Abstract
SummaryThere is little doubt that Brexit would have significant implications for UK agriculture, a sector with strong trade links to the EU and strong reliance on CAP income support. This article reports preliminary results from employing a Computable General Equilibrium Model, a Partial Equilibrium Model and Farm Level Models to explore selected trade and domestic policy scenarios post‐Brexit. These allow for the estimation of changes in producer prices, production and farm incomes against a baseline scenario of continued EU membership. Under a Free Trade Agreement with the EU, agricultural impacts are relatively modest. By contrast, unilateral removal of import tariffs has significant negative impacts on prices, production and incomes. Adoption of the EU's WTO tariff schedule for all imports favours net importers (e.g. dairy) and harms net exporters (e.g. sheep). Given the strong dependence of most UK farms on direct payments, their removal worsens negative impacts of new trade arrangements and offsets positive impacts. Impacts vary across different types and sizes of farm, but also regionally. However, the period of adjustment to new trade and domestic policy conditions may prove very challenging for a large number of farm businesses.
Highlights
Unlike the computable general equilibrium (CGE) model, the partial equilibrium model focuses on a specific sector, assuming the knock-o n impacts on the wider economy and, the feedback effect on the sector studied are negligible
The scenarios are chosen to represent a broad range of feasible options for: i) trade relations with the European Union (EU) and the Rest of World; ii) domestic UK policy for direct payments to farmers
We modelled three selected trade policy scenarios (Table 1), designed to cover the range of likely outcomes of the UK–EU negotiations and which were discussed and agreed with relevant stakeholders: (i) UK–EU Free Trade Agreement (FTA); (ii) Unilateral Trade Liberalisation (UTL); and (iii) return to World Trade Organisation tariffs (EU Tariffs Schedule – WTO)
Summary
distribution and reproduction in any medium, provided the original work is properly cited. In explicitly representing the input-o utput relationships among various sectors, the model is well suited to assessing the knock-o n impacts on the wider economy given a policy change in a particular sector In this project, it is used to estimate impacts of the Brexit scenarios focusing on the wider macro economy and the factor markets. Unlike the CGE model, the partial equilibrium model focuses on a specific sector (agriculture in this case), assuming the knock-o n impacts on the wider economy and, the feedback effect on the sector studied are negligible. Building on this assumption, the model provides more detailed and disaggregated results within the sector, the name ‘sectoral model’. Article focuses on some preliminary findings from this ongoing research
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