The UK after the referendum: renegotiating tariffs and beyond, conference paper

Negotiating market access in the wake of Brexit is a difficult matter. On the one hand, tariffs with the EU and the rest of the world have to be renegotiated. On the other hand, existing Tariff Rate Quotas (TRQs) of the EU and third countries have to be adjusted in order to deal with this new situation. According to some professionals TRQs are likely to become a contentious issue in Britain’s re-establishment of its status as an independent WTO member. While the UK is highly interconnected with the EU in almost all sectors the interdependency becomes especially apparent in the agricultural sector. Britain’s self-sufficiency rate of food products amounts to only 62 % which is also mirrored in a highly negative trade deficit in this sector. Accordingly, the agricultural markets in the UK and the exporting countries are expected to be particularly affected by a Brexit. The aim of this paper is twofold. First, comprehensive quantitative effects of a tariff scenario are analysed with a focus on the EU agricultural sector. Therefore, we assume that the UK trades under the rules of the WTO by adopting MFN tariffs. It turns out that the impact of a Brexit on agricultural sectors in Europe is mainly negative with the most pronounced effects in the meat and livestock sectors. Second, we plan to dig deeper into the question how renegotiation of an existing TRQ, i.e. the Hilton quota for beef, affects the stakeholders involved. Therefore, we combine several quantitative simulation models. The tariff scenarios are simulated with the MAGNET model a global computable general equilibrium model which is based on the GTAP model and database. In order to grasp the complex implications of a renegotiated beef quota for UK and the EU-27 across agri-food markets we also employ AGMEMOD a partial equilibrium model to focus on beef and related markets and to provide a detailed price vector for FARMIS a farm-type model which allows for assertions on farm incomes and its distribution across farms.