I
Prof Wilma Viviers
TRADE Research Entity, North-West University, Potchefstroom campus
Martin Cameron
TRADE Research Advisory Pty Ltd
n our July article we shared some
thoughts on implications for South Africa
– and specifically agricultural exports, of
the ‘BREXIT’ – the exit of Britain (or the
United Kingdom) from the European Union
(EU) membership as a result of a national referendum on the issue on June 23, 2016.
We ended the article with the well-known
Chinese saying that “in change lies opportunity” and stated that in context of agriculture
(as well as other sectors) business decision
makers and policy makers need to pro-actively
start investigating both the potential opportunities and threats that could emanate as a result of Brexit, arguably the most significant
event in international trade in the last few
decades of global trade developments.
In this article we look more into potential realistic export opportunities for South African
agricultural exports that may arise as a result
of Brexit.
UK agriculture policy in for a potential
overhaul…
The Brexit decision to leave the European Union will cause billions of pounds worth of agriculture trade to be exposed to uncertainty as
politicians prepare for a lengthy wrangle over
future policy. The EU is the biggest importer
of UK agricultural related exports. The UK is
also a major importer from EU countries such
as the Netherlands, France, Ireland and Germany. UK farmers received almost € 3.1 billion (US$3.42 billion) in direct payments in
2015 through the Common Agricultural Policy
(CAP), which made up approximately 55% of
total UK farm income. In the longer run, UK
farmers will lose a significant part of past subsidies in return for “less regulation” that the
Brexit could bring about. Although the UK
tax payers will possibly stand in for at least
some of these lost subsidies, the impact on
future UK farm planning will be significant.
Therefore, the upcoming departure from the
EU presents a rare opportunity to rebuild the
UK’s agriculture policy from scratch - should
they choose to do so. Alternatively, the UK
could decide to ‘clone’ the EU based Common
Agricultural Policy under which the UK has
been used to operating until now, and continue with something very similar to current agricultural policy (albeit with purely UK national
funding going forward).
On the EU side, the UK has in the past strongly influenced how the CAP subsidies were applied resulting in the nature of CAP subsidies
changing over time from intervention purchases and export subsidies to dispose of
those purchases, to the less market-distorting
direct payments now in place. This influence
will now disappear leaving to the EU to potentially revert back to more interventionist
approaches.
Potential opportunities posed by Brexit
for South African agricultural exports…
The EU is the largest agricultural trading partner with the UK, and agricultural imports into
the UK accounts for close to 62% of the UK’s
total agricultural imports over the period
2011-2015.
Evident from Figure 1 is that agro-value chain
imports into the UK are concentrated in the
Processed Food (58%) component, followed