Latest modelling shows impacts of different Brexit deals

eu, brexit, fields and uk highlighted, consultation_36557A leading agricultural research institute has analysed the potential impacts of different post-Brexit deals.

The Agri-Food and Biosciences Institute looked at a bespoke Free Trade Agreement with the EU (tariff and quota free, with 5% facilitation costs); a switch to World Trade Organisation defaults (8% facilitation costs) and unilateral trade liberalisation (zero tariffs on imports, UK exports face MFN tariffs, 8% facilitation costs).

It model captures the impacts on commodity markets as a result of changes in trade flows with the EU and the rest of the world. The results are presented as changes in farmgate prices, production and output value.
 

What did the study show?

The AFBI found a bespoke free trade agreement with the EU presented minimal disruption.

But even if that was achieved, the model shows there would be impacts depending on whether the sector is a net importer or exporter - i.e. prices increase slightly where we are net importers (e.g. beef and cheese), but decrease where we are net exporters (eg, barley). This is because an additional 5% “facilitation” cost is included to reflect additional charges associated with paperwork and customs checks.

The WTO default scenario was, on the face of it, generally positive for some, especially the sectors with the highest tariff protections - dairy, beef, pig, poultry, but there was a big impact on sheep sector. However, it’s worth noting that this would be a highly protectionist outcome, with high tariffs applied to many agricultural goods coming from the EU. No government will tolerate the subsequent rise in food prices for long, and we could expect a swift response reducing tariffs, leading to the unilateral trade liberalisation scenario

Unilateral trade liberalisation, whereby the UK removed all tariffs on imported agricultural goods, meant every sector would be hit, with livestock farmers hit the hardest. 

The report did not include consideration of farm support. Gail Soutar, the NFU's chief EU exit and international trade adviser said: "If we factor in change in support levels, as the NFU did through its modelling work with the Wageningen University last year,  or increased costs associated with labour force, it’s very clear that Brexit will have a major impact on our farming’s future."


Study findings by trade deal and sector
 

Bespoke Free Trade Agreement

WTO default

Unilateral trade liberalisation

  • UK retains free access to the EU and EU retains free access to the UK
  • UK maintains EU Most Favoured Nation (MFN) tariffs to rest of the world
  • 5% trade facilitation costs on UK-EU27 trade

  • MFN tariffs applied to imports from the EU
  • EU’s TRQs concessions to 3rd countries retained
  • MFN tariffs applied to UK exports destined to the EU
  • UK maintains EU Most Favoured Nation (MFN) tariffs to rest of the world
  • 8% trade facilitation costs on UK-EU27 trade

  • Zero tariffs applied on imports to the UK from both the EU and the rest of the world
  • MFN tariffs applied to UK exports destined for the EU
  • UK maintains EU Most Favoured Nation (MFN) tariffs to rest of the world
  • 8% trade facilitation costs on UK-EU27 trade

Beef

Price

+3%

+17%

-45%

Production

0%

+10%

-10%

Output Value

+3%

+29%

-50%

Sheep:

Price

-1%

-30%

-29%

Production

0%

-11%

-11%

Output Value

-1%

-38%

-36%

Pigs

Price

0%

+18%

-12%

Production

+1%

+22%

-6%

Output Value

+1%

+44%

-17%

Poultry

Price

0%

+15%

-9%

Production

0%

+11%

-3%

Output Value

0%

+28%

-12%

Milk & dairy

Price

+1%

+30%

-10%

Production

0%

+7%

-2%

Output Value

+2%

+37%

-12%

Wheat

Price

-1%

-4%

-5%

Production

0%

-1%

-1%

Output Value

-1%

-4%

-6%

Barley

Price

-1%

-5%

-7%

Production

0%

-1%

-2%

Output Value

-2%

-6%

-8%


Last edited on: 18:08:2017

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  • Posted by: Roger JenkinPosted on: 23/08/2017 18:30:25

    Comment: After 20 years of deregulation within the Dairy sector all but the new Zealand type Dairy farms are heavily in debt . We can of course all go down the New Zealand production route, however I'm not sure the British public will want dead Dairy bull calves in piles beside the roads for the Knackermen to collect . This system will also put 2/3 of the UK Dairy farmers out of business and also many in the supply industry as the income to the farms falls along with the milk supply from these farms so it appears that the WTO default is the way forward as the only sectors worse off under these rules are Sheep and cereals ,as we are only just over 100 % self sufficient in Sheep and most of the meat is chilled balancing the seasonal supply in this country shouldn't be rocket science however could need a degree of common sense.
    As far as cereals is concerned it appears that the cereal sector will not be a lot worse off and as a lot of the cereals produced in this country stay in this country I'm sure a mechanism for keeping the arable boys in profit could be come up with.

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