Brexit: How might UK Agriculture Thrive or Survive?

Transcription

1 Defra/AES One Day Conference Agricultural Trade & Brexit Nobel House, March 12 th, 2018 Brexit: How might UK Agriculture Thrive or Survive? [Part of the ESRC-funded UK in a Changing Europe Brexit priority programme] David Harvey [With great thanks, but no blame, to Carmen Hubbard, Michael Wallace, Mercy Ojo, Charles Scott, Myles Patton, Siyi Feng, Andrew Moxey, Shailesh Shrestha and George Philippidis]

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3 FTA comprehensive UK/EU FTA with UK-EU tariffs at zero. UK adopts the EU common tariff schedule on RoW imports & the UK has a share of existing EU Tariff Rate Quotas (TRQs) applying to these RoW imports the UK s departure from the Single Market plus additional costs affecting UK/EU trade (5% for livestock and 2% for crops) Selected UKAP Scenarios: Trade

4 Selected UKAP Scenarios: Trade FTA comprehensive UK/EU FTA with UK-EU tariffs at zero. UK adopts the EU common tariff schedule on RoW imports & the UK has a share of existing EU Tariff Rate Quotas (TRQs) applying to these RoW imports the UK s departure from the Single Market plus additional costs affecting UK/EU trade (5% for livestock and 2% for crops) UFT elimination of all UK import tariffs for RoW an extreme free-trade scenario, in addition to free trade with the EU additional trade costs of 10% (livestock) and 5% (crops) respectively for products flowing from the UK to the EU

5 Selected UKAP Scenarios: Trade FTA UFT WTO comprehensive UK/EU FTA with UK-EU tariffs at zero. UK adopts the EU common tariff schedule on RoW imports & the UK has a share of existing EU Tariff Rate Quotas (TRQs) applying to these RoW imports the UK s departure from the Single Market plus additional costs affecting UK/EU trade (5% for livestock and 2% for crops) elimination of all UK import tariffs for RoW an extreme free-trade scenario, in addition to free trade with the EU additional trade costs of 10% (livestock) and 5% (crops) respectively for products flowing from the UK to the EU no agreement by March 2019 reversion to WTO rules & schedules UK trading with EU and RoW under WTO MFN tariffs requires an UK s allocation of a share of the current EU TRQs with the RoW additional trade costs of 8% and 4% for livestock & crop products to UK trade flows in both directions with the EU

6 Selected UKAP Scenarios: Domestic Policy No further UK contributions to or receipts from the EU budget

7 Selected UKAP Scenarios: Domestic Policy No further UK contributions to or receipts from the EU budget All Pillar 2 payments continue after Brexit at current real levels

8 Selected UKAP Scenarios: Domestic Policy No further UK contributions to or receipts from the EU budget All Pillar 2 payments continue after Brexit at current real levels Pillar 1 direct payments: Retained as now, or Phased out: elimination of direct payments over a 5-year period ( ) involving a straight-line reduction of current payment levels to zero in 2025.

9 Selected UKAP Scenarios: Domestic Policy No further UK contributions to or receipts from the EU budget All Pillar 2 payments continue after Brexit at current real levels Pillar 1 direct payments: Retained as now, or Phased out: elimination of direct payments over a 5-year period ( ) involving a straight-line reduction of current payment levels to zero in Plus some Sensitivity Analysis: restrictions on migrant labour the sterling exchange rate with & $

10 CGE Effects on GDP, Agri-food Output and Prices (cf. baseline projection 2026) Scenarios FTA UFT WTO + DPs - DPs + DPs - DPs + DPs - DPs Selected results: UK GDP (%) Per cap net domestic product(%)

11 CGE Effects on GDP, Agri-food Output and Prices (cf. baseline projection 2026) Scenarios FTA UFT WTO + DPs - DPs + DPs - DPs + DPs - DPs Selected results: UK GDP (%) Per cap net domestic product(%) UK production (%): agriculture (9 activities) food (8 activities) (red + white) meat

12 CGE Effects on GDP, Agri-food Output and Prices (cf. baseline projection 2026) Scenarios FTA UFT WTO + DPs - DPs + DPs - DPs + DPs - DPs Selected results: UK GDP (%) Per cap net domestic product(%) UK production (%): agriculture (9 activities) food (8 activities) (red + white) meat UK prices (%): agriculture crops livestock food meat

13 Effects on Agricultural factors and Trade balance ( in relation to the baseline projection 2026) Scenarios FTA UFT WTO + DPs - DPs + DPs - DPs + DPs -DPs UK agricultural factors (%): Labour Use Wages Rent

14 Effects on Agricultural factors and Trade balance ( in relation to the baseline projection 2026) Scenarios FTA UFT WTO + DPs - DPs + DPs - DPs + DPs -DPs UK agricultural factors (%): Labour Use Wages Rent UK trade balance with EU ( m): (Base 2026) Base: Food: -14,993 Meat: - 4,462 food ,622 3,398 4,050 3,894 - meat ,818 2,719 2,679 2,620

