Could Brexit Boost Olive Oil Exporters?

Summary

Theresa May trig­gered Article 50 of the Treaty of Lisbon, start­ing the two-year Brexit nego­ti­a­tion process, which will fun­da­men­tally change trade agree­ments between the UK and the EU, poten­tially cre­at­ing new oppor­tu­ni­ties for olive oil exporters out­side of the EU. The UK’s reliance on food imports, par­tic­u­larly from the EU, will likely lead to increased prices for imported goods, includ­ing olive oil, and the pos­si­bil­ity of adopt­ing a ​“New Zealand-style trade model” to open the mar­ket to exporters out­side of Europe.

At the end of March, UK Minister Theresa May offi­cially trig­gered Article 50 of the Treaty of Lisbon, set­ting in motion the two-year nego­ti­a­tion process of Britain leav­ing the European Union – or as it’s more com­monly referred to, Brexit.

The move sig­nals a fun­da­men­tal change in the way the EU and Britain will con­duct trade now and in the future. Not only will this affect trade agree­ments between the UK and the EU (allow­ing the UK to freely sell goods to EU coun­tries with­out incur­ring addi­tional import taxes), but it’s also set to have a mas­sive impact on food imports which could cre­ate new trade oppor­tu­ni­ties for olive oil pro­duc­ers and exporters located out­side of the EU.

The UK cur­rently has a strong reliance on food imports, with an esti­mated 27 per­cent of all food eaten in the UK (by value) and 40 per­cent of all fresh pro­duce com­ing from the EU. In total, 2016 saw £47.5 bil­lion ($60.8 bil­lion) in food and agri­cul­tural prod­ucts being imported into the UK, of which over 70 per­cent came from the EU. It’s a need that the UK itself can­not sup­port, with just 164,000 of crop-grow­ing land.

Thanks to Brexit, it is esti­mated that the prices for imported goods will rise by at least eight per­cent, with prices for items like olive oil expected to rise by up to 20 per­cent due to the fact that pro­duc­ers in coun­tries like Italy and Greece have been expe­ri­enc­ing poor har­vests over the past few months. This price increase is unlikely to change despite any new trade deals bro­kered between the EU and the UK, thanks to the costly, increased bor­der and cus­toms con­trols that Brexit will require.

Dutch multi­na­tional food and agri­cul­ture finance bank­ing com­pany Rabobank has sug­gested that a solu­tion might be found in the UK adopt­ing a ​“New Zealand-style trade model,” which would see the elim­i­na­tion of food import tar­iffs alto­gether, open­ing the mar­ket to exporters out­side of Europe who can offer UK cus­tomers sim­i­lar prod­ucts at a more favor­able price.

One of the import areas where this could occur is olive oil, with UK MP and Prime Minister’s trade envoy to Morocco and Tunisia Andrew Murrison even sug­gest­ing that smaller coun­tries with an export capac­ity (such as Tunisia) could be the key to a more read­ily avail­able, com­pet­i­tively priced source of olive oil for UK con­sumers.

In recent years, Tunisia has out­stripped sev­eral European coun­tries in olive oil pro­duc­tion and while the EU cur­rently has waived taxes on up to 35,000 tons of olive oil imports until the end of the year, it is a move that that has not been well received by European farm­ers, many of whom fear that intro­duc­ing a cheaper olive oil source into the EU mar­ket will under­cut local pro­duc­ers.

If the UK does decide to open adopt a more free mar­ket approach, it could pose bad news to EU olive oil exporters, who will lose their pref­er­en­tial access to UK buy­ers via a sin­gle mar­ket.

Other olive oil pro­duc­ing coun­tries such as Australia might also be able to ben­e­fit from Brexit, where farm­ers have pre­vi­ously com­plained that the strin­gent label­ing and mar­ket­ing require­ments for export­ing olive oil (as well as the sub­si­diza­tion and tar­iff pro­tec­tion of European goods) make sell­ing to EU mar­kets a sig­nif­i­cant chal­lenge.

• Agrimoney


• Olive Oil Times