Brexit and U.K. Agriculture
Feb 02, 2018
It has been more than 18 months since the citizens of the United Kingdom (U.K.) narrowly approved a referendum to withdraw from the European Union (EU). Even though that verdict was not legally binding on the U.K. government, new Prime Minister Theresa May--who won the Tory Party’s leadership election after David Cameron’s resignation in July 2016--committed to follow through on the ‘Leave’ decision enunciated by that vote. The United Kingdom had joined the European Union in 1973, and will be the first member country to leave that customs and trade union.
In March 2017, the Prime Minister sent a letter to the European Council of Ministers, formally invoking the right of her country to withdraw from the EU under Article 50 of the Treaty on the European Union. That letter triggered a two-year period for the U.K. to negotiate with the other 27 EU member countries over the terms of that withdrawal, and the nature of the trade and economic relationship between the U.K. and the other countries that will prevail once the withdrawal is completed.
According to official EU data, crop farmers in the United Kingdom produced about $14 billion worth of output on average between 2013 and 2017, accounting for about 5.2 percent of the crop production of the EU-28 countries. Farmers grow primarily wheat, barley, oats, potatoes, and sugar beets. Similarly, U.K. livestock producers averaged total production valued at just under $21 billion over the same period, raising primarily poultry (broilers and egg laying hens), sheep, and cattle, accounting for about 10 percent of total EU livestock production.
As a country, the U.K. is a net food importer, bringing in about half of its food and feed from other countries as of 2016. About half of that imported food comes from other EU member countries. Other EU member countries have also been the main markets for UK farm exports, accounting for 70 percent of the total in 2015. Access to those markets are now in question, until the trade terms that will exist after Brexit between the UK and its former partners are resolved. If the U.K. decides to no longer abide by all of the provisions of the EU’s strict SPS regimes, as some trade officials from outside the EU have suggested, will U.K. farm products still be welcome on the continent?
The U.K.’s agricultural exports to many third country markets outside the EU will also be at risk once the withdrawal is completed at the end of March 2019. At that time, their products will no longer have preferential access to countries with which the EU currently have free trade agreements, such as Egypt, South Africa, Mexico, Chile, Turkey, South Korea, and several European countries which are not EU members, such as Norway, Iceland, Albania, Georgia, Macedonia, and Serbia. The U.K. government will surely seek to negotiate new free trade agreements, including with new partners such as the United States, but those efforts will take some time. Some of those agreements may be with partners with lower farm costs of productions than U.K. farmers face, which could result in increased imports of agricultural products.
Before Brexit is fully completed, some U.K. farmers are already facing problems, as many of the agricultural workers they have previously hired from other, poorer EU member countries such as Romania and Bulgaria, are no longer available. In a December 2017 story in the New York Times, it was reported that the National Farmers Union, the major British farm group, has estimated that the agriculture sector faced a labor shortage that varied from 13 to 29 percent on a monthly basis from May through September.
As residents of an EU member country, U.K. farmers currently are covered under the EU’s Common Agricultural Policy (CAP), which provide them financial benefits under a variety of programs. In 2016, the U.K. government committed to maintain that support to U.K. farmers, estimated to cost about $4.2 billion annually, through at least 2022. In a speech in January 2018, Michael Gove, the U.K. Secretary for the Environment, pledged to continue payments through 2024, but also indicated that he wanted to see the basis on which those payments are made to be changed. In his remarks, he said that “the EU subsidies would be replaced by payments for farmers who wish to enhance the natural environment by planting woodland and help create new habitats for wildlife.”
In that speech at the Oxford Farming Conference, Mr. Gove also seemed to suggest that the new system should include some sort of payment limitations, because he decried the current CAP which “diverts money from the public purse to some of the UK’s richest landowners.”