WASHINGTON, June 22, 2016 - The U.K. already buys hundreds of millions of dollars of nuts, beer, wine, ethanol, seafood and other agricultural goods every year from the U.S., and volumes are expected to increase should the U.S. and the European Union eventually reach agreement on the Transatlantic Trade and Investment Partnership (T-TIP).
But that’s only if the U.K. – the third-largest European economy and a major market for imported salmon – stays in the EU. If it withdraws – the so-called “Brexit” – then uncertainty takes over. The latest polls indicate Thursday’s referendum could go either way.
Farm economists and trade experts agree that a U.K. withdrawal would not be good for U.S. agricultural exports. Import tariffs on farm goods are higher in the EU than they are in the U.S. and the prospect of leveling the playing field is just one of the reasons most U.S. farm groups support T-TIP. Wesley Peterson, a professor of agricultural economics at the University of Nebraska-Lincoln, points out that any trade benefits the U.S. and EU work out in T-TIP would not apply to the U.K should Brexit be approved.
“Will the U.K. just maintain the tariff schedules that they have already with the EU with respect to the rest of the world?” Peterson asked about a U.K. withdrawal. “Or would they go back to the drawing board and start over again? There would be an awful lot of confusion about what would happen.”
And it’s not just tariffs. As an EU member, the U.K. shares the same demand for protections of geographical indications – think of Scotch whisky or Parmesan cheese – as well as the “precautionary principle” ideology when it comes to issues such as the approval of genetically modified crops and acceptance of beef from hormone-treated cattle.
The U.S. will certainly keep negotiating T-TIP with the remaining 27 EU nations if the U.K. leaves, said David Salmonsen, senior director of congressional relations for the American Farm Bureau Federation, but the exclusion of the U.K. would represent a loss of potential trade growth.
And there’s also the prediction that the U.K. will simply have less money to buy foreign goods because of the expected impacts on its overall economy, said Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development.
Studies show that the average British household would lose $2,000 to $5,000 of income should Brexit be approved, Gurria said last week at a forum sponsored by the Washington International Trade Association.
While the U.K. is the third-largest economy in Europe, behind Germany and France, it is also the top European market for U.S. agricultural exports and the fifth-largest market in the world for all U.S. goods, behind Canada, Mexico, China and Japan, according to a recent report from USDA’s Foreign Agricultural Service.
The U.S. exported $1.8 billion worth of agricultural goods – everything from wine to oilseeds – to the U.K. in 2015, but imported $2.7 billion worth of products. The U.K. imports roughly 40 percent of its food, giving the U.S. a lot of room to improve its trade balance, but that would be much more difficult if Britain isn’t part of T-TIP negotiations.
Peterson said that if the U.K. votes to leave the EU, the country may also have to renegotiate dozens of trade deals with countries that it already had close ties to because of the European agreements.
“The U.K. would… need to renegotiate trade relationships with the 60 non-EU economies where trade is currently governed by EU agreements,” the International Monetary Fund said in a recent report. “These negotiations could drag on for years, leading to a period of heightened uncertainty and risk aversion, which in turn would discourage consumption and investment and roil financial markets. In the long run, most formal assessments agree that the U.K. would be worse off economically if it were to leave the EU, as higher trade and financial barriers would lead to lower output and incomes.”
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