UK Makes Brexit Official; What are Implications for U.S. Rice?

Mar 30, 2017
Vanishing act
Brexit Graphic

BRUSSELS, BELGIUM – In a move that will have implications and present opportunities for U.S. rice, the Prime Minister of the United Kingdom informed the President of the European Union yesterday that the UK is invoking its rights under Article 50 of the Treaty on European Union to withdraw from the EU.  Teresa May’s six-page letter formalized what all knew was coming since UK citizens voted to leave the EU in June – the “Brexit.”

The prime minister’s action begins a two-year negotiation between UK and EU officials to remove the UK from more than 45 years of regulatory, economic, and political integration and establish a new relationship with the remaining 27 members of the EU.

“This task is tremendously complicated and it’s unclear if two years will be sufficient,” said Bob Cummings, USA Rice COO.  “Many believe that the result will be an interim agreement that recognizes Brexit while the two sides continue negotiations, and the U.S. rice industry has a definite stake in the outcome.”

At issue for the U.S. industry is how the much-diminished European market for U.S. rice will fare.  What has essentially been a single market: the EU, is becoming two markets: the EU and the UK.

“We will need to work closely with U.S. trade officials on the treatment of the existing 38,000-metric-ton tariff rate quota for milled rice that the United States has with the EU,” Cummings said.  “Brexit should not affect that agreement that is the foundation of much of our current access in the EU where duties on U.S. rice are high while either very low or non-existent for many, many competitors.”

Cummings acknowledged that much of the U.S. rice heading to the EU went to the UK, but that once Brexit is complete, the UK will have to establish its own tariff regime for imports not only from the EU but also from all other countries, including the United States.

“Any U.S.-UK trade deal is at least two years away as the UK is unable to negotiate bilateral agreements with other countries while still a member of the EU,” Cummings explained.  “A U.S.-UK trade deal is attractive to our industry, especially now that a larger U.S.-EU trade deal (T-TIP) appears to be in hibernation.”

The United States has exceeded its EU TRQ in each of the last 10 years, with 55,840 mt ($42.4 million) going to the EU last year.  However, shipments are down considerably from the pre-Liberty Link period.  For example, exports to the EU in 2005 were almost 306,000 mt ($86.4 million), of which 135,640 mt ($36.1 million) went to the UK.