Industry weighs in on “Brexit” referendum
June 23, 2016
by Erica Shaffer
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The Brexit vote could have a major global economic impact.
KANSAS CITY, Mo. – “It’s going to be one heck of an interesting day here,” — and a historic one, as voters in the United Kingdom head to the polls to decide the fate of the European Union. Data collected by the UK’s Electoral Commission shows a record 46,499,537 registered voters.
Guy Whitten, a professor of political science and director of the European Union Center at Texas A&M Univ., connected with MEAT+POULTRY from Brussels which is headquarters for the EU. Whitten said the ramifications of Britain leaving the EU — a so-called “Brexit” — would be significant.
“Mechanically it would take at least two years (due to EU rules about leaving) to carry out,” Whitten explained. “In some ways, not a lot would change because the UK has always been a reluctant member and has opted out of the open border (coming in without passports) and the currency.
“In other ways, there would be major changes — citizens of the UK and EU would no longer be able to work and live seamlessly in the other place and laws/regulations passed in Brussels would no longer go into effect in the UK,” he added. “There would also likely be economic downturns in both places, though how severe and how long is hard to know.”
Also uncertain is the impact a Brexit would have on the international community.
“The European Union is an important customer for US red meat, but it is also a formidable competitor — especially when it comes to pork,” said Joe Schuele, vice president of communications for the US Meat Export Federation (USMEF). “So, USMEF is certainly concerned about any economic turmoil stemming from the Brexit vote, particularly if it causes the euro to lose value versus the US dollar.
“The weak euro created a significant price advantage for EU pork in many key markets for some time,” Schuele added, “but the euro has recently regained some strength. We hope to see that continue, but Brexit could case the euro to take another negative turn.”
Schuele noted that there is great uncertainty about the potential duty and access structures in Europe should the UK leave the EU.
“If the UK’s meat imports and exports are limited by higher duties or lack of an agreed-to protocol, the biggest impacts would be on beef and pork trade with Ireland and the Netherlands, and pork trade with Denmark and Germany,” he said. “The UK is a major net importer of meat products, mainly from these fellow EU member states.”
Whitten said US-based companies with substantial UK holdings likely are worried about the value of those holdings in the short term. The threat of the UK leaving the EU has been particularly vexing, because there is no way for companies to prepare for it. Cargill, which is a global corporation with holdings throughout Europe and the UK, “…believes there are distinct advantages for the UK and member countries to remain together as part of the European Union, as it provides economic and trade stability that supports business investment and growth,” the company said in a statement.
The company’s position is in line with that of the UK Food and Drink Federation, which conducted a poll of its members. Seventy-one percent endorsed the campaign in support of the UK remaining in the EU.
Ian Wright, director general of the FDF, said “71 percent of FDF members who voted believe the interests of their business will be best served by the UK voting to remain in the European Union. Members identified the single market, access to raw materials and the free movement of labor among key considerations in coming to their view.”
But it’s the single market and the free movement of workers, among other facets of EU membership, which have soured many Brits against the bloc. For the anti-EU crowd, the Brexit referendum is about inclusive governance, immigration and domestic issues.
“All of these factors are driving what is going on along with heavy doses of nationalism and xenophobia,” Whitten said.
The UK isn’t alone in this thinking. A Pew Research Center poll conducted ahead of the referendum found that “Euroskepticism” is on the rise across Europe and “…about two-thirds of both the British and the Greeks, along with significant minorities in other key nations, want some powers returned from Brussels to national governments.”
The poll also found that that Europeans generally disapprove of the EU’s handling of refugees and the economy.
With the vote to stay or go too close to call, the referendum also has raised concerns about the future of the EU. “Beyond the potential near-term economic disruptions, a Brexit vote could also have dire implications for the future viability of the EU experiment as a whole, as member states attempt to use the threat of leaving the EU to leverage concessions on a wide range of issue,” Schuele said. “The UK also has provided a relatively moderate voice within the EU regarding trade and regulatory issues, and this is another way that its departure could impact the US red meat industry.”
Europe and the UK have long been closest partners of the US in trade and international politics. Whitten said the referendum represents “a big upheaval for them, so we have to be concerned with how it is going to work out. On the other hand, our shared security interests are still very much the same and those partnerships are not on the table.”
“If it fails, it’s just another referendum,” Whitten said. “If it passes, the worry is that the whole EU project might come unglued.”