat initially requiring 27  

stamps, and one single load going to four member  states, requiring 96 stamps. That clearly takes   a great deal of time and effort, and therefore  cost and delay. In addition, it seems extremely   pedantic in this day and age that we have not  managed to achieve an electronic pre-notification   method or some other way of dealing with  such issues without such a lengthy process. The Convener:  Before Brexit, the impression that was  given was that a lot of this would be   dealt with electronically. We were  told that that was what would happen. Charlie Adam: I presume that what we have is   a function of the limited time within which  people were able to prepare properly when the   agreement was made. I hesitate to say this, but  there may be an element of bloody-mindedness:  

certain people are sticking to the  letter of the law to the nth degree. The Convener: Your submission talks about the   effect that that has on export volumes in the meat  industry. Do you want to say any more about that? Charlie Adam: Yes. I checked my figures this morning and we are   only at about 25 per cent of normal volume for  meat products. Where it could, quite a lot of   stuff went early, but we are still only at 25 per  cent. People are trying to get stuff in—more pork   than beef and lamb, I gather—but even they are  having limited success. The volume is down, but it  

will increase. However, unless the current issues  are resolved, the delays, costs and problems will   increase—they might even quadruple if we were ever  to get back to 100 per cent. However, I am hearing   that that may never happen: some of the smaller  producers may simply give up trying, or may lose   their markets. There are a number of issues around  that, which I might go into if I have the chance. The Convener: You can go into them now. Twenty-five to 30 per   cent of volume is enormous. Unless that improves,  I imagine that farmers will go out of business.

Charlie Adam: I do not think that it is likely that it will stay   at 25 per cent purely as a result of people not  trying to trade or giving up; I think that there   has been a reduction in volume simply because of  the initial changeover. I would expect volume to   increase fairly quickly; my point is that it may  never get back to 100 per cent. There are a number   of reasons why that might not happen. One that  has been mentioned relates to what is known as   groupage, which is when a number of smaller  producers share a truck for deliveries and   either one part of that load is rejected and  they all suffer, or they send a load over in   a half-full or quarter-full truck. I heard of one  example recently where there were just six pallets  

on a whole articulated truck. That obviously  involves a huge cost and a certain amount of risk.   For smaller producers, for whom groupage is  probably the only economic way of getting their   material across, the problem is considerable  and could lead some of them to give up. We may be told that the issues are  teething troubles or are down to Covid,   but it is important to emphasise that  that simply is not the case. There are  

serious structural issues and problems  that need to be addressed. It is also about   urgency. The UK Government says that these  things will be addressed and that changes are due   to come in April, but that is too late. If  people have lost business in the meantime,   they may not get it back. Their customers will  go to other suppliers. Once you lose business,   it is very hard to get it back. I emphasise—no  doubt James Withers will, too—that the situation   represents a real threat to  achieving our strong ambition and the   target set for Scotland Food &  Drink to double turnover by 2030.

The Convener: Of course. Thank you for that. It   is very worrying and I am sure that members will  want to drill into that later on in the meeting. The meat industry is obviously affected  by export health certificates. I   ask James Withers to talk us through and maybe  give us a step-by-step guide to the barriers   that food and drink exporters face. James Withers (Scotland Food and Drink): Good morning, and thank you for the   opportunity to give evidence on what  has been an absolutely dreadful first   few weeks of trading in this post-Brexit world.

The position is best summarised by saying  that it was as easy to sell products to   Madrid as it was to sell them to Manchester in  the run-up to the end of the transition period,   when you could have sent a pallet or a  lorry-load with just one cover sheet—a   single piece of paper. However, now there are  18 different steps that an exporter needs to   negotiate and another eight steps  that an importer needs to negotiate.   That is a real nightmare, particularly for  products that have a limited shelf life and   need to get from the north of Scotland down to  markets in France within, say, 12 to 24 hours. We are testing a new multibillion pound trading  system in real time, and things are going wrong.  

If only one of those steps goes wrong, you  can lose the value of that product altogether   and suffer huge financial damage as a result.  If I started listing the problems, we would run   out time. There have been dozens and dozens, from  companies struggling to get the right certificate,   to French information technology systems  falling down at Dunkirk and Boulogne,   logistic companies’ IT systems falling down,  and UK Government IT systems for the national   transit system and Her Majesty’s Revenue and  Customs falling down. Loads are held up because   stamps have been put only on the front page of a  document and not on every page, and there is still   an on-going debate about whether forms  should be filled in with red ink or blue ink. Because there was zero time to test any of the  systems—indeed, the final border operating model   was not published until about 5 pm on Hogmanay—we  have hit all of these issues in real time. That is  

why Charlie Adam talks about how thin the volumes  are on red meat. On the seafood side, we have seen   about £1 million a day in lost sales so far.  The problems are multiple and they are not at   the same point, so it is very difficult to quickly  target the solution. It is like whack-a-mole:   a problem crops up and you hit it on the head and  fix it, and another two crop up at the same time.

The Convener: It is unbelievable   that there is a fight about red and blue  ink. Do you have any more detail on that? James Withers: There has been an on-going debate   about what colour of ink should be used. You think  you have the right colour of ink and you are told   that the signature needs to be in a different  colour from the colour of the letterhead.   Part of the challenge, particularly on the  other side of the channel, is that there are   a lot of young, inexperienced customs agents.  You can get a view on ink colour one day,  

but the next day, when they change shifts  in Boulogne-sur-Mer, Calais or Dunkirk,   you get a different interpretation. It is  extremely difficult for businesses to plan. This has been an issue not just for small  businesses. Even big, multinational companies with   export departments that have export paperwork in  their DNA because they sell to North America and   China have found systems falling down and loads  getting held up. It is not just about ink colour;   it is about whether the names of fish species  need to be translated into Dutch on forms.   A catalogue of problems has  been racking up day by day.  

