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If the UK votes to leave the EU, it would have a severe consequences for trade with other EU states.
A new report from the Irish Agriculture and Food Development Authority, Teagasc, shows that there will be a significant impact on Irish agri-food exports.
The report by economists at Teagasc says that the extent of the impact which Brexit would have on the Irish agri-food sector would depend on a range of factors, but the UK’s future trading relationship with the remaining EU members (EU27) is the most important factor for Ireland.
Total Irish agri-food exports were worth nearly €11 billion in 2014.
The UK is the number one export destination, with agri-food exports in 2014 worth over €4.5 billion. This makes the UK market more important to the Irish agri-food sector than is the case for other sectors of the Irish economy.
Teagasc Economist Trevor Donnellan said that a Brexit could mean a reduction in the value of Irish agri-food exports of anything from €150 million (1.5 per cent) to €800 million (7.2 per cent) per annum.
The economists say that the UK might negotiate a trading arrangement that closely approximates a Free Trade Agreement (FTA) and this would be the most desirable outcome for Ireland.
However. It adds that the administrative costs associated with trade with the UK would increase for Irish exporters even under an FTA, meaning that even the most favourable Brexit outcome would have a negative impact on the Irish agri-food sector.
While the volume of trade might be relatively unhindered under an FTA arrangement, the cost of doing business with the UK would increase, the report says.
The most negative outcome for Ireland would result if the UK and EU27 failed to negotiate the terms of the UK’s exit.
At that point, as World Trade Organisation (WTO) members, the EU27 and UK, would only be obligated to offer each other Most Favoured Nation status.
This would result in the imposition of Most Favoured Nation tariffs on trade between the UK and the EU27 and would be expected to lead to a reduction in the level of trade between the UK and the EU27.
Under Brexit the UK would also need to address its trading relationships with other countries around the world, the report says and as a non-EU member, the UK would be free to negotiate deals with countries that already have a trade deal with the EU and countries that do not yet have a trade deal with the EU.
From the perspective of the Irish agri-food sector the least desirable outcome would occur should the UK establish liberal trade agreements with agri-food net exporters that do not currently have trade agreements with the EU27 as this could increase the supply of agricultural commodities in Europe, with adverse consequences for EU27 commodity prices.
Even if the UK and EU27 resort to trade relations under Most Favoured Nation terms, agri-food sector trade between the EU and the UK is unlikely to collapse.
As a net importer the UK would need to continue to import agri-food products and would not be expected to pursue an agri-food self-sufficiency policy, the Teagasc report says.
Should the UK leave the EU and if trade takes place on a Most Favoured Nation basis, there would be notable agri-food trade consequences for several EU member states, concentrated in particular sectors.
Ireland’s beef, dairy and lamb exports would be affected. Denmark’s pig and dairy trade and the Netherlands’ exports of vegetable products would be affected. In Southern Europe, exports of wine from France, Spain and Italy would be affected, as would exports of olive oil from Greece.
The extent of the impact on EU27 agri-food exports to the UK would depend on the availability of competitive agri-food exports from counties outside of the EU, and would also depend on consumer country of origin preferences, which are influenced by amongst other things, traceability, animal welfare, human health and sustainability concerns.
The report was published at a Teagasc and Agricultural Economics Society of Ireland seminar in County Kildare last week.