Brexiteers imagine global trade to be a panacea, confident that a deal with the U.S. could help offset trade lost with the European Union. But a transatlantic trade agreement could create more problems for British agriculture and food consumers than it would solve. For reasons of scale, timeframe, standards, and geography, the UK would be wise to prioritize a deal with Europe after Brexit.
The UK imports 40 percent of its food. It also has a large trade deficit in food with the EU – with exports of £18 billion dwarfed by £38.5 billion in imports in 2015. If Britain withdraws from the European single market and customs union as planned, it will need to establish alternative agreements to ensure a supply of affordable, safe, environmentally-sound food. Conservative minister Chris Grayling raised eyebrows recently by suggesting that post-Brexit shortfalls could be met by ‘growing more’ in Britain. But trade is clearly the answer – the question is, who with?
There are several reasons to be concerned about the impact on Britain’s food sector from prioritizing a trade deal with the U.S. Firstly, President Trump’s trade policy agenda is pursuing U.S. producers’ interests more aggressively than any administration in recent history. The American farm lobby is also more powerful than its British equivalent and is likely to fight its corner vigorously.
Standards are a key dividing line. American regulatory standards, which permit genetically modified organisms and hormone-treated beef, are highly restricted in the EU. The U.S. agricultural lobby has long considered some EU regulatory standards in agriculture, such as restrictions on chlorinated chicken, as trade barriers to be ‘torn down’.
If the UK adopted U.S. standards to facilitate transatlantic trade, as U.S. Commerce Secretary Wilbur Ross recently demanded, it would have to diverge from EU regulations. That would mean UK produce and food products would start to face customs and sanitary checks at the EU’s border, even if tariffs could be avoided.
Border controls with the EU would be disruptive, and raise questions about the arrangements on the Northern Irish border — one of the key Brexit issues. The UK market is vital for Ireland, accounting for 47 percent of Irish agri-food products exports in 2015. The agri-food industry has extensive supply chains across the island of Ireland, with some products crossing the Northern Irish border multiple times before coming to market. Some Europeans have suggested Northern Ireland could have a special status where it remains in the European customs union and keep its standards aligned with those of the EU. But that is strongly opposed by the Democratic Unionist Party, which is propping up British Prime Minister Theresa May’s minority government.
A Brexit “no deal” scenario would be costly for the United Kingdom. Under World Trade Organization terms, exports to the EU would face tariffs, with agri-food products worst affected. Foods imported from Europe, which account for one-third of British consumption, would also be more expensive. The Resolution Foundation estimates that prices for imported European dairy and meat products would be 8 and 6 percent higher respectively under WTO rules.
There is the issue of scale and timing. The U.S. economy is six times the size of the UK’s. Its favorable climate, cheaper land, and larger farms give it a competitive edge. The UK will also face pressure to agree to trade deals quickly after Brexit, increasing the risk it has to make undesirable concessions to expedite the agreement. The Trump administration also appears to have bigger fish to fry, such as the North American Free Trade Agreement. Furthermore, the UK is out of practice when it comes to trade negotiations, as the EU has done that job for the past 44 years.
Agricultural subsidies are another tricky area. In trade negotiations with the UK, the U.S. is likely to demand a different support system for British farmers to align it more closely with its own regime. The U.S. 2014 farm bill ended direct payments to farmers and introduced the “agricultural risk coverage” scheme, where farmers buy crop insurance, subsidized by the government. It is unlikely that British agriculture, which has operated within the EU’s Common Agricultural Policy subsidy system for decades, would be able to compete with their American counterparts on such terms.
Lastly, there is the simple matter of geography. The proximity of the EU market means trade in perishables is relatively easy, cheap, and swift – by contrast, the U.S. market is 3,000 miles away and represents a greater logistical challenge. The U.S. is the UK’s second largest overall export market, and accounted for 19 percent of British exports from 2016-17, whilst the EU bought 44 percent. But food, feed, and drink exports to the U.S. are minimal, at less than 2 percent, whereas the EU imports 62 percent of UK agricultural exports.
As the clock ticks down to Brexit in March 2019, the UK government would be well-advised to ensure agriculture is included in any transition deal that keeps trade with the EU on current terms while new agreements are hammered out. A U.S. trade deal is not the answer for Britain’s food sector.
Chris Haskins is former chairman of Northern Foods and a member of the House of Lords.
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