This is what happens when you have  no time to test systems and you just   throw businesses to the wolves—that is  what it feels like to a lot of them. The Convener:  Do you see the situation getting better or worse?  There are still systems to come in at the UK end. James Withers: I think that people will get used to   the paperwork, but there is a  fundamental question as to whether   the new export model is sustainable  at all for many food exporters. There are a number of reasons why things will  get worse before they get better. Some of   the Great Britain-Northern Ireland grace periods  are due to lapse, although a request has gone   in to extend them out to 2023. Potentially more  products will fall under the official controls.   At the moment, products of animal origin—red meat  and seafood—are affected. If products that contain  

ingredients of animal origin—dare I say  butter in shortbread?—start requiring EHCs,   which, come April, is a risk, you will  have enormous demand, which the system   probably will not be able to cope with. Import controls will also start on  products coming from the EU to the UK—that   is due to commence in April. A grace period  was given to EU export businesses; sadly,   the same grace period for UK exporters was not  granted. When those import controls happen,   companies that rely on ingredients coming  from the EU will potentially face problems.  

The crucial point is that, because haulage is such  a circular industry, we might then start to see   the first ripples of a shortage of haulage  availability, exacerbated by rising haulage costs   come Easter. We can see problems coming in the  same way that we saw problems coming at the end of   the transition period at the end of December  2020. The warnings at the end of last year were   ignored and we just fell into this disastrous new  operating environment. We cannot afford warnings   being ignored again, or else the problems  will be exacerbated as the year goes on. The Convener: As you know, the committee   backed your call for a grace period when you made  it at the end of last year. Are you still asking  

for mitigation or a grace period? What would  you like the UK Government to do to fix this? James Withers: The most critical   thing that we need is dialogue with the European  Commission. We would absolutely support a pause   in some of the checks as a recognition that  Government systems both here and on the other   side of the Channel have not been ready. That  is not just costing businesses here millions of   pounds, but letting our customers down.  Unless we get some fixes very quickly,   we are in danger of seeing the start of a  permanent restructuring of EU supply chains   away from Scotland and the UK, despite our  having spent a decade building up our brand in   those markets. The critical action that we need is  political engagement with the European Commission. We know that we are out of the  EU and now a third country.   What has become clear in the past four  or five weeks is that the EU’s third   country import system, particularly for food,  was never built for a country such as the UK.  

It was never built for groupage—the consolidated  loads—which Charlie Adam absolutely rightly   identifies as a massive problem. It was never  built for a country that is so integrated already   into European supply chains. It was never built  for the fast movement of large quantities of   perishable products. It is a system that was built  to send 40-foot containers of frozen lamb half way   around the world, where one company fills one  container that is going to one destination, and,   frankly, because the product has a longer shelf  life, getting held up a wee bit is not a problem. We have seen political will to act on GB-NI issues  and the Northern Ireland protocol in the past few   days. That is welcome. The same systemic issues  also exist for trade over the short straits,  

which is the artery for £1.2 billion  of Scottish food exports every year.   We need the same engagement to see whether we  can achieve what the EU needs—we understand what   it needs—but in a way that is more streamlined,  quicker, less complex and certainly not as costly. Claire Baker (Mid Scotland and Fife) (Lab): The description that we have heard of the   trading arrangements is quite a bleak start.  James Withers talked about the need for political   dialogue with the European Commission. Currently,  we are operating with a European model and will   not bring in a system for imports until April, so  we are taking a different approach from the EU.  

As I understand it, the cross-border task  force that has been announced is UK-only.   What is the expectation of the task force? You  think that the critical point is more dialogue   with the European Commission, so should the  task force do that? As far as I can see,   it is an internal UK task force. James Withers: The task force is welcome in that it will consider   whether we can achieve the current requirements  in a more streamlined fashion. The call for a task   force was led by the Scottish Salmon Producers  Organisation and it has our full support. My   understanding is that terms of reference and  remits are currently moving backwards and forwards   between the Department for Environment, Food  and Rural Affairs and the Scottish Government.  

I believe that the Scotland Office might  be the lead on that for the UK Government. You identify a critical issue, which is that,  unless we open a similar twin-track dialogue   with the European Commission, we will not be able  to explore whether the core requirements can be   streamlined. We risk simply rearranging  the deckchairs if we look only at how to   meet the current requirements in a more  streamlined way. The task force absolutely   will be helpful and we desperately need it, but  part of the process has to be to take its findings   to the European Commission to explore  whether we can do things a bit differently.

Unfortunately, the mood music that I have  been picking up in the UK Government is that   it is unlikely that it will want to engage and  try to get the EU to the table until April,   when we start implementing the checks on  its exports into the UK. In other words,   the EU has to feel the same pain as we do to get  it to the table. That is the same mentality of   brinkmanship and last-minute negotiating  that has spectacularly failed us so far.   We cannot afford to wait until April—we do  not have time. The task force is good news,  

but it is doing 25 per cent of the job. The other  75 per cent is opening dialogue with the European   Commission on the findings of the task force to  explore whether we can do things differently. Claire Baker: Mr Adam, do you want to comment   on what you hope the task force might achieve?  What problems would you like it to focus on? Charlie Adam: James Withers has covered a great deal   of the issues. There are things that need to be  done on this side of the water in the short and  

longer term, and we might need help with resource  from the UK and Scottish Governments to do that.   We need consistency among UK vets and officials.  We definitely need to improve with regard to   training people, having enough people and ensuring  that they are all singing from the same hymn book.

