Tag: Brexit

Impact of UK Trade Deals with Four Non-EU Partners on UK and Scottish Agriculture

The Scottish Government has recently published a Summary Report from a study that The Andersons Centre undertook in 2022 to assess the impact on Scottish agriculture of Free Trade Agreements (FTAs) between the UK and four selected non-EU partners, namely: Australia; New Zealand (NZ); Canada; and the Gulf Cooperation Council (GCC). 

It quantifies the FTA impacts on selected Scottish agricultural sectors namely: cereals (wheat and barley); livestock (dairy, beef and sheep); and potatoes. This has been done using two FTA scenarios, Low Liberalisation (tariff-free trade with a 25% reduction in non-tariff measure (NTM) costs) and High Liberalisation (tariff-free trade with a 50% NTM costs’ reduction). These scenarios are compared to the Main Baseline whereby the UK has left the EU and the Trade and Cooperation Agreement (TCA) is in place, as are the rollover trade deals that the UK agreed during the Brexit process. Additionally, a top-level comparison was given between the Main Baseline and an Alternative Baseline (No-Brexit) scenario.

The research was undertaken in collaboration with Wageningen University and Research (WUR) and used a combination of MAGNET, a computable general equilibrium economic model to assess the individual and aggregated impacts of each FTA, as well as desk-based research and interviews with industry experts representing organisations in Scotland and the UK, Australia, New Zealand, Canada and the Gulf region.

Assessments were also undertaken on the impact of tariffs, non-tariff measures (NTMs) and tariff rate quotas (TRQs) on UK trade with each selected partner, as well as the EU. These modelling results were then used in conjunction with additional analyses on potatoes to ascertain the impact of the FTAs on UK and Scottish agri-food output and farm-level performance in Scotland. 

A PDF version of the Summary Report is available via the Scottish Government website.

ANDERSONS NEWS RELEASE – WEBINARS 2021

ANDERSONS WEBINARS 2021

Brexit: It’s Just the Start

The farming industry breathed a collective sigh of relief when the UK and EU signed their 11th-hour trade agreement.  However, those in the agricultural sector who believe that trade issues have been put-to-bed for the foreseeable future are likely to be disappointed.  Now that the UK has left the EU, the industry will arguably have to keep a closer eye on trade policy, not least to ensure that the sector’s position is protected when deals are being done.  This is the message from Andersons the Farm Business Consultants.

Firstly, the UK/EU ‘Trade and Cooperation Agreement’ (TCA), even at 1,246 pages, is not the final word on trade with the European Union.  The next few months will see how the complex provisions of the deal in areas such as Rules of Origin, Customs and Checks impact on trade in practice.  Already problems have been seen, especially regarding Northern Ireland.  And this is when trade flows have been quieter than usual as a result of previous stockpiling.  The TCA does not cover services (around 80% of the UK economy), including the key sector of financial services.   There are also unresolved questions on data sharing, and some parts of the deal, such as fisheries, come up for review after five years.  Therefore, perhaps after a brief pause, there is likely to be continuous ongoing negotiations with the EU on these issues.  The danger for farming is that it might get drawn into these negotiations as ‘leverage’.

The TCA also includes Level-Playing-Field provisions to uphold existing standards in areas such as environmental standards and labour law.  Any significant undercutting by one side could lead to retaliatory tariffs by the other – with farm goods likely to be a key target for any such tariffs.  How the level-playing-field rules are going to work in practice is very unclear.  For example, if the UK were to authorise GM crops, or at least gene-edited crops, would the EU see this as a reduction in ‘environmental standards’.  The scope for arguments seems huge.

The second main area of concern is trade deals with other countries or trading blocks.  The TCA was largely about protecting what was already in place  –  i.e. the significant trade between the UK and the EU.  Therefore, the agreement largely preserves the status quo and has had little effect (so far) on markets.  Any new deals the UK signs with other countries will see a change in the trading environment – and an effect on prices.

Much of the focus in this area has been on the US and the potential clash of production standards with the famous chlorinated chicken and hormone beef.  A deal with the UK is unlikely to be top of Joe Biden’s to-do list in the short-term.  Deals with Australia and New Zealand are perhaps more likely in the short-term and, arguably, could have a bigger impact on our farm markets – especially in the livestock sectors.  Free trade agreements with these two nations are seen by the UK Government as a prelude to the UK joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).  Further down the line, the UK is almost certain to explore deals with other agricultural ‘powerhouses’ such as Mercosur, which includes Brazil, and Argentina.

The danger for farming in all of these potential deals is that the UK Government may be willing to trade access to our agricultural markets for gains for our exporters elsewhere in areas such as aerospace, financial services, medicines etc.  The UK farming industry needs to ensure it is not made a sacrificial lamb.

The final area concerns tariffs on food imports generally.  For those countries we do not have a Free Trade Agreement (FTA) with, the level of tariff protection offered by the new UK Global Tariff (UKGT) is very similar to that which we enjoyed in the EU.  However, the UKGT is only ‘temporary’ and could be easily changed.  If the UK economy enters a post-Covid recession, might the Government be tempted to move to a ‘cheap food’ policy and lower some of these tariffs?

