Brexit’s impact on US food trade in Europe
Thursday, June 30, 2016
Brexit tops the discussion charts right now, and businesses around the world are busy analyzing how this will impact their future. For U.S. companies with euro exposure, this could be a decisive time indeed.
President Barack Obama had issued dire warnings about U.S.-U.K. trade relations before the Brexit vote in favor of the United Kingdom leaving the European Union. For example, the lower tariffs U.K. exporters pay may go up, and they could also potentially face more trade barriers like other non-EU countries like China, India or Brazil.
Then, there is the Transatlantic Trade and Investment Partnership (TTIP) deal between the EU and U.S., which may further affect the mutually beneficial trade relations. Primarily meant to cut regulatory barriers and clamp down on tariffs between the U.S. and EU countries, Brexit may affect trade across industries like pharmaceuticals, clothing, energy, cars, finance, chemicals and of course, food and beverage.
For the food and beverage industry, this may be an indication of some tough times in the export markets for a while. U.S. companies with the highest euro exposure may have to brace themselves for a probability of a recession in the U.K. As Credit Suisse reported, immediate repercussions may include higher costs to consumers through pricing in the near to medium term.
Due to transaction currency exposure, there is a high chance of higher raw material costs as well as higher tariffs across Europe. According to Food Business News, companies like Kellogg's, General Mills and Kraft Heinz, may be impacted most. Agricultural companies like Archer Daniels Midland Co. and Bunge may also suffer from negative sales percentages, though it is still too early to tell. ConAgra Foods Inc., which was planning an IPO for its Lamb Weston business, may stall the action right now.
Across the Atlantic, 70 percent of Britain's leading food and drink manufacturers had favored the U.K. remaining in the European Union. The stakes are rather high for them as the food and agricultural sectors in the U.K. and Europe rely rather heavily on free and plentiful trade between member states.
Clearly, the industry is disappointed with the decision, but the U.K. Food and Drink Federation is now gearing up to face the economic challenges ahead and help members secure the best outcome for trading, market access and regulations.
Brexit critics are also worrying that food standards could be heavily impacted as well. Many argued that uncertainties in the markets could lead to marketing of cheaper and substandard products, as regulations on pesticide use, GM crops and food additives differ among countries.
Now, major corporations can use these investor-state dispute settlements to bully individual governments into dropping legislation to improve food standards. The end consumer will suffer as much as the industry will.
However, once the vote passed, U.S. food giants chose not to add to the panic and immediately offered support for the U.K. food industry. While many urged that new trade deals not be overwhelmed by quotas and tariffs, companies General Mills and Mondelez have expressed that they will continue to invest in the U.K. Food giants like Nestlé and Unilever have quietly expressed that they will continue with their status quo in U.K. as of now, though they will be monitoring the developments closely.
- The stress of 911 call-takers and emergency dispatchers
- EPEE: Cooling has an essential role to play
- 9 steps to more concise business writing
- Can solar energy compete with fossil fuels?
- Nurses rally in DC to address staffing issues with Congress
- US vs. Europe: Comparing different approaches to renewable energy
- Modern slavery and the hidden world of human trafficking
- Big winners in California’s new healthcare plan: Households and small businesses
- Report: CEO pay increases 1,000% over past 40 years
- Can stem cells help teeth heal? Scientists say yes
- Study investigates effectiveness of hormone injections for weight loss in obese patients
- How much do teachers spend annually on school supplies?
- Infographic: The future of work
See your work in future editions
Your content, Your Expertise,
Your Industry Needs YOUR Expert Voice & We've got the platform you needFind Out How