Yesterday, we heard from American Farm Bureau economist Veronica Nigh about the impending exit of Great Britain from the European Union, and the potential impacts to agriculture. Today, we turn the argument on its head, and think about what re-negotiating treaties with the EU will be like without the moderating voice of the UK:
“That moderating presence of the UK is felt throughout a lot of decision making, and you would expect it to have an impact in a lot of different ways. And another thing that I haven’t heard a lot about, is that the UK’s contributing quite a lot to the EU’s revenue stream, I think it’s interesting to think about. The EU’s not allowed to borrow money, so it’s revenues have to cover it’s spending. And the UK contributes about 10% of the total EU revenue, they’re the third largest net contributor to the EU.
So, when your third-largest contributor drops out, that could have some potential impact on how the EU government operates, and could potentially lead to some slowdowns. We complain a lot about how slow the EU is making decisions as it is, but when you lose a pretty significant amount of your revenue and you’re trying to do the same amount of work one could anticipate some slowdowns in the operation of the government, as well.”
Of course, when the news came out that UK citizens had voted to leave the European Union, markets worldwide reacted violently, but in the days since, there’s been some moderation, and Nigh says that’s to be expected short term. But, long term, there is no road map:
“I think short term, this is quite significant, and we’ve seen that in the markets. But I think in the long term I personally don’t believe it’s going to be as big a market mover in the short term, we’ll all figure out how this is going to work.”
And Nigh anticipates that the US/ UK relationship will carry on:
“The EU and the UK will figure out how to trade with each other once again, without that common market. The strong relationship that the US enjoys with the UK will march along, and there’s opportunities to actually strengthen that relationship.
So, it is a big deal, it is a big deal politically, but some folks have been pretty dooms day, but from an ag perspective, I don’t necessarily think this is going to have the negative consequences that folks are predicting.”
And as far as the UK itself, Nigh says they’ll fall back on hundreds of years of history:
“I would hope so. I think with every passing day we know more about how this is going to play out, and in the UK we have a very thoughtful country that has governed itself before, obviously, and hasn’t forgotten what that looks like. It’s not like they’re a brand new country trying to figure out how to govern, they’ve got a long history and they’ll fall back on that. I think we’ll see a lot of the market impacts start to moderate, and hopefully go away.”
Veronica Nigh, American Farm Bureau Economist.