I am led to believe that, in the face of  the pernickety judgment of documents and   issues about ink colour and whatever, we need  to continue our efforts to ensure that our   exporters know to the letter exactly what they  need to do to ensure that their consignments   and paperwork get through when they arrive. Those  issues need to be addressed because, when we are   faced with such difficulties, we need to ensure  that the problems are not arising because of a   lack of knowledge or ignorance as to what needs  to be done to get a smooth flow from this side. Claire Baker:  Do you see any progress on some of those issues?  Your written submission states that we need to “increase the number of certifying officers”. I suppose that capacity needs to increase. Do you  see any evidence that that is starting to happen,   or are there plans to increase capacity? James  Withers suggests that the whole system needs   to be reviewed. You say that we need to bring in  measures to cope with the system that is in place,   but do you agree that the whole system needs to  change? That would require political change. How  

do we deal with the current situation? What  needs to happen in relation to logistics and   border controls to make the current system work  more smoothly? Do you agree that we need change? Charlie Adam: I agree that we need change. I   absolutely echo the point that James Withers made  about urgency. It is not about making the current   mess work a bit better; it is about arriving  at a system that will work in the long term. I   believe that Food Standards Scotland is working  hard on training officials and increasing   their number. To the best of my knowledge from  what I have heard, it is making considerable  

efforts and is probably to be congratulated on  that, but the result of that is still to appear. Unlike some of the people whom James Withers is  dealing with, such as shellfish producers, who   are feeling the problems immediately, for  farmers, the problems that we are discussing   are probably having more of an effect on our  exporters and processors than they are at the   farm gate at the moment. However, I have no doubt  that, unless the problems are solved quickly,   they will find their way back to the farm  gate and will affect our members directly. Claire Baker: My final question is for both witnesses.   Do you have routes into Government, whether that  is the Scottish Government or the UK Government,   so that you can raise the points that you  have made? Are the people who are making   decisions and who can change the situation  speaking to you? The task force is in its   early stages. Do you imagine that to  be the main route to raise issues,  

or do you have a good relationship with Government  and feel that you are being listened to? Charlie Adam: We certainly have lines into Government and   we have means of communication. There has been a  teleconference or online meeting with Michael Gove   on the subject. The lines are there, but  I do not know whether people are listening   and acting. Noises are being made about  April, but we need to convey to those people   that that is too late and that a lot  of damage will be done before then.   Our message is heard, but we need  to have it listened to and acted on.

Claire Baker: I ask James Withers to clarify   the significance of April.  Is that just when the import   rules change or will something else  happen in April that I have missed? James Withers: On your first question, we have   no complaints on engagement. This morning, my  day started, as most do, with a catch-up call   with the Scottish Government and Food Standards  Scotland. There are calls with DEFRA twice or  

three times a week, too. Officials at UK and  Scottish levels are working their socks off.   The gap is in ministerial and political will  to engage at UK level—that is my take on it.   We continue to see phrases such as  “teething problems” and “short-term issues”,   and we even had a statement from DEFRA this  week to the BBC that trade “continues to   flow smoothly”. No, it does not, and  it has not done so for five weeks. On your second question, at the start of April,  we are due to implement the first sanitary and   phytosanitary checks on products that come  into the UK from the EU. At the moment,   we are basically waving everything through,  except controlled substances such as tobacco   and alcohol. Come April, fresh fruit and  vegetables, for example, will face the first   health checks, albeit that some customs  checks are already causing a few problems.

The other thing that will happen from 21 April  is the potential expansion of official controls   to a broader set of products, which could  include products that have products of   animal origin as part of their ingredient mix. A  consultation on that is happening now. In April,   we will start to see an additional ream of  checks that could make things a lot worse,   which is why the timing of the attempts  to identify solutions and make progress   is critical. We cannot afford to wait until  April, or we will potentially double the problems,   the pain and the cost. It will take time  to get any alleviation of the challenges. Claire Baker: Is that when   the UK consumer is more likely to feel the  impact of the changes to exports and imports? James Withers: It is certainly when the risk will increase. At   the moment, the success of Brexit in the first few  weeks has been defined as there being no queues   of lorries in Kent and no gaps on the shelves  in the UK. There are no gaps on the shelves in  

the UK because most of the checks on imports have  not started. There are no queues in Kent because   most of the lorries are empty or, as Charlie Adam  said, a lot of the business just is not happening. The Convener:  Beatrice Wishart and Jamie Halcro  Johnston have supplementary questions. Beatrice Wishart (Shetland Islands) (LD):  James Withers said that his group  supports the calls for a task force.   Obviously, time is of the essence. Who should  be on such a task force and what exactly should  

it consider? What should its focus be and  how quickly might that get things moving? James Withers: If I was writing the remit and putting people   on the task force, I would say that it should be  minister-led, and jointly. I would choose Fergus   Ewing and George Eustice, the Secretary of State  for Environment, Food and Rural Affairs, to be   co-chairs. It needs to be a tight and small  group with technical expertise. Ideally, it would   involve a logistics company, a processor that  is into export and probably some of the support   agencies. If there are more than 10 people on it,  that will probably make quick progress difficult. It is critical that there is an agreement in  the remit that the findings and conclusions on   the scope for simplifying the core requirements  will be taken to the EU. I would also ask that,   starting now, before the task force even meets—I  hope that it might meet for the first time next   week, although I am unclear on that—Michael Gove,  alongside the discussion he is having on GB-NI,   opens up a route to consider short straits issues  and routes from GB to the continent in order to   raise awareness that the task force is starting  and is likely to come up with potential solutions. Jamie Halcro Johnston  (Highlands and Islands) (Con):  I declare an interest, as a partner in  a farming business and a member of NFUS.

What we have heard is interesting and,  obviously, there are issues of real concern.   I want to pick up on a couple of issues that have  been raised, the first of which is preparedness.   James Withers called for a six-month period and  did not receive a response, which is not great. In   the past few weeks and months, we have seen issues  with ink, which we have talked about, and problems   with forms. Obviously, in recent days, we have  seen issues with vaccines. My understanding is   that the UK seed potato industry meets all the  requirements, but we are still being blocked,   although the issue is to again go before the  Standing Committee on Plants, Animals, Food and   Feed. Is the political will there on the  EU side, or are there concerns about that? On preparedness, what preparations  were done in advance? I know that the   information came very late, which was certainly  not ideal and has caused considerable problems.  