15 Effects on Agricultural factors and Trade balance ( in relation to the baseline projection 2026) Scenarios FTA UFT WTO + DPs - DPs + DPs - DPs + DPs -DPs UK agricultural factors (%): Labour Use Wages Rent UK trade balance with EU ( m): (Base 2026) Base: Food: -14,993 Meat: - 4,462 food ,622 3,398 4,050 3,894 - meat ,818 2,719 2,679 2,620 UK trade balance with RoW ( m): Base: Food: - 1,499 Meat: 1,487 food ,090-4,419-1,905-2,052 - meat ,130-5,

16 % change in Produciton 20 CGE Production changes CROPS LVSK MEAT DAIRY AGRI FOOD UFT UFT- UFT - (-Lab) WTO WTO - WTO - (- Lab)

17 % price change CGE Price changes (retail) & DPs CROPS LVSK MEAT DAIRY AGRI FOOD -4-6 UFT UFT- WTO WTO-

18 % price change CGE Price Changes (retail) & exchange rates CROPS LVSK 10 MEAT DAIRY AGRI 5 FOOD 0 UFT +10% deval +20%deval WTO +10% deval +20%deval Note: Value of sterling swamps the tariff and trade cost changes

19 % price change 60% FAPRI Price Changes (farm) 40% 20% 0% -20% Beef Sheep Pigs: Poultry Dairy Wheat Barley -40% -60% UFT +10% deval +20% deval WTO +10% deval +20% Deval

20 % price change Bradley & Hill s Model Price Changes 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% % % % Comp WTO Using a gravity model to generate price changes, Bradley and Hill (AHDB report) estimate that barley and sheep prices suffer under WTO rules, as well as under a UFT scenario. This model appears to generate more modest price effects under UFT than FAPRI & CGE

21 % change in FBI from base Average Farm Income Change by Country & Scenario England NI Scotland Wales All farms FTA+ FTA- UFT+ UFT- WTO+ WTO-

22 Farm Business Income ( ) FBI Distributions with DP, England 150, ,000 50, , , Base FTA+DP UFT+DP WTO+DP % of Farms

23 Farm Business Income ( ) FBI Distributions minus DPs, England 150, ,000 50, , , Base FTA-DP UFT-DP WTO-DP % of Farms

24 Interim Conclusions UK Agriculture could survive, and even thrive, depending on scenario;

25 Interim Conclusions UK Agriculture could survive, and even thrive, depending on scenario; Trade scenario effects depend on net trade position, and/or on world prices, but are swamped by exchange rate & possibly labour market changes and NTBs (hardly included here);

26 Interim Conclusions UK Agriculture could survive, and even thrive, depending on scenario; Trade scenario effects depend on net trade position, and/or on world prices, but are swamped by exchange rate & possibly labour market changes and NTBs (hardly included here); But, many farms might not, especially without DPs, & with varied region, type and size impacts

27 Interim Conclusions UK Agriculture could survive, and even thrive, depending on scenario; Trade scenario effects depend on net trade position, and/or on world prices, but are swamped by exchange rate & possibly labour market changes and NTBs (hardly included here); But, many farms might not, especially without DPs, & with varied region, type and size impacts And there will be some potentially substantial structural changes, depending on policy

28 Interim Conclusions UK Agriculture could survive, and even thrive, depending on scenario; Trade scenario effects depend on net trade position, and/or on world prices, but are swamped by exchange rate & possibly labour market changes and NTBs (hardly included here); But, many farms might not, especially without DPs, & with varied region, type and size impacts And there will be some potentially substantial structural changes, depending on policy Need to reconcile the relatively modest sectoral and macro changes with the substantial impacts on farm incomes, especially w.r.t DPs

29 Interim Conclusions UK Agriculture could survive, and even thrive, depending on scenario; Trade scenario effects depend on net trade position, and/or on world prices, but are swamped by exchange rate & possibly labour market changes and NTBs (hardly included here); But, many farms might not, especially without DPs, & with varied region, type and size impacts And there will be some potentially substantial structural changes, depending on policy Need to reconcile the relatively modest sectoral and macro changes with the substantial impacts on farm incomes, especially w.r.t DPs

30 Project Information Principal Investigator: Dr Carmen Hubbard, Centre for Rural Economy, Newcastle University Co-Investigators: Dr Shailesh Shrestha, Agricultural Policy Analyst, Scotland s Rural University College, Dr Myles Patton, Project Leader for FAPRI-UK model (Northern Ireland), Professor Emeritus David Harvey, Newcastle University Dr Michael Wallace, Senior Lecturer in Farm Business, Newcastle University, Charles Scott, Manager of Farm Business Survey (Northern England) Dr. Mercy Ojo, Newcastle University Dr. Andrew Moxey, Newcastle University Dr. George Phillipidis, Newcastle University Anne Liddon, Science Communications Manager CRE, Newcastle University. Advisory Board: Sarah Baker- AHDB; Graham Redman- Andersons; Paul Caskie- DARDI Northern Ireland; Ken Thomson- University of Aberdeen; Peter Midmore University of Aberystwyth; Ian Bailey, Savills Ltd; Jonathan Baker- CLA Senior Adviser; Michael Bourne Defra; Tom Keen- EU Exit and International Adviser, NFU; Graeme Beale - Scottish Executive; Neil Paull - Economic Advice Division, Welsh Government; Adam Bedford - NFU North East; Bradley Tooze - Natural England North East For more information contact Dr Carmen Hubbard at carmen.hubbard@ncl.ac.uk