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How Will Brexit Affect US Agriculture?

30 June 2016

US - Britain’s departure from the European Union would have little direct effect on US agricultural trade, Purdue University agricultural economists have said.

Their greatest concerns are whether the current shakeup in the financial markets is short-term or longer, whether the US dollar will continue to rise in value and how access to global markets might be affected.

“The indirect effects will matter the most,” said Philip Abbott, a professor of agricultural economics who researches international trade and agriculture.

“The effects on agricultural trade will be through the exchange rate mechanism and through any negative business cycle effects involving global demand. How big those are depend on whether this is a temporary or longer-term situation and how long the very recent changes in exchange rates and interest rates persist.”

He pointed out that a strong dollar makes US exports more expensive to the rest of the world and that trade and a weak dollar are generally considered good for US agriculture.

Still, agricultural exports to the United Kingdom amount to a very small portion of US exports worldwide, Mr Abbott said.

Mike Boehlje, distinguished professor of agricultural economics, pointed out that the vote drew more attention to the issue of globalisation versus nationalisation - essentially, open or closed markets.

Supporters of the referendum to withdraw contended that the influence and sovereignty of Britain has suffered under the EU’s trade and economic regulations. Similar issues have come up in the current US presidential election campaigns.

“Generally, agriculture is much more dependent on international trade than other parts of the economy,” Mr Boehlje said.

Mr Boehlje said openness also is important to agriculture for immigrant labour it needs and for sharing of innovations that promote growth.

“These are probably the more important longer-term issues,” he said. “We don’t know what the answers are yet.”

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