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As the United Kingdom and the European Union negotiate future trading relations, bilateral negotiations are likely to prominently feature agricultural trade. Currently, the UK’s EU membership provides the framework for Britain’s trading relations with the EU and the rest of the world. Following Brexit, the UK government appears to have five major options for its future international trade relations with the EU: agreements based on the EU’s current arrangements with Norway, Switzerland, Turkey, or Canada or trading under World Trade Organization rules.
These arrangements present different degrees of integration within the EU single market, as well as varying degrees of autonomy regarding the UK’s domestic agricultural policies and the country’s trade relations with non-EU countries. If the UK decides to abandon its current EU customs union arrangement, the UK government must also develop a comprehensive international trade strategy. In this paper, we discuss the prospects of trade agreements with four countries—the United States, Canada, Australia, and New Zealand—which have already expressed interest in signing trade agreements with the UK. Trade agreements with these countries, along with the EU, would cover more than 75 percent of the UK’s overall agricultural trade. With these agreements in place, the UK could be well positioned to leave the EU single market and customs union after the Brexit transition period ends on December 31, 2020.
The United Kingdom and the European Union completed an initial Brexit framework on December 7, 2017, paving the way for negotiations on agricultural trade and policy issues between the two parties.1 Additionally, on March 19, 2018, Westminster and Brussels agreed on a Brexit transition period that would end on December 31, 2020. Until then, the UK will remain part of the EU single market and customs union.2 Following the end of this transition period, the UK will face several challenges concerning its agricultural trade relationships with EU and non-EU countries.
Since the early 1970s, membership in the EU has shaped British agricultural policy in three important ways: by incorporating the UK agricultural sector into the EU food supply, providing price supports and incomes to British farmers through the common agricultural policy (CAP), and assuring a reliable supply of low-skilled labor to the UK agricultural sector. Through the EU single market and customs union, the EU provides the framework for the UK’s trade in agricultural products, both within and beyond the 27 EU member countries. Further, the EU is currently the UK’s largest agricultural trading partner. If the UK decides to abandon the customs union component of its current EU membership, the UK will have to renegotiate terms of agricultural trade with both EU and non-EU countries.
In this context, the UK has several options, including Norway-, Switzerland-, Canada-, or Turkey-style arrangements with the EU or trading under current World Trade Organization (WTO) rules. Depending on the final agreement regarding the UK’s relationship with the EU, the UK might be able to sign separate trade agreements with non-EU countries. However, British and European farmers might also face higher tariff and nontariff barriers to bilateral agricultural trade, an outcome that depends on the structure of any UK-EU agreement.
Beyond the UK’s international agricultural trading relations, Brexit is likely to affect British farmers’ incomes measurably and in complex ways because of possible changes in domestic policies. In particular, the CAP has played an important role in providing financial support to British farmers since 1971. Currently, CAP payments account for between 50 and 60 percent of total farm incomes in the UK.3 Despite the price and income supports that British farmers receive under the CAP financing rules, the UK is a major net contributor to the CAP payment scheme. The current CAP payment framework is scheduled to expire in 2020, after which the UK government will have the option of introducing new farm payment programs for its agricultural sector or abandoning such programs altogether.
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