Progress | Centre-left Labour politics

Brexit means higher food prices

The hard Brexiteers’ desired approach to our negotiations with the EU reveal them to be as ignorant as they are reckless, writes Andy Tarrant

Priti Patel has asked why the trading dependence of Ireland on the United Kingdom revealed in leaked UK government papers, particularly in relation to trade in food, is not being used to force Ireland to drop its demand for the backstop.

This demand is illuminating as to the mindset of the Brexiteers.

Brexiteers believe that the UK has a special (but unexplained) dispensation from recognising the existence of other countries’ mandates in any negotiation. This special quality therefore has the property of eliminating any need for an assessment of relative bargaining power. It is in this sense Trump-like, although Trump and his supporters at least have the excuse of having formed their views in a period when the United States did enjoy hegemonic power.

The perceived lack of need for any diplomacy also removes any need to understand the domestic economics and politics of the countries with which the UK is seeking to do a deal. Should such understanding have been sought, Brexiteers could have found the information about the effects of Brexit on Ireland long ago, not least on Irish government websites.

The backstop is entirely in Irish interests. The core of the backstop is no barriers to trade in goods between the Republic and Northern Ireland. Eliminating the backstop and accepting a hard border in Northern Ireland would only add additional economic loss for Ireland and contains the threat of bringing back the troubles. The Irish insistence that the European Union maintains the backstop also pushes the UK to adopt a softer Brexit than would otherwise be the case. The current UK government has been forced, in order not to cut across the red lines of the Democratic Unionist party, to make the backstop UK-wide. By reducing all barriers to trade between the EU and the UK, this reduces the economic losses for Ireland which new barriers to trade with the UK mainland would cause.

Would a threat to Irish trade in food be credible? It would hardly be credible even if Ireland stood alone. Putting up barriers to Ireland’s €4.8bn worth of annual exports in unprocessed foods to the UK would lead to reciprocal barriers for the UK’s €3.7bn worth of food exports to Ireland. The UK also exports more processed foods to Ireland than vice versa.  The suggestion becomes farcical when Ireland’s membership of the EU is considered.

Penalising Irish trade in food would mean barriers to all British goods throughout the EU. With the exception of a couple of countries in the EU, and the major one being Ireland, the economic damage to EU countries arising from trade barriers with the UK is estimated to be a small fraction of that which would hit the UK.  Nor would it make any economic sense, despite musings from some Brexiteers, for Ireland to also leave the EU so as to avoid a hard border with the UK. The Irish export roughly three times as much to the rest of the EU as they do to the UK.

Brexiteers are also casual about who will bear the brunt of their pursuit of abstract formal sovereignty. The Bank of England estimates that depending on the type of Brexit, the increase in prices would range from five to 10 per cent. Higher food prices hit the poorest harder as food purchases represent a much bigger proportion of their expenditure. Nearly one fifth of British households are already either living in or near to a situation of food insecurity. Priti Patel’s strategy of raising costs to Irish food exporters would in particular mean higher prices for beef and cheese in the UK. Irish producers provide about 30 per cent of beef consumed in the UK and about 40 per cent of cheddar.

Brexit means higher food prices because the UK (unlike Ireland) is far from capable of self-sufficiency. Currently 30 per cent of UK food comes from the EU and another 11 per cent comes in under trade agreements with third countries agreed by the EU. Once the UK leaves, it will either have to have an agreement with the EU, where the EU can also seek to have its demands met, or it will have to fall back on WTO rules.

In the latter situation, it will have two choices: to place the same tariffs on EU food imports as it applies to food imports from the rest of the world or to cut tariffs on all food imports. If the UK were to opt for the latter, then the UK farming industry would be decimated. It is highly unlikely a British government would ever go down that road. The current government has already set out its post-Brexit tariff schedule, should one be needed – and this would see an average tariff of 22 per cent on food imports. While importers might absorb some of the cost of a tariff, a good proportion at least would be passed on to British consumers through price rises.

Costs are also likely to be pushed up by ending free movement as UK producers will struggle to maintain current output and scarcity will likely push up prices. 30 per cent of workers in food processing come from other EU countries, as do 80 per cent of workers in horticulture.

New border checks would slow the movement of food imports into the UK, increasing transportation time and thereby also raising costs. In addition, as so much of UK food is imported and has to be paid for in foreign currency by UK importers, a further contributor to increased food prices is the depreciation of sterling due to Brexit.

The risk of an immediate hike in food prices is likely to be one of the factors which has pushed Theresa May to agree a withdrawal agreement which will keep the UK bound to EU rules until 2022.

In other words, the potential price of beef and cheese has, at least temporarily, played a role in seeing off the ‘cakeist’ strategy of arguing that the UK could  simultaneously abandon EU rules and retain full access to EU markets.

–––––

Dr Andy Tarrant is an independent public policy advisor

–––––

Progressive centre-ground Labour politics does not come for free.

It takes time, commitment and money to build a fight against the forces of conservatism. If you value the work Progress does, please support us by becoming a member, subscriber or donating.

Our work depends on you.

Print Friendly, PDF & Email

Andy Tarrant

Sign up to our daily roundup email

int(0)