Workshop on Implications of Brexit for the EU agri-food sector and the CAP. EU UK agricultural trade: State of play and possible impacts of Brexit

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1 Workshop on Implications of Brexit for the EU agri-food sector and the CAP EU UK agricultural trade: State of play and possible impacts of Brexit Cecilia BELLORA, Jean FOURÉ Co-authors: Charlotte EMLINGER, Houssein GUIMBARD CEPII 1

2 Structure of the Presentation 1. State of play: current EU27 UK agrifood trade 2. Impact of a WTO scenario on EU27 Agri-food sectors 3. Key-findings and recommendations 2

3 State of play General picture GDP (USD bn) GDP per capita (USD) Pop. (mn pers.) 2,619 39, ,779 30, Germany 3,467 41, France 2,465 36, Italy 1,850 30, Spain 1,232 26, , Dissimetry: Country Relative market sizes Trade relationship: the UK is the 2 export destination of the EU27, far behind the EU itself (intra EU27 : USD 2,789 bn / UK : USD 353 bn)... But, important trade relation for some sectors, in some countries UK EU27 Netherlands Trade flows Agri-food: Value (USD million) % of EU trade EU27 exports Small share of total bilateral EU27 UK trade flows: 11% Larger relative UK s share in EU27 exports: 9% (vs 7% for manufacture) Positive trade balance for the EU27 Non Agric. Goods Agric. Goods Total 305, , , , , , EU27 imports Non Agric. Goods Agric. Goods Total Sources: World Development Indicators, World Bank (2016) and BACI ( ) 3

4 Main exported agri-food sectors ( ) SECTOR GTAP Code VALUE (USD mn) % of EU MAIN EXPORTER 9.76 Germany Food products nec ofd 16,917 Beverages and tobacco products b_t 7,186 Meat products nec omt 5, Netherlands Vegetables fruit nuts v_f 5, Spain Dairy products mil 4, Ireland Crops nec ocr 1, Netherlands Vegetable oils and fats vol 1, Netherlands Bovine meat products cmt 1, Ireland 9.18 France Source: BACI ( ), Authors calculations Food products (Animal feed preparations, Communion wafers...), Meat and milk related products, Beverages and tobacco (grape wines, non alcoholic beverages, undenatured alcohol) 4

Main exporters Agriculture (2013 2015) COUNTRY VALUE (USD mn) % of EU % of total agri. exports of the country Netherlands 9,519 20.12 1.89 France 6,971 14.74 1.23 Ireland 6,903 14.59 4.

5 Main exporters Agriculture ( ) COUNTRY VALUE (USD mn) % of EU % of total agri. exports of the country Netherlands 9, France 6, Ireland 6, Germany 5, Spain 4, Italy 3, Belgium 3, Denmark 1, Poland 1, Portugal Source: BACI ( ), Authors calculations 5

6 Protection faced by EU27 exports WTO scenario Sources: MAcMap-HS6 and Kee et al. (2009) 6

7 Potential impacts A simple indicator A simple indicator for trade impacts: trade flows (exports) weighted by faced protection SECTOR (GTAP) GTAP code VALUE (USD mn) PROTECTION % of EU NTMs (%, pre Brexit) MFN (%) NTMs (%, post Brexit) PROT. REV. (USD mn) Food products nec ofd 16, ,773 Dairy products mil 4, ,717 Meat products nec omt 5, ,808 Beverages and tobacco products b_t 7, ,749 Vegetables fruit nuts v_f 5, ,243 Bovine meat products cmt 1, ,489 Vegetable oils and fats vol 1, Crops nec ocr 1, Sources: BACI ( ), MAcMap-HS6 and Kee et al. (2009), Authors calculations Countries potentially most impacted: Netherlands, Ireland (i.e. main exporters of most impacted sectors) 7

8 2. Impact of a WTO scenario on the Agri-food sectors Model: We use the MIRAGE model to propose a quantification of a WTO scenario This model uses the GTAP 9.2 database, and the same protection data as in part agri-food sectors (+ 14 manufacturing and 8 services) UK, 11 countries or groups in the EU27, and the rest is aggregated on a geographical basis Business as Usual (BAU): Intra-EU preferential access remain constant (calibrated from Berden et al., 2009) Tariffs are updated in 2013 (MAcMap data) WTO Scenario: Tariff rates between the UK and EU (and UK-Turkey) are set to MFN values Trade restrictiveness of NTMs increases (UK loses 2/3 of its preferential access to the EU27, and reciprocally) 8

9 EU27 agri-food exports: most impacted sectors Large reduction in trade (-62% on average) Largest reduction in Other food (processed food n.e.c) Near complete collapse in trade for White meat, dairy, red meat Source: Authors calculations using MIRAGE-e 9

EU27 agri-food exports: most impacted regions In volume, Most affected countries are the Netherlands, Ireland and France Least affected are Portugal and Sweden

10 EU27 agri-food exports: most impacted regions In volume, Most affected countries are the Netherlands, Ireland and France Least affected are Portugal and Sweden Source: Authors calculations using MIRAGE-e In relative terms, however Ireland, Rest of EU27 and Poland are the most impacted Sweden, France and Spain are less affected 10

11 Agri-food value-added: driving forces Trade losses partially compensated by Exports to other EU27 countries Domestic demand Exceptions: Ireland and the Netherlands Dependancy on UK intermediates prevents competitivity gains Source: Authors calculations using MIRAGE-e 11

Value-added: most impacted agri-food sectors Value-added decreases in almost every country and sector, especially in the processed food sector Brexit

