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HELM TALKS: FARMING Lecture 2

  1. 1. THEMES • British agriculture and the vulnerability to free trade • Defining trade and why it is a good idea • A level playing field • Standards and regulation • Carbon border taxes • EU, US & other trade deals • Hard BREXIT in December 2020 – a big shock to come
  2. 2. BRITISH AGRICULTURE & ITS VULNERABILITY TO FREE TRADE • Very little currently internationally competitive • Corn Laws in 19th century past example • Small fields, lots of hedges • One of the most variable geologies in the world • Lots of uplands with uneconomic sheep • Shaped by subsidies, not markets
  3. 3. DEFINING TRADE & WHY IT IS A GOOD IDEA • Absolute advantage – avocados & pineapples • Comparative advantage – wheat in the Ukraine • Allows specification – specialisation – cheese, wine • Avoids the huge costs and price of food of self-sufficiency • Little problem with physical security now – cyber war much quicker than starvation
  4. 4. LEVEL PLAYING FIELDS • All externalities priced – polluter pays principle universalised So: • Common carbon price (China) • Common pesticide taxes (US) • Common treatment of biodiversity loss (Brazil) Implication: A level playing field would produce a very different outcome.
  5. 5. STANDARDS AND REGULATION • Standards refer to: food quality, animal welfare, environmental and social practices • In trade, tend to be in “blocks” – EU, Japan & US standards • UK aligned with EU standards • Will require complex border checks and assessments
  6. 6. CARBON BORDER TAXES • Unilateral carbon targets need border adjustments to work • Agricultural produces tend to be bulky – lots of transport emissions • Long supply chains • Full carbon pricing will decrease the volume of trade
  7. 7. EU, US AND OTHER TRADE DEALS • Trade deals are always about agriculture • EU & CAP and French interests and protection • Regulatory convergence • US – focus on protecting farming interests and large-scale intensive production • Brazil – focus on beef & soya • NZ – focus on sheep, Australian beef • No level playing field free market exists in any of the targets for trade deals.
  8. 8. HARD BREXIT – A BIG SHOCK TO COME • EU + especially US trade deals essential for overall economy. • Agriculture = 0.6% GDP supported by lots of subsidies • Get ready for a big shock: international competition ↑ and BFP ↓.

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