Britain has been part of the European Union (EU) for more than half a century. Her possible imminent exit from the EU raises many questions regarding future U.S. trade potential or disruption of current trade, especially in terms of beef quotas and tariffs.
The EU is an economic and political partnership involving 28 European countries. It began after World War II to foster economic cooperation among the countries. Since then the EU has become a single market, allowing goods and people to move between these countries as if the member states were one country with its own unified currency, the euro.
In recent years, the United Kingdom (UK) has been moving toward exiting the EU. This possible withdrawal has been termed “Brexit,” combining the words “Britain” and “exit,” and could be happening soon. The rules governing the EU provides both the UK and the other EU countries two years to agree to the terms of the split. British Prime Minister Theresa May triggered this process on March 29, 2017, meaning the UK would be scheduled to leave the EU on March 29, 2019.
Depending on how Brexit happens—either a “soft” or a “hard” or “no-deal” Brexit, see sidebar below—there could be either positive or negative results for U.S. beef trade.
“Looking at Brexit, there are several possible scenarios,” says Philip Seng, who worked many years for the U.S. Meat Export Federation.
“One would be a deal—which simply means Prime Minister Theresa May would be successful in getting the deal done. If there’s a deal, and Brexit moves forward, the U.S. would engage the UK immediately. We already had the Federal Register notice last October. The negotiating objectives have been published, with comments submitted. We are as far down the road as we can be, at this point.”
An unofficial working group has been focusing on these issues since last July. The parameters of a negotiation with the UK have already been outlined.
“The ambitions we desire have been articulated,” says Seng.
“If it turns out that there’s not a deal, and the UK leaves the EU without an agreement, this could be very dramatic and problematic for us because it would extend everything. It could trigger a vote of no confidence and also affect the general election in the UK,” he says.
There is considerable concern about Brexit, with people on the continent and in the UK divided in how they think this should proceed.
“Theresa May and those who are pro-Brexit must assuage the concerns of the British people, who are presently divided in opinions about Brexit. The referendum was very close when they passed it in 2017. They also have to work with the Europeans, who are not predisposed to seeing Britain leave. The Europeans are looking at having as much as $50 billion impact on their EU budget when that tax money from Britain no longer goes to the EU,” Seng explained.
There is also a possibility that the UK will ask for an extension, but to do this they’d have to get the consent of the EU and the member states. Seng suggested this is unlikely, however.
There is one other possibility.
“They might have a second referendum,” Seng said, adding that there is a lot of politicking going on ahead of the general election in the UK with some trying to make May look as weak as possible.
“That idea is gaining a lot of traction. Depending on how this goes, according to Article 50 in the EU Constitution, the UK could retract [Brexit]. This could be done without consent of the EU. The UK would then remain a full member of the EU. That might happen, looking at the way politics are moving.”
As the UK continues to debate the direction to go, the world is watching and speculating on possible scenarios and how Brexit, or a no-deal Brexit, would affect their own countries in trade agreements.
The U.S. does a lot of international trading of goods and products, while meat exports to the UK are presently quite limited. The U.S beef industry is probing what the impact on existing and in-progress trade and quota systems might be, and the potential ripple effects on international trade and consumer confidence, which both have an impact on beef.
“Additionally, the European Exporters and Processers Association (similar to our NAMI in the U.S.—the North American Meat Institute—which is the oldest and largest trade association representing U.S. packers and processors of beef, pork, lamb, veal and poultry) have said that they are now having a very difficult time commencing with new orders for their products, and not knowing what they may encounter regarding tariffs,” explained Seng of the wider meat trade situation.
“When they have products in transit they don’t know what they’ll be facing in tariffs once the products have landed in foreign countries,” he says. There is still a lot of uncertainty. — Heather Smith Thomas, WLJ correspondent
The current debate over terms and conditions for Britain’s departure from the EU is often simplified into two clashing concepts: a soft Brexit and a hard or “no-deal” Brexit.
A soft Brexit keeps Britain closely aligned with the EU to minimize disruption to trade, supply chains, and business that would be created by diverging from the EU’s regulations and standards, thereby reducing the cost of Brexit.
In practice, a soft Brexit means staying within both the EU’s single market and its customs union. The UK would still be bound by EU rules and tariffs even though Britain would lose any say in making them; it would be nearly impossible for Britain to do any trade deals on its own with third countries.
A hard Brexit arrangement would likely mean the UK would give up full access to the EU’s single market and the customs union. It would give Britain full control over her borders, making new trade deals and applying laws within her own territory. Initially, this would mean the UK would likely fall back on World Trade Organization (WTO) rules for trade with former EU partners.
