Brexit trade impacts' and Mercosur's negotiations with Europe

We estimate that a hard Brexit (HB) would reduce UK agro-industrial-imports from the EU by around 50%. Following the dismantling of the Common Agricultural Policy (CAP) the UK Government has proposed to shift towards market-oriented agricultural policies and negotiating free trade agreements (FTAs) with interested countries. Assuming that the UK restores the previous level of agro industrial products, the paper estimates the net export gains that Mercosur could achieve in the UK market for different agro-industrial products. In the event of a Hard Brexit, and assuming that the Mercosur-EU negotiations are not completed before, Mercosur would then face two negotiations in Europe: with the EU27 and with the UK. We argue that failing Mercosur to give priority to talks with the UK, other countries are more than likely sign trade agreements and fill its import gap thus creating additional trade diversion effects against the Mercosur. We offer back-of-the-envelope estimates indicating that under such an FTA, Mercosur could double its agro-industrial exports to the UK. These significant export gains are concentrated in a group of products that are now highly protected by the CAP.