As the new agricultural trade bill with Australia is deliberated, the UK agricultural sector is concerned how this might affect them. But are there potential benefits to this bill for the post-Brexit economy? Hirbod Assa, Senior Lecturer in Fintech gives us his expert opinion:
‘As Brexit resulted in the removal of the EU’s common agricultural policy and cut tariff-free access to the EU market, the agricultural sector expected supportive government endeavour for the farming businesses. Instead, farmers in the UK, and particularly Wales, are now worried that the new Australian free tax/quota trade deal will unfairly reduce their competitiveness, as unlike the UK’s land-limited hill farming, Australians enjoy large flat ranches with a well-suited farming climate.
‘Except for the environmental parameters, UK farming also must deal with a range of other restrictions, mainly related to the standards of raising animals and producing high-quality meat.
‘However, despite such challenges, there are some benefits to the proposed deal. The clearest benefit is to give the consumer a wider range of new economic goods. Reducing access from international markets can mean subsidizing one group at the cost of others.
‘Another benefit can be to push for further access to the international high-quality meat market to make a profit from the UK’s comparative advantage in producing high-quality meat. The high-quality meat is not generally substitutional, which means at an international level the UK farmers can enjoy higher profit from inelastic demand.
‘The new deal also can motivate addressing some of the UK’s long-standing farming underinvestment problems. It has long been documented that the UK, unlike many OECD countries, did not keep a positive farming total factor productivity growth in the last three decades. Introducing revenue-insurances that stabilize farming income, may motivate more investment from national and international investors in the UK high-quality meat production.
‘Such new investments can be used to modernize the UK farming industry and increase efficiency at a time in which uncertainty ensures its necessity.’
Hirbod Assa is Senior Lecturer in Financial Technology Kent Business School. His research covers topics in fintech, insuretech, machine learning and risk management. He has been collaborating with prestigious institutions, such as MUFG (Mitsubishi) Bank, Lloyds Bank and Azur UW (part of AIG) on topics in machine learning and data science. Some of these works have already resulted in conference and journal papers. He is also a member of the advisory board of the Agricultural Finance Review.