Was there an opportunity to prepare for  a worst-case scenario? For example, with   lorries in groupage, the process has been taking  six hours when it had originally been planned   to be 45 minutes, and we are now increasing the  number of inspectors at Larkhall and other places.   Could some of the issues have been dealt with?  Was the communication between the UK Government,   the Scottish Government and councils prior to  the end of the transition period good enough? James Withers: On the EU’s willingness   to engage, you are right that we  have an issue on seed potatoes.   Fresh mince and some shellfish are also,  in effect, banned. The EU’s view is that  

those non-tariff barriers that have been created  are a result of a conscious decision of the UK   Government to sign up to a deal and, crucially,  not to sign up to any alignment of standards.   From my perspective, that was a fundamental and  critical mistake. If we are to try to address   that, there will have to be some movement by  the UK Government on alignment of standards.   I am not aware of any industry body that would  be opposed to the alignment of standards.

My point about considering different  ways of doing things is not about   circumventing or working around the UK-EU trade  deal. There is specific scope in the deal to   look at simplification and certainly  to reduce the frequency of SPS checks.   A whole committee structure is being set  up to explore that. The argument that   the industry is making is that that needs to  start now and not some months down the line. Your point about preparedness is important. It  is a complex issue. Did we know that EHCs were  

going to be part of the mix? Yes, and we probably  knew that right through 2020. However, we had the   challenges of the pandemic. To be honest, most  food and drink companies were just trying to   get through the week—they were looking after  their workforce and ultimately keeping the   food supply chain moving to keep products on  shelves and our cupboards and fridges stocked.   The bandwidth, if you like, to find time for  staff to work on preparedness just disappeared. The most critical thing was the lateness of the  deal. The IT systems to manage the process did not  

go live or were not turned on until 29 December  2020. We have had issues with different IT systems   talking to one another and interpretation in  companies or at Larkhall, Dover or Calais. None   of those things could have been tested beforehand.  That was one of the real challenges that we had.  

Clearly, the UK knew that its systems were not  ready, because that is why it has delayed the   checks on imports coming in—we just do not have  a system built for it. If I was a betting man,   I would say that the UK will try to push back  even further the date when that will start. Another crucial point is that the Government’s  watchdog, the National Audit Office,   produced a report that said that disruption  was coming and border systems were not ready.   All the evidence was there that we were not ready,  but we rolled into it anyway. I have asked myself   what we could do differently if we went back in  time. However, in the circumstances, with the lack   of clarity on what we were transitioning to until  the last week, IT systems not coming on until 48   hours before the change, the border operating  model not coming out until five hours before   and the pandemic, I am honestly not sure that  we could have done anything more at the time.

The Convener: We have had two   supplementary questions, so we  will move on to Dean Lockhart. Dean Lockhart (Mid Scotland and Fife) (Con): Good morning. Thanks very much for joining us. Let us go back to the question of automation—both  of you touched on that—and how the new rules   could be streamlined very granularly. I  would like to get a general sense of the   proportion of issues that are on this side of the  channel and are, therefore, under the control of   the Scottish and UK Governments and the proportion  of issues that are on the EU side, which are, for   whatever reason—political or logistical—outside  our control. Give us a rough sense of what you   are seeing on the ground as to the percentage of  issues that we could hopefully address ourselves   and the proportion of issues that  are on the EU side of the channel. James Withers: One of the challenges we have had   is that the answer to that question has changed  day by day. Sometimes, we have challenges at  

Larkhall with EHCs needing to be reworked so  that we do not end up with a 0.5kg difference   between what is inspected in the lorry versus  what is on the form. That needs to be reworked. I have the latest statistics on Larkhall EHC  processing. We have been getting them regularly,   and the speed is certainly improving. The number  of EHCs that are being processed in under two  

hours is increasing and the percentage that  require reworking is decreasing. I spoke to one   company that got two loads through on the French  side smoothly in the past 24 hours. However, I   spoke to another company that had stuff arriving  in Boulogne on Saturday and it took until Monday   before the stuff left the port, by which  point the value of the product had dropped. My observation would be that the process needs to  be tackled at multiple different points. At some  

point, it will settle into a new normal. I do not  believe that the new normal will be sustainable   for the level of exports we are doing, hence the  need to challenge it, but I do think that, over   time, we will be able to streamline some of  the requirements. I think that automation will   be part of the answer. The challenge is that  IT systems take time to set up and they fall   down an awful lot—goodness knows that the past  few weeks have been a demonstration of that. I think that we will find a way to streamline  the requirements. What is fundamentally in  

doubt is whether the core requirements make for a  sustainable export model for a lot of businesses. Dean Lockhart: Charlie Adam, you mentioned in   your opening remarks that the rules are perhaps  being applied inconsistently or arbitrarily.   What percentage of the issues that you are seeing  could be dealt with on this side of the channel   and what percentage of those issues are at the  EU level and, therefore, outside our control? Charlie Adam: Frankly, I am not able to   give you a percentage because I do not know.  I know that there are issues on both sides.   If I had to guess, for convenience, I would  say that it is 50:50. I think that there   are problems with consistency on both sides.  Clearly, it is easier for us to do something   about the issue directly if it is on our  side. I would say that we can do something  

about anything that needs to be addressed here.  I am a great believer in sorting the things you   can sort and not being distracted from that by  complaining about things that you cannot sort. I am told that a degree of politics on the other  side of the water is causing some of the problems,   which might mean that the will does not  necessarily exist to sort them quickly. I had   better not name which countries are involved  in that, but you will have a fair idea of which   they might be. We need to make sure that  our people on this side are up to speed.

