News

How Brexit Might Affect Gem State Exporters

Idaho's ins and outs of Idaho-UK trade

by

Idaho exported more than $107 million worth of semiconductors and other industrial commodities to the United Kingdom last year. At the same time, the Gem State sent $2.9 million in food and agriculture products, and $2.9 million worth of fabricated metal products to the UK.

While Britain is almost half a world away from the state of Idaho, the recent vote there to leave the European Union—so-called "Brexit"—has created an economic aftershock that some say will reach the Intermountain West.

"Many people forget that Idaho's economy is global, interconnected and far-reaching," said Jay Larsen, president and founder of the Idaho Tech Council. "Brexit could very well have ripple effects into Idaho. The world is much flatter than it used to be."

Larsen spends his days working closely with Idaho tech companies, and knows just how far those ripples may reach. When asked what Idaho companies could be particularly affected, Larsen immediately went to Boise-based Cradlepoint, which specializes in wireless network solutions.

"It's a relatively young company," said Larsen. "But Cradlepoint supplies wireless services to Redboxes, electronic signboards and offices all around the world."

Larsen also pointed Glanbia Foods, an international cheese manufacturer and distributor. Larsen referred to Glanbia as a "major player" in the Magic Valley, home to its U.S. headquarters. Considering Glanbia's overseas headquarters is in Ireland, Larsen said Brexit might present the company with new challenges. Likewise with Boise-based Micron, whose European operations may feel a "significant impact," he said.

"While the UK is not a significant trading partner to Idaho on its own, the UK does take on a larger role in the cattle industry when we consider Idaho as a collective piece of state partnerships," said Laurie Lickley, president of the Idaho Cattle Association.

The U.S. exported about 3.6 million pounds of beef product to the UK in 2015, up from 913,000 pounds in 2014. Lickley said the increase was largely a result of loosened trade restrictions, after the UK eliminated decades old EU regulations dealing with animal identification and limits to additional hormones. Lickley said Brexit may usher in further deregulation of the beef trade, presenting trade opportunities for Idaho—where cattle and calves are the state's second most valuable commodities—by, "freeing up the market."

But these potential opportunities may be accompanied by challenges. Bill Smith, chair of the International Studies program at the University of Idaho, said the fallout from Brexit on Idaho's economy will be dependent on the UK's decision on borders with the EU: open or closed. If the UK chooses to close those borders, Idaho companies with hubs and/or headquarters in the UK might not be able to ship to the rest of Europe without facing additional customs, duties and inspections.

For companies like Glanbia, that could present a shift in how it does its UK business.

"Until we know what sort of deal will be worked out between the UK and the EU, we won't know what impact will be felt locally," said Smith. "Though I personally think it unlikely, they may negotiate a way to maintain the open borders that makes it easier to trade with Europe. If they do, there's minimal additional impact. If they don't, you bet it will."

In the midst of the uncertainty presented by Brexit, Larsen doesn't foresee any major negative effects—at least in the immediate future. Meanwhile, Larsen said, Idaho tech exporters will be maintaining a positive stance.

"When companies look at Idaho, they see a predictable and stable environment to do business," he said. "Despite what challenges may happen, Idaho will stay in a solid place financially."

Still, change is in the wind, as the UK welcomes its new prime minister, Theresa May. May has made it clear she is serious about Brexit, refusing a second referendum on the issue. Having taken office on June 13, May must take on the responsibility to start Brexit negotiations with the EU. The decision for the UK to keep its borders open to trade with the EU rests in her hands, and that decision will be watched eagerly by industry around the world—including in Idaho.

Tags