USMEF Economist Examines Brexit’s Impact on Meat Trade

With voters in the United Kingdom choosing to leave the European Union, U.S. Meat Export Federation (USMEF) Economist Erin Borror discusses the near-term and longer-term impact of the so-called “Brexit” referendum on global meat trade.

Borror explains that the meat industry’s most immediate concern is the effect on currencies, with the U.S. dollar and Japanese yen strengthening, a loss of momentum for the euro, and significant weakening of the British pound. She notes that most of the UK’s beef and pork imports currently originate within the EU, and it remains to be seen how the UK’s departure will impact these imports. Trade between the UK and EU, including decisions on tariffs, sanitary and phytosanitary (SPS) measures and other issues, will be the subject of extensive negotiations that are expected to take about two years.


TRANSCRIPT:

Joe Schuele: In this U.S. Meat Export Federation report, USMEF Economist Erin Borror offers her thoughts on how the referendum in the United Kingdom opting to leave the European Union could affect global meat trade.

Erin Borror: Our biggest concern presently is the impact on currencies and we know that with uncertainty there is generally a rush to the safe haven, which is still the U.S. dollar and also the Japanese yen. And so in the very short term, the Japanese yen strengthened but the Japanese government doesn’t exactly want a stronger currency at this time and they don’t see that favoring their exports. But it’s trading around 1.02 to the dollar, which is basically the strongest since November of 2014. The other big impact was on the euro immediately and so it had been trading about 1.13 for the past couple of months, really, and it’s now closer to 1.10. So that helps our big competitor on the pork side. That’s potentially the biggest impact, giving them additional tailwind on those pork exports out of Europe. Of course the pound is taking the biggest hit, but that’s not as relevant to us as far as meat trade. The impact for meat trade is going to be most heavily felt within Europe itself. If we look at UK imports of beef, it’s about 340,000 metric tons – more than 60 percent comes from Ireland specifically. The UK is a major net pork importer, as well, and so when we look at their pork imports, they are about 730,000 tons, and again mostly with other European members states – Denmark, Netherlands, Germany – so there are basically two years for the UK to work out a deal with the EU and frame up how their relationship is going to look, including tariffs but also related measures and how that agreement with be formatted.

Joe Schuele: For more on this and other trade issues, please visit USMEF.org. For the U.S. Meat Export Federation, I’m Joe Schuele.