Butter: modelling the impact of the UK’s accession to CPTPP

The impact of the UK’s accession to CPTPP was examined for butter, looking at the changes expected after the deal comes into force. This aspect of the modelling work assumes all other factors, except succession, remain the same.

Key points for butter were:

• The model suggests that CPTPP butter exports to the UK will not change
• The model suggests that UK butter exports to CPTPP will increase by about 929 t (an increase of 147% in percentage terms on the baseline used within the model)
• The model predicts that changes to production and price will be relatively small (less than 1%)

For this analysis, the trade model chosen accommodates five nodes: the UK, EU, USA, New Zealand/Australia, and the rest of CPTPP.

The UK and EU are key trading partners in butter. New Zealand and Australia are also major butter exporters, with China and Japan as key destinations. The USA also exports a large amount of butter, mainly to Canada.

Current CPTPP members export a small amount of butter; Canada and Mexico are the biggest exporters. A key consideration when interpreting the results is that the model cannot determine which of the nine countries within the ‘rest of CPTPP’ node will be importing or exporting the butter.

The model predicts a 147% increase in UK butter exports to CPTPP in the first year of a fully liberalised trade scenario, a rise of about 929 t per year (see Figure 1). To put this into context, the UK currently exports about 42,000 t of butter per year globally. To meet the increase in exports, there will be a slight increase in the amount of butter sold by the farming sector, as well as a decrease in exports to the EU (a decrease of 218 t) and New Zealand/Australia (a decrease of 242 t).

There will be a slight increase in the amount of butter sold by the UK farming sector to cover the increase in butter exports, as well as a decrease in exports to the EU and New Zealand/Australia.

The UK does not currently import butter from any CPTPP countries, and the model predicts that will not change. CPTPP countries all export very limited amounts of butter to the UK.

Figure 1. Predicted impact of joining CPTPP on UK’s butter exports

Note: No connecting arrows indicate no change in trade levels.

In a recent AHDB analysis of UK export opportunities around the world, AHDB identified Singapore and Japan as having the best prospects, with Canada, Mexico, Chile and Vietnam also providing good potential butter markets.

There isn’t a great deal of change in the domestic marketplace. As discussed above, domestic production will increase by a small amount, 294 t, which is less than 1% in percentage terms. There is a very small reduction in retail prices of less than 1%. Table 1 details the impact on domestic production, prices, and the total amount of butter available in both countries.

Table 1. Modelled changes in the UK and the rest of CPTPP of domestic production, prices and total amount of butter sold

Limitations of modelling results

There are a number of caveats to these results.

Like other economic models, the trade network model is not a prediction or forecast and assumes all factors other than UK accession to CPTPP remain equal. This is unrealistic in a global economy but is an essential assumption for modelling due to the complexity of predicting future changes. What the network model can do, though, is examine specific ‘what if’ scenarios and this is something that AHDB will continue to analyse.

The model does not take into account Sanitary and Phytosanitary (SPS) limitations such as Export Health Certificates (EHCs) and other trade barriers.

Read more about the trade implications of Non-Tariff Measures (NTMs).

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