Frontier hosted a roundtable today on the future of agriculture policy in the UK, in the context of Brexit.
A wide-ranging discussion ended up focusing on three specific issues:
Choice of ‘big bang’ reforms, similar to New Zealand, compared to more incremental progress adapting the current model for a few new priorities (like climate change)
how to manage the transition under either scenario, particularly the distributional consequences and the link to new trade negotiations.
how to promote innovation and productivity growth during the transition, and the role of government, private sector retailers and wholesalers and farmers.
The discussions were facilitated by two speakers: Ulrike Hottop, formerly chief economist at DEFRA at now Professor of Economics at the University of Kent, and Amar Breckenridge, Senior Associate at Frontier Economics. The event was chaired by Matthew Bell, Director of Frontier Economics Public Policy Practice, and is part of Frontier’s leadership of the Trade Knowledge Exchange, an initiative involving 4 other institutions in the UK, Canada and Australia.
Agriculture is a policy hotspot for several reasons. Leaving the EU would provide the UK with an opportunity to reform the policy framework for the sector. The proposed direction of policy is to shift subsidies away from production to environmental services. But, as speakers and participants observed, there are some fundamental questions that need to be answered. These include what can be done to stimulate productivity and innovation, and what role, if any, subsidies could play in this regard. The distributional effects of proposed policy changes also need further attention.
Trade liberalisation could lead to productivity gains in aggregate, as well as to consumer benefits. But the political impetus for liberalisation would likely be weakened by the effects of liberalisation on a sizeable cohort of low productivity farms. As things stand, the UK has yet to decide whether the future shape of trade policy would be marked by incremental change, or more radical transformations as undertaken in New Zealand or Australia.
On the trade policy side, one of the neglected issues in current discussions was the role of services as a facilitator of trade, including agriculture and manufactured food products. Preliminary modelling estimates suggest that an increase in trade costs as a result of increased services trade restrictiveness (e.g. in cross border transport and logistics services) after Brexit could have significant effects on UK agriculture trade.
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