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Myth #4: The UK needs a veterinary agreement to trade with the EU

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Written by Catherine McBride

The UK exports a very small amount of unprocessed agricultural products to the EU, and it has continued to export these goods since Brexit without a Veterinary Agreement. So why is the FT so sure that we need one now, especially as Border Friction is not obvious in UK trade statistics? Do they want to ensure the UK remains a captive EU market?

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Myth #4: The UK needs a veterinary agreement to trade with the EU

Catherine McBride

Excerpt:  The UK exports a very small amount of unprocessed agricultural products to the EU, and it has continued to export these goods since Brexit without a Veterinary Agreement. So why is the FT so sure that we need one now, especially as Border Friction is not obvious in UK trade statistics? Do they want to ensure the UK remains a captive EU market?

 

This Myth seems to have been started by the Financial Times (FT) or at least they have been pushing this idea in their articles and videos disparaging Brexit.

But they seem to have overlooked several key points:

  1. The UK is not a large exporter of unprocessed agricultural goods to the EU. Measured by value these products are worth about 0.5% of our total exports. The entire SITC 0 Food and live animal sector is worth less than 2% of total UK exports, but this includes manufactured foods, crops and cereals. None of which needs a veterinary agreement. Over 90% 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), neither needs a veterinary agreement.

    However, EU activists and their lobby groups are demanding the UK align with EU regulations for this tiny part of a small export sector. Why? UK exports by sector are shown on the Graph below, if you are having trouble finding  Food and live animals it is the first bar – three-quarters of which doesn’t need a Veterinary Agreement.

    image 2024 06 23 194555773

  2. The UK is a major importer of food, not an exporter, primarily because our population has outgrown our land mass and farm productivity. The UK’s self-sufficiency index (production to supply ratio for all foods) is only 60%. This has nothing to do with Brexit. It was also 60% when we were members of the EU, but it has everything to do with the UK’s population relative to its area of productive farmland. An area that is being reduced by environmental land use subsidies.

    The UK needs to import food and UK consumers will benefit from importing less expensive food using the new trade agreements with major agricultural exporters. A veterinary agreement with the EU would prevent this by tying us to more expensive EU agricultural imports.

  1. Even when the UK was a member of the EU with completely free access, EU countries didn’t buy very much British food. Many EU countries have different tastes in food, preferring pork to lamb and cheese made with goat’s milk rather than cow’s milk.

    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. When it comes to food and the EU, the UK is the buyer, not the seller, due to simple comparative advantage.

    If you are still in any doubt as to who would be most advantaged by keeping the UK as a captive market for EU agricultural products under a veterinary agreement – please look at the graph below: The EU exports about three times the amount of food and live animals to the UK than the UK exports to the EU. And as I have already mentioned, most of the UK’s exports don’t need a veterinary agreement.

    image 2024 06 23 194707753

 

  1. Of the few agricultural products that the UK does export to the EU, only unprocessed or lightly processed: meat & meat products; dairy products & eggs; and fish & fish products; could possibly need a Veterinary Agreement. However, the UK has continued to export these products to the EU since Brexit without a Veterinary Agreement – so why would we need one now?

    According to COMTrade, the UK still exports over 770 million litres of milk to the EU, 97% of which goes to Ireland, as it did before Brexit. Sure, our small exports to France and Belgium have dropped, but they have been replaced by higher exports to Poland and the Netherlands, so border friction cannot be the problem.

    Similarly, according to Defra, the UK exported 93,000 tonnes of lamb in 2023, of which 86,000 tonnes were exported to the EU. Admittedly 2019 saw higher lamb exports to the EU of 101,000 tonnes but that was unusual, and the highest export tonnage to the EU since 2011.

 

  1. But before you blame post-Brexit border friction for lower lamb exports in 2023, we must consider other factors, most obviously price. UK producer prices for lamb, in pence per kilogram, increased by 39% between 2019 and 2023, so it is not surprising that exports to the EU fell by 15%. Considering the size of the price increase and that many EU economies are struggling, UK lamb exports held up relatively well. Incidentally, UK lamb exports to non-EU countries increased by 13% over the same period, but this was from a very low base.

    image 2024 06 23 194805604

    This basic price quantity trade-off is also true for UK exports of chicken and beef. The higher UK domestic producer price for chicken has not only lowered exports to the EU but also increased UK production and increased UK imports from the EU. Total supply increased by 14% between 2019 and 2023 as UK consumers turned to chicken rather than higher-priced lamb and beef.

    image 2024 06 23 194834343
    image 2024 06 23 194856608

    UK exports have fallen as our farm-gate prices have increased, and farm-gate prices do not include export costs. For the Financial Times to blame lower export sales on Brexit paperwork rather than the cost of the underlying goods, misunderstands some very basic economics. Our largest markets in the EU are in a recession, our producer prices of beef, pork and lamb have all increased by around 40% compared to 2019 prices, and even chicken by over 30% between 2019 and 2023, but still, the FT believes that only Brexit border friction could be the reason why consumers in the EU are buying less British meat.

  1. UK trade statistics in some agricultural products may also be lower because UK consumers appear to be eating more British products. For example, Defra’s Agriculture in the UK statistics show our domestic production of beef is relatively stable. But both imports and exports are lower. The UK’s domestic production-to-consumption ratio for beef has increased from 80% before Brexit to 85% in 2023. This is also true of lamb, where domestic production is stable but both exports and imports are lower.

    If you have heard stories that UK farmers can’t compete with imports of cheaper beef from Australia, New Zealand or Namibia, please have a good look at the chart below – imports of non-EU beef are minimal. These scare stories appear to be entirely made up by people who want the UK to rejoin the EU.

    image 2024 06 23 194936443
    This is even more pronounced for lamb where UK imports from non-EU countries have more than halved from 2015 and 2016 levels (See graph below). But still, the NFU complains that they are being undercut by cheaper imports – so where are these imports coming from? Meanwhile, UK lamb exports to the EU in 2023 were the same as in 2015 before the Brexit referendum – so where is the border friction?

    image 2024 06 23 195006503
    EU activists have conflated all of the causes of lower trade statistics for UK food exports to make the case that the UK needs to align with EU standards to reduce border friction. Even though this would only affect 0.5% of UK exports at most and the EU has continued to buy these exports from the UK for 3 years without a Veterinary Agreement.

    The UK is joining the CPTPP, has trade deals with major food exporters Australia and New Zealand and is negotiating trade deals with South Korea, Switzerland, India, Canada, Mexico, and the Gulf Cooperation Council. All countries that could potentially buy UK agricultural products as well as UK cars and jet engines. Aligning with EU regulations could make these trade deals more difficult and could prevent UK consumers from benefiting from them.

    Why would the FT want us to do that?

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Catherine McBride