Agri Kultuur September / September 2016 - Page 52

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