The danger in all this, as James Withers said, is  that IT systems take time to put in place and the   damage may well have been done before we get them  in place. We have to set about that urgently, but   we also have to make sure that, in the meantime,  what we are stuck with works as well as possible. That is all that I can say on the matter. Dean Lockhart:  That was helpful. You have both spoken  about additional resource being required—IT,  

additional vets or whatever. For my understanding  and that of the committee, it would be good to get   very specific ideas of where you think the gap in  resource at Larkhall and other hubs will be over   the next couple of weeks. For the committee’s  understanding and in order that we can   make recommendations, it would be  useful to get a detailed sense of   where you think additional resource—IT  support, vets or whatever—could help.   Charlie Adam, where do you think additional  resource could make a difference? Charlie Adam: You have mentioned   two things for the immediate term. This is maybe  not a direct answer to your question, but I would  

like to mention the problems that we have with  composite products, whereby some ingredients come   from abroad—from other sources—and  the presence of those ingredients   can lead to the whole product being unable to  be exported. In terms of resource or effort,   one thing that we could do—I do not know how  quickly it could be done—is make every effort to,   where possible, home produce the ingredients,  which would help us to remove that problem. Beyond that, frankly, I think that James  Withers is probably better equipped to tell you   specifically what could be done. James Withers: I am satisfied that we have sufficient   public sector resource at Larkhall. It has been  a bit fluid. At the start, it was as much about  

the timing of shifts as it was about the number  of resources—there were FSS staff there at 5 am,   but the first lorry did not arrive until 11  am. FSS has now put some more staff in there,   and it is working closely with the main logistics  providers—the likes of DFDS, which is the   largest—and responding very quickly when they say  that they need a couple more people on the ground. Larkhall has been identified as where some of the  slowest processing has happened, partly because   the checks there have been rigorous.  If something goes wrong at Larkhall,   you can save the product and save the  lorry, because you can either fix it there   or you can send it back. If problems  arise on the other side of the channel,   it is very difficult and either the product  is lost or its value disappears altogether. Some positive news is that a Scottish  Government and industry joint plan   has been put together that is about both  recovering from Covid and adapting to Brexit.  

It is funded by both industry  and the Scottish Government,   through the Scotland Food & Drink partnership.  As part of that, in the past week, two new   trade specialists have started to receive funding  through Seafood Scotland to support companies. Crucially, as of yesterday, we now have  a resource on the ground in France, at   Boulogne-sur-Mer. Boulogne-sur-Mer is the border  inspection post that has been set up to deal with   seafood processing and arrival. We now have  someone on the ground there who will be working  

24 hours a day, six days a week—not  on a Sunday—and, if a lorry is stuck,   he will head that way. He is not a magician, but  he is French and that is a helpful step forward.   He was already talking last night and getting  better intel on where the particular problems   have been around documentation. Hopefully, that  is one step forward in trying to put some resource   into the right place. It does not deal with the  fundamental problems, but, for those who want to   give exporting a go and are still trying to move  product, it increases the chances of success. Dean Lockhart: Thanks very much. That is good to hear. You have both highlighted challenges with  produce that is time sensitive going to   the single market. Perishable  seafood is an example of that.  

Could you both give us a brief sense of what the  impact is on non-perishable items such as whisky   and non-perishable agricultural goods? James  Withers, what percentage of our overall exports in   the seafood and drink sector  consists of those perishable items? James Withers: We export about £6.5 billion worth of goods   in a normal year—the figure was a lot lower last  year due to Covid—of which £2.2 billion goes to   the EU. The split is that £1.2 billion will  be food exports and about £1 billion will be   Scotch whisky. So, probably 40 per cent of the  EU sales will be whisky, which is clearly not a  

product that will go off. However, it does have  some sensitivities because of the supply chain.   It has delivery slots and connection slots for  onward travel, so it is not immune to disruption. I am not sure what the impact on non-perishables  will be, in large part because the volumes are   so low at the moment. If a business that  exports to the EU could possibly avoid  

trying to do anything at the moment, it would.  We saw a lot of stockpiling before Christmas,   and I am almost certain that, if you look at the  whisky export stats, you will see a spike at the   end of last year. Every time that we got to a  no-deal Brexit deadline, and, indeed, at the   end of the transition period, there was a spike in  businesses trying to get product into the market.   As the stockpiles are worked through,  we will start to see exports pick up. At the moment, I am not too sure. Whisky  absolutely has a bit more time on its   side in terms of the perishability of the  product, but the integrated just-in-time   nature of supply chains means there are  still delivery slots that need to be met.  

This is not a peak exporting time. Had it been  a peak exporting time, the system would have   collapsed entirely. My instinct and my fear  is that those challenges are coming down the   track as we increase the volumes. Although it is  horrific at the moment for seafood exporters and   others, there is a small window to  avoid it being horrendous for everybody. Dean Lockhart: Thanks very much.   Charlie Adam, do you have anything to add about  agricultural produce that is not time sensitive?   Are you seeing a distinction between perishable  and non-perishable produce at the moment? Charlie Adam: I am aware of one or two issues around   non-perishable items. In relation to the supply  of feed and fertiliser, as has been mentioned,  

there seems to be a complete lack of clarity  as to whether any sort of EHC is required,   certainly for some feeds that  contain processed animal proteins.   That is affecting trade with the EU, but remember  that it is also affecting trade with Northern   Ireland, as are quite a number of other issues.  There is no clear guidance on that. There was a   lack of knowledge as to whether phytosanitary  certificates are required for grain, which led   to a problem, but I believe that we have now  resolved that issue and know that they are not. I do not know whether you regard sheep as  a perishable product, but the fact is that   there is a problem with the movement of sheep from  the UK—from Scotland, that is—to Northern Ireland   because of rules about scrapie testing. That has  effectively stopped that movement at the moment,   and I gather that it might lead to a long-term  change in Northern Irish demand for those animals. Those are a few things that I have a note of.  There might well be others that I am unaware of.

Dean Lockhart: Thank you, both, for those   very interesting answers. I have taken up more  than enough time, so it is back to you, convener. The Convener: Thank you very much,   Dean. Our next questioner is Stewart Stevenson. Stewart Stevenson (Banffshire  and Buchan Coast) (SNP):  Charlie Adam, I have a few questions about seed  potatoes, and then I will move on to other things.  

