The indirect effects will matter most, argues Philip Abbott, professor of agricultural economics at Purdue University. “The effects on agricultural trade will be through the exchange rate mechanism and through any negative business cycle effects involving global demand. How big those are depends on whether [Brexit] is a temporary or longer-term situation,” says Abbott, who specializes in international trade and agriculture.
Agriculture is generally more dependent on international trade than other parts of the economy, adds Mike Boehlje, a distinguished professor of agricultural economics at Purdue. “Globalization is important to U.S. agriculture to keep markets open to access,” Boehlje says. “These are probably the more important longer-term issues. We don’t know what the answers are yet.”
Background to Brexit
In the June 2016 referendum, nearly 52 percent of the U.K. residents who voted sided with leaving the EU while 48 percent wanted to remain. The impetus for withdrawal had been brewing for several years, fueled primarily by concerns over large numbers of immigrants entering Britain from other European countries, the nation’s ability to make its own laws, and the impact of EU membership on the economy.
In October 2016, Theresa May, Britain’s newly appointed prime minister, announced that she would invoke Article 50 of the Treaty on European Union by the end of March 2017, triggering the complex process of withdrawing from the EU by March 2019. However, her decision to do so was quickly challenged in court. In early November, England’s High Court ruled that the government requires approval from Parliament to trigger the exit process. “The court does not accept the argument put forward by the government,” said Lord Chief Justice John Thomas, England’s most senior judge. “We decide that the government does not have power…to give notice pursuant to Article 50 for the U.K. to withdraw from the European Union.” The government promptly appealed the case to the Supreme Court, which was scheduled to hear arguments Dec. 5-8, 2016. But the government plans to push ahead. “Our plan remains to invoke Article 50 by the end of March,” a spokesperson for May said. “We believe the legal timetable should allow for that.”
Despite being in flux, Brexit has already negatively impacted at least one pending international trade agreement. Over the past three years, the Obama administration and EU officials have been negotiating the Transatlantic Trade and Investment Partnership (TTIP) agreement, a bilateral trade and investment deal between the EU and the U.S. intended to boost economic growth by, among other things, eliminating all trade tariffs and reducing “behind the border” non-tariff barriers that impede the flow of food and agricultural products.
But in late September, EU trade ministers announced that it was “unrealistic” to expect TTIP to be finalized by year’s end, given the politically uncertain climate surrounding trade deals on both sides of the Atlantic and a new U.S. president who most certainly would want to appoint his or her own trade negotiators.
“If we do not conclude TTIP before the 19th of January [2017], then there would be a natural pause because any American administration has all of these confirmations and Senate hearings and so on,” explained Cecilia Malmström, EU trade commissioner, during a meeting of trade ministers in Slovakia in late September. She added that it was too soon to speculate when negotiations might resume.
Brexit’s Impact on Food Safety
As the U.K. seeks to negotiate a new relationship with the EU, it is likely to explore various models adopted by other countries. Using the Norwegian model, for example, the U.K. would continue to have access to the EU single market under the European Economic Area and the European Free Trade Area agreements, but would be required to make financial contributions to the EU without having any right to participate in rulemaking.
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