The French government will have to allocate financial aid to farmers to help them live through the aftermath of potential "hard Brexit," since restoration of customs duties and non-tariff barriers will be a powerful blow to French agriculture exports to the United Kingdom, Thierry Pouch, the director of the economic studies department at the French Chambers of Agriculture, told Sputnik
MOSCOW (Pakistan Point News / Sputnik - 28th January, 2019) The French government will have to allocate financial aid to farmers to help them live through the aftermath of potential "hard Brexit," since restoration of customs duties and non-tariff barriers will be a powerful blow to French agriculture exports to the United Kingdom, Thierry Pouch, the director of the economic studies department at the French Chambers of Agriculture, told Sputnik.
The crushing defeat of the divorce deal, negotiated between London and Brussels, in the UK parliament on January 15 further stoked fears of a no-deal Brexit across Europe. If the sides do not strike and endorse any deal by the Brexit deadline, March 29 will mark the start of trade on World Trade Organization terms with restoration of relevant tariff and non-tariff duties.
"I hardly see how the government could help French exporters who will face custom duties and sanitary control which also will be toughened by London, how help them given the tariff and non-tariff barriers? One of possible solutions would be financial help to farmers, in order to adapt and find alternative markets, to try to compensate the losses of losing the UK market ... I don't see how we could help them, other with than with financial aid to live through the shock which Brexit represents," Pouch said.
THIRD LARGEST MARKET FOR FRENCH AGRICULTURAL PRODUCTS
According to the French Chambers of Agriculture, France estimates the losses for its agricultural sector in case of "hard Brexit" at 500 million Euros ($570 million), with the overall damage to the French economy of 3 billion euros.
Pouch explained that the agricultural exports would suffer the hardest blow since some products would face up to 50 percent of tariffs and additional checks.
"If there is a 'hard Brexit,' the UK will restore its customs duties as the WTO member. The imports will become more expensive. There is a number of products which will be affected by these customs duties - and firstly it's agricultural food products that are mostly concerned by the customs duties increase from 10 to 50 percent, like meat, grain, sugar and confectionary products, milk and dairy products, flour, fruit, wine," he said.
According to the expert, the United Kingdom is the third largest market for French agricultural products after Belgium and Germany.
"In France wine sector would suffer the most. We have already seen the decline of exports to the UK for two years. We export less wine and spirits, less apples, and the UK is a big Apple consumer. France is very exposed in terms of these products," he argued.
'HARD BREXIT' PAINFUL FOR BOTH SIDES, UK MAY FACE FOOD SHORTAGES AMID price BOOST
Meanwhile, it is not only France that will be affected, but also the Netherlands, Germany and northern European countries, Pouch said, adding that the situation may also force the European Union to enhance its crisis management budget as part of the common agricultural policy.
The United Kingdom, however, will also bear the brunt of hard Brexit since its imports will be more expensive, according to the expert.
"British customers will have to pay more for these imported products. It'll add to the Currency effect, because the pound crumbled since 2016, so if the currency is weak, imports are more expensive. So with the currency exchange rate to euro and the customs duties, inflation of the food prices in the UK would be high. It will not necessarily be an immediate effect, it has to rather be seen as a medium- or long-term effect," he added.
Pouch clarified that it would be difficult for the United Kingdom to "reinstate domestic production to compensate for the reduction of imports."
"It will either have to sign free trade agreements with the US, Australia or New Zealand for example or it will have to face the food shortages," he suggested.
Pouch warned that the European fishery sector, in turn, would also feel Brexit ramifications if the bloc lost fishing rights in UK waters.
"The fishery sector is very exposed to Brexit as well. UK's territorial waters are rich in fish, so the north of France, the port of Boulogne, Normandy, Brittany would be strongly affected. We need to try to negotiate the access to territorial waters with the UK," he said.
EU HAS TO SEARCH FOR OTHER MARKETS TO OFFSET BREXIT FALLOUT
London's main trade partners, such as Ireland, the Netherlands, France, Germany, will have to to find a substitute to the UK market, which will be a hard task amid the already saturated European internal market.
"And if we see what happened after the Russian embargo, all those countries relied on the internal European market. The market was clogged, the prices dropped, because we could no longer export to Russia. The same scenario is possible with the UK ... France could export significantly more to the third states, Asia, Africa, middle East, where the demand is increasing. But clearly if all the European countries affected by Brexit do that same thing we would find ourselves at the same markets again," he said.
ALONG WITH RUSSIAN EMBARGO, BREXIT WILL ONLY CONTRIBUTE TO FARMERS' WOES
The expert went on to note that "hard Brexit" would be another blow to the farmers, who had not fully recovered from losses caused by the Russian retaliatory economic restrictions imposed in the wake of the Ukraine crisis.
"It could create difficulty in our trade, that's certain. Import embargo introduced by Russia in August 2014 continues, it's been almost five years now, plus the 'hard Brexit' and I'd also add the commercial effect of the treaties the EU is signing notably with Canada, negotiations with Mercosur, with Latin America, re-start of negotiations with Washington - all that will put farmers in difficulty. If you take the Russian embargo, all the European exporters saw their exports brought to zero. This situation is commercially preoccupying," Pouch noted.
According to Pouch, "even if the [Russian food] embargo is lifted tomorrow", the bloc will hardly manage to "recuperate this market." He explained that Russia's food embargo "only amplified" the progress in domestic agriculture production, with the country already being the world's first exporter of wheat, and also prompted it to diversify its trade.
Meanwhile, the United Kingdom is in much less favorable position, "since it is dependent on imports to feed itself, it's not the case for Russia," the expert concluded.