I just heard you say that grain does  not need phytosanitary certification,   but I understand that the barrier that is  keeping seed potatoes out of Europe is related to   phytosanitary issues. Of course, one  is grown above ground and one is grown   below ground, so they are in different categories.  I wonder why one is affected and the other is not. Let me broaden it out. In my constituency and  along the Moray coast, we have significant seed   potato growing. I was involved in a constituency  case in which the paperwork for exports to   Montevideo, in Uruguay, still had not been  delivered when the ship was three days from the   city. Similarly, I was involved in a case of  exporting to the Philippines in which it was  

alleged that fungal infection on the potatoes  had come from Scotland, whereas ultimately we   proved that it was acquired in the Philippines.  We had a difficulty in that the embassy in Manila,   which was trying to deal with the situation,  did not seem to have the necessary skills. Our exporters have been exporting all  over the world and are very skilled in it,   but they have this absolute barrier to  exporting to the EU. I wonder whether the   phytosanitary issue is one that we can solve,  having heard that it has been solved for grain. Charlie Adam: It is one that   we can and must solve. Currently, there is no  UK-EU agreed equivalence on seed potatoes, and  

I think that 80 per cent of the UK seed tattie  trade comes from Scotland. For your information,   about 30,000 to 35,000 tonnes of seed potatoes a  year go abroad, and that is worth £13.5 million.   We famously produce very high-health  and high-quality seed potatoes;   it is just that we no longer have the  alignment and agreement that we had before. We simply have to come to some agreement. The  fact that the UK Government is allowing EU seed   in without a reciprocal agreement is something  that I would say needs to end. That would,  

hopefully, put some pressure on  the other side to rethink its   approach. This year, quite a lot of the  tatties went prior to the situation arising,   but potato producers are obviously extremely  concerned for the future, as was expressed to   me by a number of them last night. If we lose  that trade—which might already be happening—the   European buyers are going to look  elsewhere, and, as I have said,   if they look elsewhere, we will not automatically  or necessarily get that trade back quickly.

The matter needs urgent attention. Just  talking about it come April is not good   enough. We need things to be happening and  discussions to be taking place now to achieve   equivalence. If there is no pressure on Europe  until April, I would say that that is too late. Why not get on with it now? That would, hopefully,  provoke discussions. There have been discussions,  

but there have been no decisions. I believe  that there was a meeting in the past week,   but it turned out to be just a discussion. It is  all about getting on with it and sorting it out. Stewart Stevenson: I do not   know whether the matter is ultra  vires—I do not think that it is—but   could Scotland legislate to totally align  with the European phytosanitary standards for   potatoes and thereby get a geographically—in UK  terms—restricted approval? We have been conforming   to those standards for quite a long time, so there  is no practical difficulty that I can foresee. We are talking about politics here, and the EU  might like to thumb the nose at people in London   by approving something that happens in Scotland.  That is speculation on my part—it is not informed   by knowledge. Would you encourage the  Scottish Government to explore that? Charlie Adam: I would be in danger of getting into   politics, which I do not want to do. As  I represent Scottish potato producers,  

I would never say that we should not do anything  that would allow that trade to happen. However,   our trade is in all directions and I think  there are always problems in creating a   difference in the movement of product  from different parts of the UK.   What we need is a UK-wide solution to the  problem. I am not clever enough to know the legal   opportunities that might exist, but we need to get  the trade working quickly, and anything that would   help that to happen would be a good thing. I think  that we need UK-wide solutions to such problems.

Stewart Stevenson: Yes, I am sure that you are right. Let me turn to James Withers. We now have somebody  at Boulogne-sur-Mer, which is very welcome news.   Are we still allowed to import potatoes from the   EU while we are seeing our potato exports  being blocked? I know that some potatoes   come from Cyprus—not seed potatoes, but  potatoes for general consumption. Some   of the issues in France have related to the way  in which French customs officials are working—I   have various bits of personal experience, through  my constituency casework, of the difficulties that   have always existed in relation to that. Is  the customs training school at La Rochelle,   which is where they all go to train, providing  any extra or modified training for French customs   officials to reflect the significant change in  workload that they are experiencing through trade   into France? An awful lot of our exports to the EU  will hit France in the first instance, even if the   ultimate destination is not France, and it will be  French customs officials who are involved in that. James Withers: Unfortunately, there is not much   light that I can shed on that. I do not know  whether there has been any more investment or  

effort put into La Rochelle. I do know  that one of the challenges we have faced is   the number of new French customs agents  who are young, inexperienced and—bless   them—learning their trade in a heck of  a challenging and complex environment. On the potato trade, we have  ware potatoes still coming in and   ware potatoes are travelling on either side.  Some varieties of seed will be moving, too,  

but Charlie Adam might be better placed to  remind me—I think he has been close to the   seed potato issue—of exactly what the converse  restrictions are on seed potatoes coming in. The seed potato issue sits in the same category  as the live shellfish and live bivalve and mollusc   issue—as does the fresh mince issue and the live  sheep to Northern Ireland issue—which is that,   in the run-up to this, no one was talking  about outright bans on trade. However,   that is where we have ended up because of a  very conscious decision to erect these barriers. I go back to the point you made, that the  alignment of standards is the ballgame here   in trying to alleviate some of the  restrictions we have and some of   the barriers to trade. Unless there is  movement on that, we are stuck, for the   foreseeable future, with a very difficult trading  environment with our most important export market. Stewart Stevenson: Convener, I have a tiny supplementary   question for Charlie Adam. One of the issues  in the meat industry generally, although it  

will affect exports, has been our dependence on  non-UK vets in abattoirs. Has that turned out to   be the kind of problem that was previously being  raised? There is a fairly brief answer, I suspect. Charlie Adam: With the volumes that are going abroad,   I do not know whether that problem has come about  yet, but it brings up the whole issue of labour,   given that such a large proportion of our  vets are EU nationals. Hopefully, that will   be addressed by the regulations that have been put  in place, but there is a potential problem there.

