A proposed US-UK trade deal could deeply impact the agriculture sectors in both countries, sources say. In May, trade negotiators from both parties held a video conference with the aim of striking an accelerated deal. However, agriculture could prove to be a difficult topic, with both countries not wanting to .
Francine Brownell, an expert in global economic governance, said that “at first glance it may seem as though British farmers would be at risk, but this is somewhat of a protectionist argument…Most of the people who study international trade will agree that the agreement will be beneficial in the long run.” But, what are both countries look for?
What does the UK want?
The UK submitted its Objectives for a Trade Deal this year. The document states that 20% of the UK exports are currently directed to the US, with trade between the two countries valued in £221bn. Additionally, the category of food and agriculture is of great interest for the UK, in spite of accounting for only 5% of the exports. However, many experts worry the negotiations might stall.
“It is worth noting that the most recent round of trade negotiations at the multilateral level stalled largely due to disagreements about trade in agriculture,” Brownell said.
The government’s goal is to help UK farmers position their products abroad. An agreement on traceability rules will be key to identify locally produce goods, though it won’t be easy. In a globalized world, value chains tend to involve more than one country.
Also, a tariff reduction might be beneficial for both countries, considering that supply-chain components are around 62% of all goods exported from the US to the UK, and 42% of all UK goods exported to the US.
What does the US want?
The US wants a wider market access for their exports, as well as the removal of barriers that block food and agricultural goods produced according to US standards. Other points of negotiation involve the trade of products developed through biotechnology and the duty-free access to US textiles and clothing.
However, more regulatory cooperation will be needed to ensure a fair deal. The current regulations in the UK align mostly with the EU, but things could change soon. Some of the UK regulations and standards might be modified to encourage new trade partners.
US agriculture secretary Sonny Perdue said in an interview that “both the EU, the UK and the United States benefit when we have free and reciprocal trade, and that’s really what our objective is – is to come to a conclusion where we can accept one another (…)” Clearly, there is an interest in creating a mutually beneficial agreement.
The US-UK trading relationship
The UK is an important trading partner of the United States. In 2018 the US exported an estimated of $140.4 billion to the United Kingdom, while imports totaled $121.5 billion, a positive balance for the North American country. And in terms of agricultural products, the figures reached $2.0 billion in 2018.
UK exports from 1995-2017 (Source: Atlas of Economic Complexity)
The most important categories regarding exports include: wine & beer ($261 million), nuts ($197 million), manufactured food ($168 million), soy ($109 million), and live animals ($90 million). It’s important to remember that the UK is one of the largest beverages and meat importers, so US producers continually look towards the UK as a consistent market for their products.
70% of arable British land is utilized for agriculture. However, because of its large population, the European country has turned mainly into an agricultural importer. Since 2005, the US has increased its exports to the UK of alcoholic beverages –mainly wine- and soybeans too.
Growth rate in US to the UK exports, 2005-2015 (Source: USDA)
Who would benefit?
The food and agriculture sectors of the two countries could win big in this trade deal. Currently, Britain imports expensive French and Spanish foods from the EU, but the US has a lower production cost, so, cheap foods coming from the other side of the Atlantic could be very appealing for consumers.
At the moment, U.S. chicken exports to the UK are virtually non-existent. With the proposed agreement, though, a change in regulation will open space for poultry companies. Food safety is a delicate issue, so regulators will have to tread carefully on this topic.
If everything turns out well, the UK economy could increase its size by $4.3 billion (£3.4 billion), over the next 15 years, while Transatlantic trade flows could increase $19.5 billion (by £15.3 billion) over the same period of time. Although, the role of COVID-19 is something to consider.
Both countries are keen on sealing a deal, but many specialists have their doubts. Although there could be many pitfalls during the negotiations -added to the current crisis- there’s an interest in strengthening the commercial bonds between the US and the UK. So, the food and agricultural industries will have to pay close attention on how negotiations develop, in order to make the best out of the new trade deal.