The impacts of changes in agricultural policies in the United Kingdom on trade and agriculture especially in New Zealand – the WTO option

Abstract

The United Kingdom’s (UK) exit from the European Union (EU) will have a range of implications for the UK, the EU and other countries like New Zealand (NZ). The nature and extent of its impacts will be determined by the terms under which the UK exits, hence the impact of Brexit is yet unknown. This study assessed how the agricultural sector in the UK, the EU and NZ would be affected if the UK does not reach a trade agreement with the EU by 31st October 2019, then by default, the UK will have to comply with the WTO rules to trade with the EU, and third countries. The Lincoln Trade and Environment Model (LTEM), a partial equilibrium trade model that simulates international trade, production and consumption of agricultural commodities was used for the analysis. A WTO scenario was developed applying trade weighted outbound facing MFN (WTO) tariffs to imports from the EU and other third countries. In addition, the change in trade facilitation costs was set at 10 per cent. Modelling results showed a large impact on UK’s production and consumption of agricultural goods while the agricultural sector in the EU and NZ would be only slightly affected by this trade policy. However, the UK leaving the EU could work to strengthen the trading relationship with NZ depending on the UK’s access to the EU’s Single Market