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Deconstructing the pro-EU fantasies of the FT

22.5 per cent agrifood export growth? They must be joking

Why is the Financial Times  (FT) so determined to convince its readers that the UK needs to sign a veterinary agreement with the EU? A few weeks ago, the FT published a video full of half-truths and misinformation about the need for a veterinary agreement spouted by people who appeared to know little about UK agricultural trade. 

This week the FT promoted an academic paper claiming that the UK could increase its agricultural exports to the EU by a massive 22.5 per cent if only the UK would sign a veterinary agreement. 

I have just read the academic paper that was the basis of the FT’s wild claims. It contains some complex calculations, but zero common sense. I doubt its authors have spent much time reading the labels on the foods they buy in UK supermarkets, and I suspect they have spent even less time in the UK countryside, and possibly not even very much time in the UK. 

The paper’s authors assume the UK has unlimited capacity to produce food for export, regardless of its limited landmass, relatively large population and cold wet climate. Nor have they considered the present anti-agriculture policies of both this government and probably the next one, where farmers are now subsidised to take land out of food production and instead grow wildflowers, recreate peat bogs and plant trees. 

Although 71 per cent of UK land is presently in agricultural use, the UK’s self-sufficiency, (production-to-supply ratio for all food), is only 60 per cent. It is difficult to imagine how the UK could increase its total agrifood production by 22.5 per cent let alone increase its agrifood exports to the EU by that amount.  

The UK’s production-to-supply ratio was also 60 per cent when we were EU members, so this has nothing to do with Brexit border friction but everything to do with the UK’s population relative to its agricultural production. It is much more likely that UK self-sufficiency, along with its agrifood exports, will fall in the future rather than increase, as while Defra policies are reducing agricultural land, Home Office policies are increasing the population. 

According to Defra, the only unprocessed agrifoods the UK produces in quantities large enough to meet both domestic demand and export requirements are: Barley, Oats, Lamb and Milk. Of these, only Lamb and Milk exports could potentially benefit from a veterinary agreement. But as the UK has continued to export 99.4 per cent of its excess milk and 94.3 per cent of its excess lamb to the EU since Brexit, without a veterinary agreement, how could these exports increase with a veterinary agreement? And where would Ireland find the 750 million litres of milk it imports from the UK each year for its butter and cheese factories if the EU were to ban UK milk imports?

These academics don’t seem to understand comparative advantage nor the UK’s relationship with the EU

The paper’s authors also assumed the EU has an unlimited appetite for the UK’s relatively expensive agrifoods. I very much doubt this is the case. Most EU countries didn’t buy much UK agrifood when we were EU members despite the frictionless borders. One reason for this is that most EU countries produce cheaper agrifoods than the UK, either because they have more farmland per capita, better weather, lower wages, cheaper energy for processing food, or all of the above. Despite this, a proportion of the paper’s 22.5 per cent increase in exports was based on the UK selling even more expensive varieties of food. These academics don’t seem to understand comparative advantage nor the UK’s relationship with the EU – when it comes to food, we are the buyer, not the seller. 

Additionally, many EU countries don’t eat the same types of food as the UK: for example, central and eastern EU countries prefer pork to lamb, while southern EU countries prefer cheese made with sheep’s milk rather than cow’s milk. 

Over 90 per cent of UK food and drink exports are classed as processed or highly processed foods. After beverages, the UK’s largest agrifood export to the EU is cereal & cereal preparations (i.e. biscuits and cakes) — we do not need a veterinary agreement to export either. Only exports to the EU of meat and meat products, dairy products and eggs and fish and fish products would potentially need a veterinary agreement and these exports would need to increase by 130 per cent if total agrifood exports were to increase by 22.5 per cent.  This is completely unachievable.

The paper’s authors also predicted a 5.6 per cent increase in EU sales to the UK, but they didn’t mention that the EU sells three times as much agrifood to the UK than it buys from the UK. Just as they didn’t mention that a 5.6 per cent increase in EU sales to the UK would be easily achievable, unlike a 22.5 per cent increase in UK exports to the EU. If the EU expands into Ukraine or the Balkan countries, we should expect to see an even greater increase in imports of EU agrifoods especially if we are tied to EU standards by a veterinary alignment. 

I doubt even the most adamant Europhile believes a veterinary agreement would make the EU increase their imports of UK agrifoods by a massive 22.5 per cent. But unfortunately, some politicians with little knowledge of agrifood trade statistics might be attracted by this idea.

The Europhiles are merely promoting a veterinary alignment in the hope that it would prevent a US trade deal, and I suspect this is the Financial Times‘ primary motivation as well. The UK is still a captured market for the EU’s expensive food producers and a veterinary alignment would only cement this subservience. Preventing food imports from cheaper producers, such as the US or the Mercosur countries, would hurt UK economic growth as consumers would have less money to spend on other goods and services. 

Similarly, reducing the UK’s massive tariffs on food imports from Australia and New Zealand over 5, 8, 10 and even 15 years will not alleviate the UK’s “cost of living crisis”. Both countries are major food exporters for precisely the reasons that the UK isn’t — farmland to population ratio. Restricting food imports from them, despite having a trade deal, is perpetuating the UK’s sluggish economic growth.

Freedom to determine our agricultural regulations and which country’s products we want to buy would benefit the whole UK economy by much more than a veterinary agreement with the EU. In the three agrifood sectors that could need a veterinary agreement: meat & meat products; dairy products & eggs; and fish & fish products, exports to the EU were only 0.5 per cent of total UK exports by value. Why would we align with the EU for such a small amount of our exports when we have continued to sell these goods to the EU without one? It would also be possible for the UK to find new export markets for its products if the EU didn’t want them, but how many of our food producers are even looking for new markets?

The idea that only border friction is preventing the EU from buying more UK agrifood is total bunkum. The limiting factor in UK agrifood exports is production capacity, not border friction. Signing a veterinary agreement with the EU would not increase UK farmland nor would it increase UK agricultural productivity. And no elaborate econometric extrapolations will change this.

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