Catherine McBride is an economist and a Fellow of the Centre for Brexit Policy.
The Department of International Trade’s (DIT’s) latest report on the benefits of trade for UK employment is reassuring. However, if trade is to benefit British consumers, then our markets must be open to import competition allowing the best value global products to be sold here.
While Liz Truss’ department has done a fantastic job signing trade agreements with non-EU countries, too often these deals have simply rolled over EU agreements, and continue to exclude or limit more competitive agricultural products. This means that the UK is still a captured market for EU farmers and food producers.
Use FTAs to facilitate farmers’ natural advantages
The UK is not large enough to supply all of its agricultural needs. It must therefore concentrate its agriculture on products where it has a natural advantage and improve its farm productivity with innovation previously prohibited by EU regulations. In parallel, DIT should be opening up two-way trade agreements with other agricultural producers, not just rolling over EU trade agreements designed to limit agricultural trade.
Meanwhile, British producers should be helping their own cause by developing higher value products and creating recognisable brands. For instance, the UK is a net exporter of milk but a net importer of dairy products. The UK could be processing its surplus milk into value-added dairy products such as butter, yogurt, kefir, lassi or cheese. These products have longer shelf lives and are easier to transport.
The UK could follow the example set by Denmark, Ireland, and New Zealand who export their dairy products globally. This may need some Government marketing assistance, in addition to some trade deals, if a British butter brand is to compete with Lukpak, Kerrygold or Anchor. But with a high quality British product, this would not be impossible.
Similarly Sweden’s ‘oat milk’ brand, Oatly, seems to be lacking competition even though the UK is a net exporter of raw oats. Oatly should be an inspiration to British agricultural entrepreneurs: a Malmo-based company that has capitalised on the growing international market for milk substitutes and is about to list publicly in the US with a value between $5 and $10 billion. The UK also exports a large amount of barley, but exporting Brtish barley, pre-brewed as beer or pre-distilled as whisky, would be a more profitable exercise.
Use most efficient suppliers for necessary imports
While Truss’ speech to the National Farmers Union Conference a few weeks ago was correct that the UK should be targeting the growing middle class Asian markets, Britain is unlikely to be selling these markets any commodity where it is itself a large net importer, such as pork and beef.
The UK is a net importer of roughly 20 per cent of its beef and 40 per cent of its pork – these are areas were the UK should be prepared to open its import markets to non-EU suppliers. According to DEFRA’s annual survey of UK agriculture 2019 , the UK imported a whopping 756,000 tonnes of pork from the EU in 2019, while exporting only 158,000 tonnes in return.
While there is obviously some potential for import substitution, where British farmers supply more of the UK’s consumption, we should also be considering if the huge amount of pork the UK is importing from the EU is the best value available, or if there are more efficient suppliers.
If British farmers demand protection from more efficient suppliers – having grown used to this protection under EU trade barriers – then fixing the total import quantity at the five-year average might quell their anxiety. That would give the UK a maximum import quantity of 530,000 tonnes of pork and 200,000 tonnes of beef, yet still benefit local consumers as imports would move from protected EU production to world prices.
But these import quota limits must be temporary and gradually increased to force British farmers to become competitive in the international marketplace through innovation and farm consolidation.
Furthermore, there will be some obvious two way trade with other agricultural producing countries. The US, for example, exported over 2.1 million tonnes of pork in 2020, increasing their production by over 300,000 tones to supply the increased demand from China after its Swine Flu outbreak. So the US could supply most of the UK’s pork requirements. Yet the US produced only 63 thousand tonnes of lamb in 2019, while importing 120 thousand tonnes of lamb from Australia and New Zealand.
This is good news for British farmers. Lamb is seasonal, so our lamb farmers won’t be competing directly with the antipodeans. And supplying lamb in the spring may suit US seasonal menus better than Australian and New Zealand lamb produced in the American autumn.
Does EU harmonisation serve our farmers?
Truss is right: there are real opportunities for British farmers outside of the EU. But these will also require that the UK is outside of the EU’s non-tariff trade barriers such as their sanitary and phytosanitary regulations.
There is currently an EU-rophile lobby pushing the UK to align with EU regulations by claiming that this will solve the problems created by the ill-thought through Northern Ireland Protocol. Giving in to this lobby would be a mistake. There are much larger markets and much better food suppliers outside of the EU – with both higher quality and lower prices. Trading with these markets would reduce British food bills, increase farm exports, and benefit the economy as a whole.
Any fears that British farmers would be unable to compete in international markets demeans them. If allowed to innovate outside of the EU’s precautionary principle, encouraged to consolidate their farms; and to focus their production on higher value products, our farmers should be able to compete with the best in the world. It is time that the Government let them do so.