Agriculture a difficult issue in US-UK trade negotiations; what a surprise

London’s Financial Times reports on a struggle within Britain’s cabinet on how much to cut farm tariffs in any US-UK trade deal.  It’s not the most edifying reporting – and the economics are even more questionable.

Of course, there’s always artificiality in the briefing of intra-government squabbles.  Political slogans predominate and reporters struggle to present the real views of ministers who can be incapable of understanding, let alone articulating, the underlying economic arguments.  But here the gap between presentation and reality is truly remarkable.

Britain’s international trade secretary is negotiating with the US government on a post-Brexit trade agreement and apparently wants to offer tariff cuts on food imported from the US.  These are reported as ‘concessions’.

But the environment secretary worries that the unfair competition will reduce the incomes of British farmers and the welfare of British livestock.

Where to begin?

Cutting tariffs and quotas on food imports from the US would reduce the price of food bought by British consumers.  It would also reduce the incomes of British – and European – farmers who are least efficient and most unable to adjust to a new market. It’s really a category error to think of this as a ’concession’.

A more informative label might be ‘no-brainer’.  Because Britain is a net food importer, the economic benefits of cheap food, forcing British farmers to become a bit more efficient, imposing losses on French and Spanish farmers and getting better access to American markets look rather attractive, and certainly greater than the costs when weighed in the political calculus.

Moreover, if the British government believes it should be nicer to animals killed for the enjoyment of UK consumers, it does have the option, post-Brexit, of imposing even more ingenious and costly requirements on producers selling into the UK market.

It is a textbook example of the win-win from mutual reduction of trade barriers – and by extension, the opportunities offered by breaking away from the EU.

But apart from the fundamental economic misapprehensions in the saga, there are some other important lessons to be learnt.

So it’s clear that producer and special interest lobbies will be working hard through post-Brexit restructuring to protect their privileges at the expense of general prosperity and economic growth.

And it’s also a sign that Brexit has altered the balance of political forces in the UK, pushing the UK towards a more open and global stance. How far Boris Johnson’s government is willing to go down this path remains to be seen. But its stance on food imports is a pretty good first test.

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