On Thursday 9 November, the European Parliament’s agriculture committee discussed three studies which it had commissioned on the budgetary, commercial and institutional “implications of Brexit for the EU agri-food sector and the CAP”. One thing is certain, the United Kingdom’s departure will not be painless for the sector.
With regard to the budget, the study carried out by the Jacques Delors Institute estimates that the UK’s withdrawal will leave a permanent annual shortfall of €10.2 billion in the budget and, in particular, the funding gap for the CAP will be around €3 billion. CAP funding could possibly be reduced by even more after 2020 if priority were to be given to other policies, such as migration or research. Against this backdrop, the study suggests delaying negotiations on CAP reform until 2022 or even 2023 (when, in theory, they are due to open in 2020).
Socialist MEP Éric Andrieu (France) suggested that this situation could allow discussion to take place on the substantive issues and work to be done on the CAP so that it remains relevant. Albert Dess (EPP, Germany) argued that budget cuts must not be made at the expense of farmers, “who must not have to pay for the others”.
Differing implications depending on the scenario. Were the €3 billion to be offset by an increase in the contributions of the other 27 member states, the main net beneficiaries of the CAP, such as Poland and Greece, would be almost unaffected. However, current net contributors, particularly Austria, Germany, Netherlands and Sweden, would have to pay for the lion’s share of the shortfall. If, on the other hand, the CAP budget was reduced by €3 billion, the big losers would once again be net contributors such as Germany and Netherlands but also net beneficiaries like Spain and Poland.
“Concentrating spending cuts on Pillar 1 while protecting Pillar 2 has been suggested as a way of reducing the costs of the CAP and improving the quality of CAP spending”, this “requires certain gross recipients of CAP funds (particularly France and Spain) to accept a sizeable deterioration in their net balances”, the report also states.
Trade: Netherlands and above all Ireland are the big losers. The budgetary implications of Brexit on to CAP may still be uncertain but the future for trade is clearer: Ireland and the Netherlands will suffer.
The study, conducted by the Paris-based Centre d’études prospectives et d’informations internationales (CEPII), estimates that the €47 billion in agri-food exports from the EU27 to the United Kingdom will be severely affected by the UK’s withdrawal from the EU. Non-tariff barriers, such as labelling, are already estimated to account for 18% of the cost of the goods traded. They could jump to 45% by 2030. To this must be added around 18% customs duties were no free-trade deal to be agreed. This is a situation which could bring a 62% drop in agri-food trade between the two partners.
The fall would, however, vary from product to product. Trade in, for instance, red meat, sugar and dairy products, could drop by 90%, according to the CEPII. The impact would differ widely among the member states.
The main exporters of agricultural and agri-food products to the United Kingdom are Germany, France, Netherlands, Ireland, Spain and Italy. But two countries could suffer by far the most negative impact: Ireland could see its exports plummet by 71% and the Netherlands by 66%. For France and Spain (each down 51%), on the other hand, the effect is less severe. In terms of added value, Ireland is by far the biggest loser (-16%), ahead of the Benelux countries (-2%).
Brexit would also bring an increase in intra-EU27 trade and exports to third countries as a result of a loss of UK competitiveness. It would not, however, be enough to offset added value losses, except in a few sectors, such as French beef and Spanish wheat.
Lastly, the study concludes that no increase in consumer prices is to be expected in the EU, except in Ireland where they could rise by 5.4%.
Putting in place arrangements for Brexit. The third study, by Alan Matthews of Trinity College, Dublin, on inter-institutional relations, states that, even if the United Kingdom and the EU27 concluded an agreement on the withdrawal conditions and the nature of the EU future relationship by 29 March 2019, economic operators would still be faced by a lack of preparedness on the part of customs administrations and other relevant authorities on both sides in the management of border controls. Provision should be made for specific tools to help farmers - particularly in the event of a “hard Brexit”. These might include the provision of adjustment assistance, creative use of financial instruments, a strengthened promotion policy and improved access to third-country markets. (Original version in French)