On potatoes in general, my understanding at  the moment is that there is no barrier to   European product coming here. Quite an amount  of our seed goes over to Northern Ireland, and   we must not forget that in all of this. It  cannot go there under the current rules, either. We need to make sure that we have enough vets. I  do not have an immediate, up-to-date answer as to  

whether that is a problem right now. Given that  we are moving only 25 per cent of normal levels,   time will tell. Kenneth Gibson (Cunninghame North) (SNP): Good morning, gentlemen.   One thing that concerns me here is the  long-term impact on competitiveness,   with businesses facing increased costs and perhaps  also closure of markets. If European customers   feel that their supply has been disrupted, they  might look elsewhere. Andrew McCornick said:

“New demands on paperwork and  new rules around certification   will bring a period of adjustment, the  potential for delay and add additional costs.” Given that export volumes of meat are currently  at only 25 to 30 per cent of normal levels,   what are your concerns for the medium to  long term? Although the Government may   provide additional money for  the industry in the short term,   I fear that there could be significant losses  in the future if those issues are not addressed. Charlie Adam: You are right. The message that I am   getting is that that is particularly likely to be  an issue for smaller firms. That is probably where   the biggest potential loss is. The fear  is that they will not send their goods   to the continent because of  the difficulty and the cost.

On the question of losing markets  because buyers look elsewhere,   as I said before, it is a fairly basic  point that, once they have gone elsewhere,   we will have to go through the whole process  of trying to win those markets back. We may   not get them back, and, even if we do, it may  take some time. That brings us back to the   need for urgency in sorting out all  the problems and for simplification,   wherever that is possible, especially  on sanitary and phytosanitary standards. As far as the issue of the volume being down at  the moment is concerned, to what extent that is   true and to what extent it is a result  of people trying to send stuff over to   Europe but not being able to and markets being  lost, I do not know. There will undoubtedly be   some people on the other side who have the  product that they need in the short term   because we accelerated things before the end of  the year. However, with every day that goes by,   the pressure will be on. If those people  are doubtful about whether they will get  

their supply in the future, they will start  looking elsewhere, so we need to get a move on. Kenneth Gibson: You have talked about all the bureaucratic   nonsense that accompanied the agreement—the  additional regulations and so on. What will the   cost implications be for your sector? There will  obviously be variances according to the product,   but do you have a ballpark figure? Will that put  up the price of your exports by 3 or 5 per cent?   What should Government do in the  long term to ameliorate things,   given that it is not the fault of your  members that we are in this situation? Charlie Adam: I am afraid that I   cannot give you percentages. As always in  farming, the impacts and the cost implications   will differ from sector to sector and product to  product. When the situation is not our fault, we  

would look to receive support, where  necessary, in order to alleviate matters.   It is important that any help that is  provided finds its way back to producers,   because, at the end of the day, they are  the people who are going to be impacted.   As ever in farming, the producer cannot simply  add a cost on to the price that he gets for   his product. It is an old chestnut, but it is  worth restating that, whereas other industries  

can, to an extent, pass a cost on to their  customer, the primary producer in farming   has virtually no opportunity to claw back from  his customer the costs that are put on him. Kenneth Gibson: We have spoken on a number of occasions about   reciprocal agreements. Understandably, there seems  to be an element of frustration from your side   that your members are meeting barriers when they  export—for example, in trading with Europe—but   the UK does not seem to be imposing reciprocal  arrangements on imports, which could compete   with Scottish and other UK products. I think that  James Withers mentioned a lack of ministerial will   at UK level. Has the UK Government indicated  why that is the case? Is it an ideological  

position that is based on the idea  that free trade trumps all? What   reasons, if any, have been given for that?  There is not much of an incentive for Europe   to lower barriers if we have no barriers. There  is not much to negotiate with in that regard. Charlie Adam: I have to agree with you.   Right at the beginning, James Withers or I pointed  out that we are often told that the problems are   just teething problems, or that the situation has  been caused by Covid or whatever else, and that   everything will be sorted out on 21 April.  Our purpose in being here is to point out that   that will be far too late, that the situation  is not down to teething problems and that   urgency is required. There seems to be a lack of  urgency from DEFRA and the UK Government on the   matter; I do not think that we have been shy in  saying that. We just need to apply the pressure.  

I do not think that they are giving excuses. I  suspect that the reason behind it is a desire to   show Brexit as a positive thing  and to suggest that it is all fine,   when in fact, as James Withers has made  very clear, at the moment it is not. Kenneth Gibson: You indicated that you have concerns about the   seasonal worker pilot scheme. We now  have the added dimension of Covid.   Last year, the regulations on bringing in  workers were fairly light touch—they were   exempt from some travel restrictions  as long as they were kept on farm   safely. You have fears about bringing in those  workers this year. Has any progress been made on   that issue? Are there any early deadlines for the  sector that need to be met? What kind of scale are   we talking about in the context of Scotland? That  could be a significant issue, particularly as we   get into spring and summer, if the pandemic  does not lift as early as we would hope.

Charlie Adam: We welcome the fact   that the seasonal worker scheme limit has  been upped to 30,000 for the UK, although   we might have liked a bigger number. My  understanding is that we needed about   70,000 in the UK and that about 10,000 of  those would have been required in Scotland. As you said, last year, protocols and  arrangements were put in place for   workers to enable them to come in the face of  Covid. Given the likelihood—I had better not say  

“assumption”—that restrictions will still have  to be in place when we get towards peak season,   the fundamental thing that we need is for similar  arrangements to be put in place again. With what   is happening with Covid at the moment, it is  likely that people will be even more concerned   about disease spread. We would definitely be  asking for such measures to be put in place. As to whether any progress has been made or any  answers provided on whether that assurance will   be given, I would have to come back to you  on that. I am not aware of that having been   resolved yet. At the end of the day,   there is a huge risk of crop loss or disruption  to supply if we do not have those workers. Kenneth Gibson: Thank you very much.

