{"id":3763,"date":"2019-07-15T08:36:26","date_gmt":"2019-07-15T07:36:26","guid":{"rendered":"http:\/\/blogs.sussex.ac.uk\/uktpo\/?p=3763"},"modified":"2019-07-15T08:38:06","modified_gmt":"2019-07-15T07:38:06","slug":"hiccups-that-make-us-reel","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/uktpo\/2019\/07\/15\/hiccups-that-make-us-reel\/","title":{"rendered":"Hiccups that make us reel"},"content":{"rendered":"Share this article: <\/em> \"Facebook\"<\/a>\"twitter\"<\/a>\"reddit\"<\/a>\"pinterest\"<\/a>\"linkedin\"<\/a>\"mail\"<\/a>

\"\"\"\"15 July 2019<\/em><\/p>\n

Dr Michael Gasiorek is a Senior Lecturer in Economics at the University of Sussex and\u00a0 <\/i>Julia Magntorn Garrett is a Research Officer in Economics at the University of Sussex. Both are Fellows of the UK Trade Policy Observatory.\u00a0<\/i><\/em><\/p>\n

A favourite band (of at least one of the authors of this blog) from the 1980s was the Cocteau Twins (See, or rather listen to\u2026Sugar Hiccup<\/a>) \u2013 well-known for the dreamy unintelligibility of their lyrics.\u00a0 Which of course leads to the dreamy unintelligibility of some of the promises being made around Brexit. Supporters of Brexit have argued that the UK need not be overly concerned with a \u2018No deal\u2019 Brexit. This ranges from positions that \u2018No deal\u2019 would not be \u201cas frightening as people think\u201d although there would be \u201csome hiccups in the first year\u201d (David Davies<\/a>), and that although there may be \u201csome disruption\u201d Britain would \u201csurvive and prosper without a deal\u201d (Jeremy Hunt<\/a>), to arguments that the idea that \u2018No deal\u2019 would have a negative impact were \u201ca fantasy of fevered minds\u201d (Jacob Rees Mogg<\/a>).<\/p>\n

But how big could those disruptive hiccups be? We cannot know for certain, but Jeremy Hunt thinks they are big: on 1st July, he pledged \u00a36 billion to help farmers and the fishing industry<\/a> in the event of no deal. This is a sector which comprises circa 1% of the UK economy, yet may need \u00a36 billion in support.<\/p>\n

Leaving aside the WTO legality of any such action (see here<\/a> for a discussion), let\u2019s try and put these numbers in context. First, we consider how much agriculture and food-processing (agri-food) trade would be directly affected by the tariff changes arising in the event of \u2018No deal\u2019. Second, we assess how big the impact might be when we simulate the impact of the UK government\u2019s proposed tariff changes in a more formal economic model.<\/p>\n

How much agri-food trade would be affected?<\/strong><\/h3>\n

Agricultural tariffs, for products such as sugar, meat and dairy,[1]<\/a> can be particularly high so any changes may have relatively large consequences. In a \u2018No deal\u2019 scenario the resulting tariff changes directly impact on both exports and imports, and the tables below provide some summary statistics.<\/p>\n\n\n\n\n\n\n\n\n\n\n
Table 1: UK total agri-food trade (average 2017-2018)<\/strong><\/td>\n<\/tr>\n
Partner country<\/strong><\/td>\nTotal Exports, \u00a3bn
\n(% of total UK agri-food exports)<\/strong><\/td>\n		Total Imports, \u00a3bn
\n(% of total UK agri-food imports)<\/strong><\/td>\n<\/tr>\n
EU<\/td>\n14.5 (62%)<\/td>\n35.6 (71%)<\/td>\n<\/tr>\n
FTA & GSP countries1<\/sup><\/td>\n3.2 (14%)<\/td>\n8.2 (16%)<\/td>\n<\/tr>\n
Rest of the World<\/td>\n5.8 (25%)<\/td>\n6.1 (12%)<\/td>\n<\/tr>\n
Total<\/em><\/td>\n23.6<\/em><\/td>\n49.8<\/em><\/td>\n<\/tr>\n
1 <\/sup>Covers countries which the UK, through its membership of the EU, currently has Free Trade Agreements (FTAs) with or which are eligible under the EU\u2019s Generalised Scheme of Preferences (GSP), including countries under Everything But Arms (EBA).<\/em><\/td>\n<\/tr>\n
Source: UN Comtrade, HS2017 6-digit. Values have been converted from USD to GBP using the average OECD exchange rate for years 2017-2018. Agri-food is defined as all products in HS chapters 01-24<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Table 2: UK affected agrifood trade (average 2017-2018)<\/strong><\/td>\n<\/tr>\n
Partner country<\/strong><\/td>\nAffected Exports, \u00a3bn
\n(% of total UK exports of ‘affected’ products)<\/strong><\/td>\n		Affected Imports, \u00a3bn
\n(% of total UK imports of ‘affected’ products)<\/strong><\/td>\n<\/tr>\n
EU<\/td>\n11.4 (71%)<\/td>\n7.6 (71%)<\/td>\n<\/tr>\n
FTA & GSP countries<\/td>\n*<\/td>\n*<\/td>\n<\/tr>\n
Rest of the World<\/td>\nn\/a<\/td>\n3.1 (9%)<\/td>\n<\/tr>\n
Total<\/em><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
* Although not included in this analysis, some of UK’s exports and imports from FTA countries will also be affected if the existing agreements are not rolled over.<\/em><\/td>\n<\/tr>\n
Source: UN Comtrade, HS2017 6-digit. Values have been converted from USD to GBP using the average OECD exchange rate for years 2017-2018. Agri-food is defined as all products in HS chapters 01-24<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Exports:<\/strong> On average, around 62% of all UK agri-food exports go to the EU. In a \u2018No deal\u2019 outcome, the UK would face tariffs on exports to the EU, and also other countries who have not agreed to roll over existing free trade agreement (FTA) arrangements. The value of UK agri-food exports to the EU that could face new tariffs is around \u00a311 billion, accounting for over 71% of UK exports of these affected products.[2]<\/a> The imposition of EU (and FTA country) tariffs will make it more difficult for these products to be exported from the UK.<\/p>\n

Imports:<\/strong> Here there are two effects:<\/p>\n