British politics might seem far from Beef Country, USA. But when it comes to potential economic upset on a global scale, it might be too close for comfort.
On July 24, Boris Johnson became the Prime Minister of the United Kingdom (UK), replacing Theresa May. Johnson is from the UK’s Conservative Party (often called “Tories” in mainstream UK press) and has been staunchly pro-Brexit.
“Brexit” is the common term for Britain exiting the European Union (EU). Concerns have existed all over the UK and beyond what Brexit will mean for trade, both in the region and globally. Johnson has repeatedly said he is willing to take the UK into Brexit without a divorce deal. This is often called a “no-deal Brexit.” The extended Brexit deadline is Oct. 31, 2019.
A no-deal Brexit scenario has stoked trade- and economic-related fears more than even Brexit alone. According to the Associated Press, economists say a no-deal Brexit would severely disrupt trade and plunge the UK into recession. This possibility has shaken the UK’s currency value. On Thursday, Aug. 1, the pound stood at $1.21, its lowest level against the dollar in more than 30 years.
According to the Associated Press, Johnson vehemently opposed the EU divorce deal May struck with the EU. Under the plan, Britain will have to pay a departure fee of 39 billion pounds ($48 billion) and adhere to its guarantees to avoid a hard customs border on the frontier between EU member Ireland and Northern Ireland, which is part of the UK. The potential hard divide along the Ireland/Northern Ireland border has stoked old cultural concerns and animosities.
The EU has repeatedly said it has no plans to renegotiate the Brexit agreement struck by May, even though it didn’t pass the UK Parliament. This position was reiterated last week by European Commission spokeswoman Mina Andreeva, according to the Associated Press.
Brexit’s beef connection
However, depending upon what happens with the UK following Brexit, the UK breaking from the EU could open doors to U.S. beef producers… eventually.
Erin Borror, economist with the U.S. Meat Export Federation (USMEF), previously told WLJ that any direct short-term impact of Brexit—deal or no—would be small. “Yet it could have a significant impact on the people doing the international business.”
Due to the EU’s stringent demands for beef from non-hormone treated cattle and import quotas, the U.S. does not send much beef to the EU or UK. Last year, the U.S. only sent about 21,000 metric tons of beef and beef variety meat to the EU. In June, the European Commission, executive branch of the EU, announced that the U.S. will get a much larger, dedicated share of the existing duty-free beef import quota, but it will take several years to realize this change.
Brexit could cause problems with these quotas. The EU and the UK think that with the UK’s exit, the UK will take a share of the quotas, but that is not certain at this point.
“The U.S. disagrees with that, so [U.S. Trade Representative], along with governments from all other major suppliers of commodities to the UK, is raising concerns,” Borror previously told WLJ. “No one thinks it is fair, because everyone essentially loses access to both the EU and the UK.”
But there could also be opportunity.
A late 2017 report by the European Livestock and Meat Trades Union (UECBV), which represents meat and livestock trade sectors across Europe, called a no-deal Brexit scenario a “meat crisis.” Meat trade between the UK and the EU would see tariffs up to or over 100 percent of the product value. This would make meat trade between the two uncompetitive.
Still, the UK will need to import hundreds of thousands of tons of red meat, as it does not produce enough within its borders to meet demand. U.S. beef exports could fill if a U.S.-UK free trade agreement could be negotiated. — WLJ