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TTIP, EU Ag Policies Likely to Change Due to British-EU Breakup | KTIC Radio

TTIP, EU Ag Policies Likely to Change Due to British-EU Breakup

WASHINGTON (DTN) — U.S. experts on Europe and global food markets don’t think Britain’s exit from the European Union will do serious damage to the global food supply, but the move does add a great deal of uncertainty to investing in Europe and agricultural in England.

Just three weeks out from the referendum, uncertainty remains with a new government forming in Great Britain under Prime Minister Theresa May, who was installed Wednesday. Britain still needs to give formal notice to the European Union to start separation negotiations.

The Farm Foundation hosted a forum Wednesday at the National Press Club to analyze the impacts of the Brexit vote on agriculture and trade. The overriding message from panelists is that nobody has a good feel for how Britain’s separation from the EU will play out.

While 44% of all British exports go to Europe and 16% to the U.S., the Brits are now faced with possibly having to create new free-trade agreements with the EU and the U.S. The U.S. exports about $15.7 billion in ag goods to Europe overall, of which about $3.6 billion go directly to Great Britain.

John Dardis is an Irish native and now senior vice president of corporate affairs in the U.S. for the dairy and nutrition company Glanbia. While the majority of Glanbia’s business is in the U.S., Dardis said the Brexit vote adds uncertainty for companies wanting to invest in Europe and Britain. Dardis noted the Brexit vote could add to the anti-trade, anti-immigrant rhetoric in the U.S. election, as well.

“The volatility and the uncertainty is a risk for anyone trading anywhere,” Dardis said. He added “If you are an investing company around the world, all of this is bad news.”

For the U.S., losing Britain’s voice in the EU could further complicate biotechnology approvals. Britain is one of the few consistent voices in the EU supporting new technology in agriculture. That could eventually aid in shipping products to Britain, but could also cause Europe to further withdraw from approving crop-protection products, Dardis added.

Michael Dwyer, chief economist for the U.S. Grains Council, said he thinks Brexit itself is a ripple that will barely make a dent in the global food system.

“I’m not saying there won’t be some fallout in Europe, but when you diffuse that across a global food system, I don’t think this in and of itself will be that big a deal,” Dwyer said.

Dwyer’s comments had one caveat, however — “no contagion” — meaning the issues could become a lot more complex if other countries start to leave the EU as well. The main impact of the British move on the global food system comes from the impact on currencies, he said. The crash in the British pound, commodity markets and bonds that happened right after the vote amounted to a “repricing of assets for an unexpected outcome,” Dwyer said. He added “I do not expect to see this level of chaos continue for that long at all.”

Still, more complicated trade linkages could hurt demand for commodities if the European economy is affected enough to impact imports of Chinese goods, thus slowing the Chinese economy — then it becomes a global problem.

Overall, a rise in the U.S. dollar could accelerate, Dwyer said, which could become a problem, but the demand side for food and feed is more important than the realignment of currency. Still, Dwyer avoided the tendency of economists to look at one hand versus the other by stressing one conclusion: “This event, as bad as it is, as scary as it is for the Europeans themselves, poses no real risk in my opinion, for the global food system.”

U.S. agribusinesses hoping for approval of the Trans-Atlantic Trade and Investment Partnership (TTIP) to improve their access to Europe may need to temper such hopes. The Brexit vote, coupled with elections next year in key EU countries, damages a trade deal already appearing to be in jeopardy. TTIP negotiations are going on this week again, but the trade deal is becoming increasingly more complex. While European negotiators want a deal done, individual member countries are far less certain.

“One of the biggest sticking points in TTIP is agriculture,” Dwyer said. “Most people in agriculture weren’t terribly optimistic this thing would happen before the Brexit vote. Clearly, this probably made that a more difficult situation.”

Trade deals with Europe may have gotten more complicated last week as the European Commission agreed to turn the Canada-Europe Trade Agreement (CETA) over to all 28-member parliaments to approve. If even a single parliament in Europe rejects the deal, it could jeopardize CETA’s chance of being ratified in Europe. TTIP, which has even more resistance in Europe than CETA, could face a similar prospect.

“That may be a taste of things to come when it comes to trade deals in the future,” said Benno van der Laan, a U.S.-based European trade consultant.

Further, British farmers are going to have separate from the Common Agricultural Policy, which can provide half to more than 80% of a farmer’s income in parts of England, Scotland and Northern Ireland. While British taxpayers may like the environmental obligations placed on farmers by the CAP, it seems unlikely farmers will get the same level of financial support.

“You are going to see a reduction of support for producers, I imagine,” Dardis said.

John Wilkes, a British agricultural consultant now working in Washington, said the Brexit support in rural Britain had nothing to do with business or trade, but was centered heavily on immigration. British farmers, however, now are beginning to understand the impact of their protest vote.

“The sheer horror of what they have done is sinking in,” Wilkes said.

More information on the Farm Foundation can be found at…

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