Members of the World Trade Organization (WTO) like Indonesia, Argentina, the United States, China, and Russia are taking a keen interest in Brexit, particularly on how the U.K will handle its agricultural tariff system in the future.
Indonesia officially posed the question on Britain’s agricultural market status in WTO’s agriculture committee, Reuters reported on Monday.
History of criticizing CAP
Liberating Britain from the chains of the EU’s Common Agricultural Policy (CAP) is an iconic demand for Britain’s eurosceptics. CAP consumes 40% of the European Commission’s budget. In 1984, Prime Minister Margaret Thatcher argued that Britain has a much smaller agricultural sector to demand and secure the famous rebate on the U.K’s contribution to the EU budget. And even the pro-European Liberal Nick Clegg has called the CAP a “wasteful and economically perverse support system for Europe’s farmers.”
As Britain sets out to embrace the opportunities of a post-Brexit world, there are few challenges London will need to address, including rallying the consent of 164 WTO members on the level of subsidies for its farmers, for commodities such as beef, poultry, or wheat, as well as preferential trade schemes for poorer countries. While negotiating with the world, Britain must also negotiate with its own farmers a new agricultural regime, which will be less protectionist and presumably more open to global competition.
Realities on the Ground
EU agricultural subsidies make up for 67% of farm income in the U.K. according to a study commissioned by the British National Farming Union. Of course, these are not all family-run businesses. The British Royal Family, as well as big multinationals such as Nestle and Campino, are big beneficiaries of EU subsidies.
But, lowering tariffs and subsidies will disrupt Britain’s agricultural status quo.
In February 2017, the British Secretary of Trade, Liam Fox, suggested that the British ambition is to adopt EU’s free trade deals, the Financial Times reports. The question arises as to whether that means nothing will change. Of course, the British Royal Family, as well as big multinationals such as Nestle and Campino, are big beneficiaries of EU subsidies. Britain will finally have the opportunity to renegotiate from scratch its agricultural regime.
“How free” British agriculture will be in the post-Brexit era is the question at hand.
Before the June 23 referendum on EU membership, WTO’s Director-General Roberto Azevedo said that the negotiation of Britain’s place in global multilateral trade could take years or decades. For example, Argentina will have to concede on beef subsidies or Russia on wheat subsidies. Hence, maintaining the current trade regime in place seems to be the first priority. But, how “easy” that will be is a different question, as both international and domestic stakeholders will be pressing for change.
Britain is covered by the EU’s common external trade regime until 2020. Thereafter, U.K’s future WTO agricultural schedule — essentially, trade licenses — will need to be open to renegotiation. .