Brexit: Implications and Parallels

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The Department of Agricultural Economics & Economics at MSU led a class of students to the United Kingdom this month to explore agriculture in a global context. The implications of Brexit for UK’s agricultural industry was of primary concern in many our discussions with researchers, policymakers, and industry leaders throughout England and Scotland. The UK’s decision to leave the European Union comes at high cost—and possibly with new opportunities, but much is still uncertain. I will summarize three key consequences of Brexit that we discussed during our trip, highlight potential consequences for trading partners, and draw some parallels to U.S. policy.

 

  1. Agriculture is subsidized in the European Union, and few agricultural producers in the UK would have a profitable business without government support. Policymakers in the UK must write new agricultural policies, which will impact global trade and competition with countries that provide different subsidies or regulations.
  2. The UK will have to renegotiate trade deals. There may be new opportunities for U.S. agricultural products in the UK, but these opportunities are contingent on the terms of new agreements, consumer preferences, and quality and safety standards. For example, U.S. chicken processors wash raw chicken in chlorine as a safety measure to kill potentially harmful bacteria, but this violates EU safety standards. Are there new opportunities to negotiate appropriate health, safety, and quality measures with the UK?
  3. Brexit will end frictionless trade and mobility between the UK and the EU. This may open opportunities for other trading partners to the UK, but the UK will also lose access to some of its key trading partners in the EU. Restricted movement across borders also pertains to labor. The National Farmers’ Union estimates that 99 percent of seasonal farm workers in the UK migrate from the EU. Agricultural guest worker programs to protect the supply of seasonal labor to UK farms are under consideration.

 

The United States may face similar challenges as support grows for tightening borders and reducing the number of immigrant visas issued, particularly for low-skilled jobs.  Key questions moving forward include:  Are domestic workers willing to work in the low-skilled jobs that immigrants typically fill? Can employers attract more domestic workers by raising wages, and if they can, how much of the additional cost of production will be passed onto consumers? Can firms reduce their dependence on foreign labor by adopting more mechanization or capital-intensive processes, and what are the trade-offs of doing so?

 

Brexit allows the United Kingdom to take more direct control of agricultural and trade policies, but there is no guarantee that the UK can negotiate more favorable trade policies on its own. There are benefits and costs in every negotiation and alliance. As the United States is renegotiating NAFTA, trying to secure borders, control immigration, and implement new protectionist trade policies, many of the questions currently looming for the UK with respect to Brexit likely have striking parallels in the United States as well.

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Diane Charlton

Diane Charlton is an assistant professor in the Department of Agricultural Economics and Economics at Montana State University. She received her Ph.D. in agricultural economics from the University of California, Davis. She has done research on agricultural labor markets in Mexico and the United States along with researching the determinants of migration. She never tires of talking about agriculture with her sister and brother-in-law from their almond orchard in the Central Valley of California, and she is looking forward to learning more about and researching agricultural production in Montana and the northern Great Plains.

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