12 Value-added: most impacted agri-food sectors Value-added decreases in almost every country and sector, especially in the processed food sector Brexit could represent an opportunity for a few sectors in few countries: Red meat and cattle in France Wheat in Spain Source: Authors calculations using MIRAGE-e 12

13 Value-added: most impacted countries Ireland is the most impacted country Belgium-Luxembourg and the Netherlands agri-food VA decrease significantly Otherwise, impacts remain small in relative terms The UK experiences an increase in agri-food VA Source: Authors calculations using MIRAGE-e 13

14 Consumer and producer prices variation (%), 2030 CONSUMPTION AGRI-FOOD TOTAL REGION PRODUCTION AGRI-FOOD TOTAL Ireland Sweden France Portugal Belgium and Luxembourg Netherlands Spain Rest of EU Germany -0.1 Italy -0.1 Poland UK Production prices: two opposite effects More expansive intermediates (+) Market effect / decrease in demand (-) Consumption prices: two opposite effects Tariffs, NTMs (+) Market effect / decrease in demand (-) Source: Authors calculations using MIRAGE-e 14

15 Key findings WTO scenario A return to WTO rules would imply significantly less agri-food trade between the EU27 and the UK in both directions (around 62%). Some EU exports almost completely collapse, like those of Rice, White meat, Sugar, Dairy and Red meat (more than -90%). Ireland, the Netherlands and France loose the most in terms of bilateral trade. Brexit also implies more room for EU27 products on their domestic markets and other EU27 markets replacing UK products. This effect fails to compensate the incurred losses in value-added. Exception: a few sectors, such as Red meat and Cattle in France, or Sugar and Wheat in Spain, in which value-added increases. Brexit could be an opportunity for the UK s agri-food sectors as a whole. Excepted in Ireland, consumers are hardly affected by changes in overall consumption prices or economic activity. 15

16 Additional material 16

17 List of regions EU27 Belgium and Luxembourg, France, Germany, Ireland, Italy, Netherlands, Poland, Portugal, Spain, Sweden, Rest of EU27 UK Rest of the world Middle East, North Africa, SACU, Sub-Saharan Africa, Turkey ASEAN, China and Hong-Kong, India, Japan, Korea, Rest of Asia Canada, Mexico, USA Australia and New Zealand, Rest of Oceania CIS countries, EFTA, Russia Brazil, Rest of MERCOSUR, Rest of Latin America Rest of the World 17

18 List of sectors Agri-food Animal products, Beverages and Tobacco, Cattle, Cereals, Dairy, Fiber crops, Fishing, Forestry, Oil seeds, Other crops, Other food, Red meat, Rice, Sugar, Vegetable oils and fats, Vegetables and fruits, Wheat, White meat, Wool Industry Chemistry, Electronic, Energy, Ferrous Metals, Machinery, Metal products, Metals n.e.c., Minerals, Paper, Textile, Transport equipment n.e.c., Vehicles and parts, Wood, Other Manufacturing Services Business Services, Communication, Finance, Insurance, Other services, Trade, Transport 18

19 Main imported agri-food sectors ( ) SECTOR VALUE (USD mn) % of EU MAIN EXPORTER Food products nec 6, Ireland Beverages and tobacco products 4, France Dairy products 1, Ireland Meat products nec 1, Ireland Bovine meat products 1, France Fishing France Vegetables fruit nuts Ireland Animal products nec Netherlands Source: BACI ( ), Authors calculations Food products (Animal feed preparations, Cereal foods), Meat and milk related products, Beverages and tobacco (tobacco, undenatured alcohol, non alcoholic beverages) 19

Main importers Agriculture (2013 2015) COUNTRY VALUE (USD mn) % of EU % of total agri. exports of the country Ireland 4,796 26.71 15.45 France 2,578 14.36 8.30 Netherlands 2,462 13.72 7.

20 Main importers Agriculture ( ) COUNTRY VALUE (USD mn) % of EU % of total agri. exports of the country Ireland 4, France 2, Netherlands 2, Germany 1, Spain 1, Belgium 1, Italy Sweden Poland Denmark Source: BACI ( ), Authors calculations 20

21 Protection faced by UK exports WTO scenario Sources: MAcMap-HS6 and Kee et al. (2009) 21

22 Potential impacts - A simple indicator A simple indicator for trade impacts: trade flows (imports) weighted by faced protection SECTOR VALUE PROTECTION % of EU NTMs (%, pre Brexit) MFN (%) NTMs (%, post Brexit) PROT. REV. Food products nec 6, ,944 Dairy products 1, ,974 Bovine meat products 1, ,127 Meat products nec 1, Beverages and tobacco 4, Sugar Vegetable oils and fats Vegetables fruit nuts Sources: BACI ( ), MAcMap-HS6 and Kee et al. (2009), Authors calculations Countries potentially most impacted: France, Ireland (i.e. main importers of most impacted sectors) 22

23 Variation in agri-food imports from the UK, by sector, 2030 Since trade barriers are comparable for UK and EU, same interpretation as EU exports to the UK is valid. Source: Authors calculations using MIRAGE-e 23

24 Gross Domestic Product - Variation in 2030 (scenario vs BAU) At the macroeconomic level, the WTO scenario is likely to have moderate impacts in the long run (-0.3% of GDP for EU27) Only Ireland can be significantly concerned Source: Authors calculations using MIRAGE-e 24

An East Asian FTA and Japan s Agricultural Policy: Simulation of a Direct Subsidy

An East Asian FTA and Japan s Agricultural Policy: Simulation of a Direct Subsidy Tomoyoshi Nakajima Economic Research Institute for Northeast Asia (ERINA) 1. Introduction Traditionally, Japan has assigned