In summary, trade matters will continue to be important for the farming sector for years to come.

Andersons is running two Webinars on the 11th February looking at trade matters in more detail along with farm profitability and future agricultural policy.  For more information, please go to https://theandersonscentre.co.uk/webinars/

Ends

 

No of words 725
Author Richard King
Date 22nd January 2021

This news release has been sent from The Andersons Centre, Old Bell House, 2 Nottingham Street, Melton Mowbray, Leicestershire LE13 1NW.  For further information please contact Richard King on 07977 191 427.  

Impact of Brexit on Scottish and UK Agriculture

We recently completed a study on behalf of the Scottish Government to assess the impacts of different potential Brexit outcomes beyond the end of the EU transition period on key Scottish agricultural sectors. The work combines trade-model and farm-level analysis supplemented by industry interviews and desk-based research. The report is available by clicking here.

The study has quantified the impact of Brexit on selected Scottish and UK agricultural sectors namely: cereals (wheat and barley); livestock (dairy, beef and sheep); and horticulture (potatoes, cauliflower/broccoli and strawberries). This has been done using two scenarios, a Free Trade Agreement (FTA) and a No Trade Deal (No Deal) versus the Baseline of the UK continuing as an EU Member State. The research has been undertaken using a combination of Agmemod, a partial equilibrium economic model, desk-based research and industry interviews.

Assessments were also undertaken on the impact of tariffs, non-tariff measures (NTMs) and tariff rate quotas (TRQs) on future UK-EU trade patterns. These served as inputs to the Agmemod modelling which was undertaken with support from Wageningen University and Research (WUR) to assess Brexit impacts on wheat, barley, beef, sheepmeat and the dairy sector. These modelling results were then used in conjunction with additional analyses on horticulture to ascertain the impact of Brexit on UK and Scottish agricultural output and farm-level performance in Scotland.

A PDF version of the Summary Report is available via: https://www.gov.scot/publications/analysis-brexit-scenario-impacts-scottish-agricultural-sectors/

Outlook 2021 – A Landmark Year Ahead

The coming year will see a step-change for UK agriculture. Farms will have to adjust quickly to a new business environment which is likely to be more testing. This is the overall message from Andersons Outlook 2021 which has recently been published.

The hope is that 2021 will see life return to the ‘old normal’ after the upheavals of Covid-19. However, the farming sector faces a further set of challenges. The end of the Transition Period marks the start of the real Brexit. The ‘friction’ in trade between ourselves and our largest trading partner will be much greater – leading to higher costs which may well be passed back down the supply chain. Maybe as early as next year the UK will start to conclude independent trade deals with other countries. The danger here is that access to our agricultural market is granted in return for concessions elsewhere. UK farmers could be faced with low-cost competition, possibly producing to different standards.

2021 will also see the first year of the truly ‘renationalised’ farm policy outside of the Common Agricultural Policy. Although each part of the UK is doing its own thing and progressing at different speeds, the overall direction of travel is clear. In the future, there will be less support ‘as of right’, and land managers will be expected to deliver something to society in return for the funds they receive.

Andersons’ consultants experience is that this should not necessarily be something to be feared. There are still great opportunities to improve financial performance in all sectors of our industry. Without the distorting effects of direct support, there can be a greater focus on the areas of activity on farm that actually make a profit. Over time a stronger, more resilient industry should result, able to meet many of the other challenges that lie ahead.

With Brexit and (hopefully) Covid-19 moving down the political agenda, the environment will move back up. Especially with the UK hosting the COP26 climate conference in Glasgow in November 2021. The farming sector will be expected to play its part in meeting the country’s net zero aspirations. This will require a change in practices and systems. Whilst this will be process over many years, 2021 may be seen, in hindsight, as the year when concerted efforts to address climate change really began in earnest.

Covid itself will continue to present challenges to the farming sector. The UK is likely to suffer from an ‘economic long-Covid’ – the lasting financial effects of the massive spending that has been incurred to support the economy during the crisis. The Government will be looking to balance the books and this could mean tax increases. There may also be pressure on areas of spending deemed not to be a priority – for example farm support, despite earlier promises.

With such challenges in the year ahead, and longer term, farm businesses will need to be both resilient and adaptable. Andersons has been working ‘at the coal face’ with farmers and the allied industries for over 40 years assisting them to make the right decisions, whatever the business environment.

Outlook 2021 is sent to all Andersons’ clients and contacts. Additional copies can be obtained free of charge by calling 01664 503200. The publication is available to download from the Andersons Centre’s website and is accessible by clicking here.

Andersons will be running a series of webinars and seminars in the spring looking at the prospects for UK agriculture in greater depth. This includes two webinars taking place on 11th February which provide updates on profitability, trade and future farm policy. For more information,  please go to the respective weblinks below;