I will turn to James Withers. On that  theme, what is the situation when it comes   to food and drink? There are a number of  food processors, for example, who rely   on EU migrant labour. Will you have enough  workers? Will there be difficulties in production   as a result of not having enough workers  from the EU? What is Scotland’s pro rata   share of the 30,000 workers? Is it one in seven?  Will it be a quarter? Where are we with that? James Withers: Let me put that in context.   About 120,000 people work in the agri-food  supply chain in Scotland. About a third of them   are non-UK EU nationals. The figure is just under  40,000; at the last look, it was about 39,000.  

The outcome of the work of the Migration Advisory  Committee and the general tone of the immigration   debate raise massive concerns about the flow of  workers into the country. That flow is potentially   more critical to Scotland as a country that,  without immigration, would have depopulation,   than it is to other parts of the UK. Given that  we are an industry that, despite Covid and Brexit,   has an aspiration to grow, that flow of workforce  will be critical. I remain hugely concerned about   that on a number of fronts, but especially in  relation to the red meat and seafood sectors. I would like to add something in response to  the question that you asked Charlie Adam about   the risk of buyers going elsewhere—I  stress that that is already happening.

Kenneth Gibson: I was going to move on to that issue, so   I am delighted that you are addressing it. James Withers: That is already happening. We know   of seafood buyers who are going to Denmark and  Norway instead of Scotland and the UK. We know of   red meat buyers who are going to Spain and Ireland  instead of coming to Scotland and the UK. So much   of exporting is about confidence: it is about the  exporter’s confidence that their product will get   to market on time and that they will get paid;  and it is about the importer’s confidence that   they will get that product when they need it  to satisfy their customers. That confidence has  

been shattered in the past five weeks, and that  impacts on Britain’s reputation as a reliable   place to do business. My great fear is that  that takes a heck of a lot longer to fix than   IT systems do, which is why it is so urgent that  we sort out the situation as soon as possible. On dialogue with the European  Commission, if the first few weeks   of the new relationship define it, we are not  in a good place. From the extremely ill-advised   decision not to grant the EU ambassador  full diplomatic status to the extremely   ill-advised—albeit quickly fixed—decision  of the European Commission to invoke article   16 last Friday night, all those things should  serve as a massive flashing warning sign of the   risks of not talking regularly and closely;  they should certainly not be used as reasons   for each side to retreat into their trenches.  They need to be used as a catalyst to advance   and start discussions on all such matters or  the situation will get an awful lot worse. Kenneth Gibson: Yes, I think that the interpersonal   relationships need to be worked on. There  is a lot of petulance and pettiness,  

and your industry bears the brunt of  the fallout of that kind of nonsense.   You are absolutely right—reputation can take  years to build up but only hours to destroy.   The Scottish seafood sector and our other sectors  have an exceptionally high reputation, but nobody   cares about reputation if you cannot get the  product to your customers who want that food.

Is there any indication of what is happening  with regard to the long-term viability of   areas of the sector? Are jobs being lost  now? Is there a reduction in investment   or are people hoping that things will turn  up? Everyone is working hard in Scotland and   indeed other areas of the UK in the affected  sectors in an effort to move things forward,   but what is the general view of the medium to  long term? Are people retrenching? We are hearing   that seafood is being landed directly in places  such as Denmark; people are not even bothering to   land their catch here, which obviously impacts on  the processing sector. What is the general mood? James Withers: The mood is grim. It has been a rollercoaster   of anger to disillusionment to people starting  to lose hope. On the twice-weekly calls that we   have with DEFRA and the seafood industry, we have  seen those emotions from businesses. Many are just  

saying, “Unless this is fixed or made easier  in the next couple of weeks, we’re done.” At best, EU trade has now become a high-risk,  long-odds gamble, which, a lot of the time,   involves loads that are very valuable.  The businesses for which that can go wrong   are operating on small margins. We are talking  about a generation of businesses that are now   more fragile than they have been in a lifetime  because of the impact of the pandemic and the   closure of many of their traditional markets,  particularly in hospitality at home and abroad. We are starting to see the first signs of a  fundamental restructuring of EU supply chains.   If that gathers pace, some businesses will go  under, while many others will contract. They will  

reduce the number of people in the business  and will start to focus on the home market.   Crucially, they will look for markets beyond  the EU, but it takes a generation to build such   markets. In the past 10 years, we have moved from  selling 80 per cent of Scottish food to the EU   to selling 66 per cent of it to the  EU. That is a massive step forward   in broadening our risk into different  markets, but it has taken a decade to   increase that trade to North America, Asia  and the middle east. That will take time,  

and I am worried that the cliff-edge shock that  is currently rippling through the seafood sector   will only exacerbate as trade volumes start to  increase, as more products potentially fall under   the new controls and as import checks start to  be carried out on products coming into the UK. In many ways, despite the nightmare that the  first five weeks have been for many exporters,   it might be the tip of the  iceberg unless we act now.   We might have been shielded from the worst  of it because trade has been lower anyway.

Kenneth Gibson:  Yes, I think that the UK Government took an “It’ll  be all right on the night” approach to Brexit,   which I have to say was a highly irresponsible  approach. My concern is that, once the Government   stops trying to put money into people’s hands,  almost to shut them up—a kind of Danegeld   approach, in effect—that is when the  long-term implications will really seep in. To move on from food, what is the situation  regarding Scotch whisky exports? We have talked   a lot about food, but what about whisky? I have  whisky production in Arran, in my constituency,   and many other members have it in their  constituencies, too. Where are we on that front? James Withers: The jury is out on the immediate impact for   the reason that I mentioned to Stewart Stevenson  earlier. A lot of product headed out of the  

country at the end of last year, for fear of  disruption. Product was stockpiled, and a lot   of it is sitting in warehouses in Europe. People  will start to work through that. It is not a   perishable product, but it has a very tight supply  chain. It needs to be delivered to a warehouse at   the arranged slot. If that is missed, the onward  connection beyond that becomes a real challenge.

There are issues around labelling. Producers in  the whisky industry need to have an EU-registered   business on the labels on their bottles—indeed,  that applies to every other product. There hav

2021-02-13 17:48

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