No clarity on Brexit is nightmare for farmers
Brexit? Are you thinking, “just get on with it?”.
We cannot say ‘just do it’. Nike has trademarked that slogan. But what would doing it on October 31 mean for the Shropshire countryside?
Imagine that we could climb The Wrekin in the late spring of 2020 – six months after a no deal Brexit. We would still see fields are planted. Tractors will still be moving. Cows and sheep will be grazing. But the breeze might also carry the sound of farmers wailing and gnashing their teeth.
Start with exports. Farmers and food processors face three problems. You might need to be in an approved country. The EU requires this. If the UK is not an approved country then that means no trade. Solve this problem and then you face the tariff one. For the EU they are 27 per cent for chicken, 46 per cent for lamb, 65 per cent for beef – everything you want to sell there becomes much dearer. The third issue is then regulations – does your food meet the right standards?
These problems are quite separate from the supply chain. Will the lorries and wagons be able to make the journey across borders? France has said it sees no problem in stuff coming through Calais. Good news? Not quite. The ferry and tunnel operators are saying that they will not allow anything with incorrect documentation to board in the first place. They know that it would take only a few lorries with the wrong documentation for everything to seize up.
Now let’s think about what you need to produce the food. Everyone knows about workers – but that is easy since the UK can control who comes in. But other inputs come from the EU too – seeds, animal feeds, medicines, fertilisers, pesticides, machinery and machine parts. What about their tariffs, regulations and the supply chain coming in? Can’t we buy cheaper food outside of the EU? Yes, a lot cheaper which is good for consumers but not for farmers. Then there are those famous WTO rules. They say that you cannot pick and choose the taxes you put on goods coming from different countries. If the UK government says we will allow foods from the EU to come in as before with no tariffs, then this is the deal that they have to offer to everyone. See the problem?
This also rather messes up the idea of turbo charged trade deals. Trade deals take years to negotiate but if you have removed your trade barriers at the start what incentive is there for the other side to give you a deal at all? They have what they want before the negotiations start.
Farmers too get subsidies from the Common Agricultural Policy. We can argue about whether this is good or bad but there is a scheme. With a deal and a transition period, farmers were promised a British equivalent – perhaps focused more on the environment. But with a no deal can such a scheme be up and running in less than a hundred days? These are the easy bits. An economy is a complex thing.
This is why it is hard to predict. The value of the pound has already slumped. This makes exports cheaper – good for exporters. Imports become more expensive. That is bad for consumers and also for people buying inputs from abroad. It used to be thought that a falling pound gave a big boost to ‘local production’. Today the outcomes are much less clear.
But with a falling pound it becomes easier to buy assets in the UK. There is an awful lot of money washing around the global economy looking for a profitable outlet and so buying up companies and farm land looks a good bet for companies and investment funds with cash to spare. And there are fewer restrictions on doing this in the UK than in most other countries.
Many people on the hard Brexit side are free market enthusiasts. They argue that farmers have been too protected by tariffs. Farmers are subsidy junkies. Food regulations are unnecessary forms of consumer protection. What we need is unrestricted trade and a bonfire of red tape. The weak will go under and the strong will survive – better, leaner, fitter.
They have a technical name for this – ‘creative destruction’. They emphasise the creation but what if your policies produce destructive destruction? If we were to climb The Wrekin next spring how many of the fields we would see, would really be run by farmers who were better, leaner, fitter?
Think this another example of project fear? Well you could always take what savings you have and if you are confident that a hard Brexit will work, there is bound to be a farmer who would appreciate your investment. You could discuss how much to put in while buying them the stiff drink they probably need as they think about the months to come.