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11 May 2018

Food will be cheaper after Brexit – if we ignore special interests

by Tim Worstall

Originally published by Cap X.

A House of Lords committee has just taken evidence that Brexit will reduce food prices. The same committee has also reported, the newspapers dutifully following up, that Brexit will increase food prices.

The Guardian, for example, reports:

“Shoppers face a significant rise in food prices if the government fails to secure a free trade deal with the European Union, peers have warned.

“In a bleak assessment of the impact of Brexit, the Lords EU energy and environment subcommittee suggested grocery costs would rise, businesses could go bust and year-round supplies be put at risk.

“The price of beef could rise by between 5% and 29%, while cheddar cheese could soar by nearly a third and broccoli by 10%, according to evidence from the British Retail Consortium to the committee’s inquiry.”

That’s fairly scary stuff and it’s a reasonable enough reading of what Chapter 2 of the report says. After all, if we leave the EU then we do are no longer obliged to allow in food from the continent without it being charged duty or tariffs.

With no deal at all we would revert to WTO tariffs. But remember, these are levels, maximums up to which we may and could charge – we’re entirely free to charge nothing. The report does note this, it’s just rather buried under the horrors of our charging those maximum permitted tariffs on EU imports.

Then there is the “commercial risk” to opening up the UK market, as set out in Chapter 5 of today’s report.

As food security expert Professor Tim Benton tells the committee, importing cheaper food would affect UK producers:

Current retail prices for sirloin steak in the US is £12.67 per kg and in the UK is £22.06 per kg—so a trade deal, opening the UK market to US beef, would likely undercut UK produced prices by some considerable margin. Would our farmers seek to reduce standards to compete, or would they stop producing beef? If so, what might happen to the UK agricultural economy and the wider rural economy, as well as the way land is managed in our ‘green and pleasant land’?

The NFU warned that “this sort of trade liberalisation scenario would have a hugely negative impact on the viability of many British farms”. Giving evidence to our ‘Brexit: agriculture’ inquiry, NFU Cymru told us that lowering tariffs on food imports from New Zealand and Brazil “would have a devastating impact on Wales’ livestock industry”, and Scottish Land & Estates said: “Trade deals that open our markets to cheap imports could prove disastrous for some agricultural sectors”.

I quote at length so that you can see they really are told the truth about reducing trade barriers, it just somehow isn’t picked up properly, nor emphasised.

Think about it just for a moment. We are being told that Brexit could mean tariffs on imported food, so we need a trade deal to stop food being more expensive. At the same time we cannot just not charge tariffs on imported food because that would make food cheaper. And that, folks, is the way we are governed.

What is actually happening is, of course, the special interests are sticking their oar in. The National Farmers’ Union and other producers are currently adjusted to those imports from Europe. They don’t want to have to compete against the rest of the world as well.

So we get this perversion of logic where free trade with Europeans is great and must be protected, but free trade with those we don’t share a continent with must be verboeten. If it weren’t such a cliché these days we’d be calling that out as racism, wouldn’t we?

It really is true that the House of Lords committee tells us both that tariffs make food more expensive but that we must retain tariffs, because removing them would make food cheap.

Our answer to this little conundrum is and should be simple. We wish to make the consumer better off, that is the art of economic management. Therefore our post-Brexit trade stance should be unilateral free trade, the very thing which benefits consumers. Anything else is bad economics masquerading as good sense.



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