What Does Brexit Mean For The US Fruit Export Sector?

The decision made by the U.K‭. ‬to leave the European Union after a referendum back in June has taken many by surprise‭, ‬not least maybe in the U.K‭. ‬itself‭. ‬As a result‭, ‬however‭, ‬there is now a series of impacts that will be felt first and foremost in the U.K‭.‬‭, ‬and then in many other places around the world‭. ‬The reality is that with so many areas still uncertain‭, ‬there are probably more questions than answers at the moment‭. ‬There are some indicators where‭, ‬with a bit of lateral and logical thinking‭, ‬it is possible to start developing a view of how the future might begin to look‭.‬

A recap of what happened might be a sensible place to start‭. ‬The vote was 52‭ ‬to 48‭ ‬percent in favour of leaving the EU‭. ‬Much of‭ ‬the debate in the run up to the referendum was centred around key issues such as‭: ‬migration from the rest of Europe‭ (‬and beyond‭)‬‭ ‬to the U.K‭., ‬the impact of new financial streams being available to areas‭, ‬such as health and education‭, ‬rather than being allocated to the EU Commission in Brussels‭, ‬and the ability of the U.K‭. ‬to re-determine its own laws and regulations as opposed to being subject to these being decided on by organisations such as the European Parliament‭. ‬The vote across the U.K‭. ‬was split in terms of geography‭ ‬‮—‬‭ ‬with Scotland and Northern Ireland voting strongly in favour to remain‭, ‬and Wales‭ (‬as well as large parts of‭ ‬England‭) ‬opting to leave‭. ‬

For the U.K‭. ‬to now formally leave the EU‭, ‬the government has to trigger the so called‭ Article 50, ‬which would give the U.K‭. ‬up to two years to negotiate its exit from the rest of the EU‭. ‬When the U.K‭. ‬government actually does this is not clear‭, ‬but as time goes by‭, ‬it will come under increased pressure to make a final decision on what it has been mandated to do‭. ‬It has been argued that for the time being‭, ‬over the next two years‭; ‬therefore‭, ‬that not much might change‭. ‬This seems to be wishful thinking‭.‬

A number of things are almost inevitable‭. ‬The first‭, ‬from a U.S‭. ‬export point of view‭, ‬is currently the Pound reached its lowest‭ ‬level against the US‭$ ‬for a generation‭ ‬‮—‬‭ ‬making imports from the U.S‭. ‬more expensive‭. ‬The U.S‭. ‬also has the import tariffs it pays set at a European-wide level‭. ‬By leaving the EU‭, ‬the U.K‭. ‬will have to negotiate its own trade deal with the U.S‭. ‬It might be that‭, ‬ultimately‭, ‬this looks a lot like what is already in place‭. ‬But no one knows for sure‭.‬

The whole situation is complicated by the fact that the U.S‭. ‬and the EU have for some time already been involved in‭ ‬the Transatlantic Trade and Investment Partnership‭ (‬T-TIP‭) ‬talks‭. ‬These are by no means finalised‭, ‬but are at some form of advanced stage of discussion‭. ‬The appeal for the U.S‭. ‬of‭ ‬having to start all over again with the U.K‭. ‬in a separate trade agreement might be somewhat dampened‭. ‬Much will also depend on‭ ‬the outcome of the U.S‭. ‬election in November‭. ‬Where there is a will‭, ‬there is a way‭, ‬of course‭, ‬but even negotiating a relatively simple trade deal might take some time‭. ‬If an agreement cannot be reached in the two-year period‭, ‬it will be likely that basic‭ ‬WTO‭ (‬World Trade Organization‭) ‬tariff rates will be adopted between the U.S‭. ‬and the U.K‭.‬

The other consequence is U.K‭. ‬farmers will no longer be subject to the rules of the Common Agricultural Policy‭ (‬CAP‭). ‬This makes‭ ‬payments of some US$4‭ ‬billion per annum to British farmers‭. ‬These are split between so called Pillar I and II payments for production and environmental subsidies respectively‭. ‬The view of the U.K‭. ‬Treasury has‭, ‬for some time been‭, ‬that Pillar I payments do not fit with current U.K‭. ‬government thinking‭. ‬

While these would probably not be phased out altogether‭, ‬it is possible that they might well be reduced over a period of time‭. ‬Across the board‭, ‬U.K‭. ‬farmers might well be less subsidised than in the past‭. ‬Payments for good environmental practice are likely to remain in place‭. ‬Farming organisations will oppose cuts in payments to farmers‭, ‬but the demands of other sectors of the economy will see increased competition for government funding‭. ‬

Theoretically‭, ‬there should be more market opportunities for the U.S‭. ‬‮—‬‭ ‬provided these American companies can meet all the other‭ ‬technical and commercial requirements of the U.K‭., ‬which include price‭. ‬The U.K‭. ‬market will be no less competitive than in the‭ ‬past‭. ‬Just having a competitive price does not guarantee market success‭. ‬The opportunities will also be open to others‭ ‬‮—‬‭ ‬not just the U.S‭. ‬Reduced CAP support will increase the basic opportunity for a less protected market‭.‬

Some routines won’t change though‭. ‬The U.K‭. ‬is still a big import market‭, ‬whether it is in the EU or not‭ ‬‮—‬‭ ‬some 65‭ ‬million people‭. ‬We still like U‭.‬S‭. ‬fruit‭, ‬although we also like fruit from Chile‭, ‬SA‭, ‬NZ‭, ‬Peru and other EU countries such as Holland‭, ‬Spain‭, ‬Italy and France‭.‬‭ ‬Supermarkets will still drive the overall market‭, ‬but growth will still come from the development of more discount stores‭, ‬online shopping and the convenience sectors‭. ‬The U.K‭. ‬will still have high commercial and technical standards to adhere to for all suppliers‭ ‬‮—‬‭ ‬including those in the U.S‭. ‬who want to deal with British customers‭, ‬in either the retail or foodservice sector‭.‬

At this stage‭, ‬it is still too early to tell what will happen in terms of the final detail‭. ‬The real action will begin when‭ Article 50‭ ‬is activated‭. ‬What is clear is some aspects of life in Britain will never be the same again‭. ‬The decision to leave the EU will‭ ‬have far reaching consequences for our relationship with the rest of Europe‭, ‬and then the rest of the world for years to come‭, ‬and this includes our relationships with the U.S‭. ‬

John is Divisional Director at Promar International‭, ‬the value chain‭ consulting arm of Genus plc‭. ‬He has worked extensively in the fresh fruit sectors and this includes work in the UK‭, ‬the US‭, ‬Latin America‭, ‬South Africa‭, ‬Oceania and Asia‭. ‬He can be contacted at the following email‭: ‬john.giles@genusplc.com‭. ‬He is the current Chair of the Food‭, ‬Drink‭ ‬&‭ ‬Agricultural Group of the Chartered Institute‭ ‬of Marketing‭.