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.