Emerging Markets / June 27, 2016

Brexit Creates Uncertainty and Opportunity in Agribusiness

 Thursday’s historic vote in the United Kingdom saw a majority of mostly rural voters defeat the choice of major urban centres. However, the biggest losers of the upcoming Brexit could well be UK’s farmers and agricultural workers translation program german Russian for free. When the EU was created as the European Economic Community, one of its cornerstones was agricultural development through policy and subsidies. For decades, Europe has been a world leader in agricultural production mainly because of the EU’s Common Agricultural Policy (CAP) and its €58 billion budget herunterladen. Representing more than a third of the European Union’s budget, the CAP’s subsidies and regulations are controlled from Brussels.

While within the EU, British farmers receive over 50% of their income from CAP subsidies windows media player 12 download for free german. In total, the UK receives an average of €3.1 billion (that is about ₤2.5 billion, pre-Brexit Pounds) yearly from the CAP. These numbers present an uncertain future for Britain’s food and agriculture industry app translateen. The UK’s government will have to assume great financial costs if the national farming industry wishes to maintain its sheltered position. However, it is unlikely that London by itself will be able to provide the same amount of subsidies that Brussels did google chrome mac downloaden. With the EU’s leadership asking “to give effect to this decision of the British people as soon as possible, however painful that process may be”, the UK’s Brexit implementation team has a big challenge ahead icloud fotosen iphone. Even though London might petition the EU for continued participation within some of the CAP’s benefits and responsibilities, it is unlikely that Brussels will grant such a request herunterladen.

On the commercial front, there are challenges and opportunities. If the UK abandons the EU and the CAP completely, the government in London will have the opportunity to pass new legislation and potentially allow for farming technologies that are prohibited within the EU automatically whatsapp images. An example would be that of genetically modified (GMO) crops, which are widely used in countries such as the United States and have for years hampered agricultural commerce between the EU and the US herunterladen. Similarly, a weakened British Pound could benefit farm and agricultural exports in the short term. Nevertheless, leaving the EU will bring back commercial tariffs on trade between the Union members and the United Kingdom app auf computer herunterladen. Said tariffs will affect the food and agricultural industry heavily; given that the UK’s largest commercial partner is the EU. The reestablishment of custom duties and the increased bureaucracy that will ensue from commerce outside a common market will entail massive costs for the UK government and its citizens. Finally, the Brexit reopens the issue of Scottish independence, being Scotland a major beneficiary from CAP subsidies within the UK.

In conclusion, a major world producer of agricultural goods faces great uncertainty as it gravitates away from the European Common Market. Therefore, at least in the short and medium term, the UK will experience commercial difficulties. Likewise, the long-term future of the British farm and agriculture industry remains uncertain, and there is the possibility that it will struggle for decades to come. These dynamics are already sending shockwaves across world markets and could create a substantial gap between agricultural supply and demand. Now more than ever, there is potential for other productive regions of the world, particularly those who have free trade agreements with the European Union, to capitalize from a unique market opening.

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