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Jul 1, 2016 | 09:00 GMT

British Agriculture Hangs in the Balance of the Brexit

British Agriculture Hangs in the Balance of the Brexit
(CHRISTOPHER FURLONG/Getty Images)
Summary

If anything is certain in the days following the Brexit vote, it is that much remains undecided. Article 50, the starting point for the two-year negotiation process to finalize the United Kingdom's withdrawal from the European Union, likely will not be triggered until the country has a new prime minister, probably in September or October. Without formal notification of the United Kingdom's intention to leave the Continental bloc, the European Union's hands are legally tied. Beyond the political uncertainties in Britain and Europe alike, many of the logistical aspects of the split remain unsettled. Regardless of when — and indeed, whether — the rupture happens, political maneuvering to pin down details of future regulation and trade will certainly precede it. A major focus of negotiation will likely be the Common Agricultural Policy (CAP), a cornerstone of the European Union that accounts for roughly 40 percent of its budget. If the United Kingdom withdraws from CAP when it exits the European Union, it will have serious consequences for the British agricultural sector.

Britain has long dissented from the majority of the European Union on CAP's subsidy programs. The United Kingdom is one of the largest net contributors to the CAP system, and annually it receives 1.3 billion euros ($1.4 billion) less from the CAP fund than it pays in. Nevertheless, roughly 55 percent of agricultural income in the United Kingdom derives from CAP support. The British Department for Environment, Food and Rural Affairs estimates that from 2014 to 2015, half of England's farmers would have failed to cover their production costs without support payments. Even with the payments, 20 percent of farms cannot meet their expenses. Should Britain leave the European Union and CAP, many British farmers would struggle to maintain production. After all, there is no guarantee that the funds once allocated to CAP would instead go to British farmers after the Brexit.

Growing Concerns

Furthermore, the United Kingdom's food production and agricultural sector depends to a great extent on the rest of Europe. Roughly 70 percent of Britain's agricultural and food imports come from the European Union, while about 62 percent of its exports are destined for other EU countries. Some areas of agriculture rely more on this dynamic than others. For instance, the United Kingdom depends heavily on the European Union for imports of fresh vegetables.

On the other hand, a Brexit would afford Britain more autonomy over its agricultural practices. The European Union has strict regulations on the use of herbicides, pesticides and genetic modification in agriculture, issues currently voted on by member states and administered by the European Commission and European Food Safety Authority. Until June 28, when the bloc granted an 18-month extension, it appeared that EU officials would let Monsanto's license for glyphosate, an herbicide and crop desiccant, expire on June 30. But these policies have cost the United Kingdom's agriculture sector; in 2015, for instance, restrictions on neonicotinoids, a class of insecticides, adversely affected British rapeseed crops. Compared with many of its peers on the Continent, the United Kingdom is more amenable to these processes, and separating from the European Union would certainly open up the market for products treated with them. Even so, since the United Kingdom will likely strive to maintain a close trade relationship with the rest of the Continent, it may not benefit much from its liberalized agricultural policies.

A Double-Edged Sword

Even if the exit negotiations end up being amicable and both sides agree to preserve as much of their existing trade relationship as possible, tariffs are likely to increase. As a result, British farmers will be forced to compete, perhaps with less support, in a less open market. Not only will less favorable trade conditions hurt farmers who relied on export markets, but they may also drive up food prices in the United Kingdom. This outcome is not set in stone, however. Though Norway is neither an EU member nor a CAP participant, Oslo still has access to the EU internal market.   

For the United Kingdom, the CAP program is something of a double-edged sword. Despite the net loss the country sustains as a CAP fund contributor, many of its farmers depend on the subsidies and protections that CAP and the common market provide. Even though the agricultural sector accounts for a small percent of Britain's overall gross domestic product — less than 1 percent in 2013 — cuts to subsidy programs could deal a major blow to the farming sector. Failure to maintain subsidies would rouse opposition from farming lobbies and could put smaller, less competitive farms out of business. And if Prime Minister David Cameron's eventual successor decides to curtail farming subsidies further, British farmers will face an even greater struggle to compete in the global agricultural market.

Unless and until withdrawal negotiations begin, these issues will remain unresolved. If the terms of the Brexit are unfavorable enough, some British operations might move back into the EU trading bloc. For now, though, the future of Britain's agricultural sector hangs in the balance.

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