A recent headline in the BBC has revived scare stories of food tariffs leaving millions of Britons out of pocket if tariffs are imposed on European food imports in the event of a WTO exit. (These worries will have a familiarly dreary ring for Brexit-watchers: the British Retail Consortium has been complaining for some time about the dangers that tariffs might pose to its profit margins.) The numbers cited in this story are, however, misleading. The UK only gets about 25% of its total food from European sources – making apocalyptic predictions of massive price rises deceptive.
As the article admits, tariffs are added to the import price, but this price is only a fraction of the retail price. (This is due to importer, distributor and retailer all adding their own mark-ups). Secondly, if prices rise substantially then there will be incentives for import substitution with local products as well as with products sourced from Non-EU countries. Finally if there is a rival, locally produced product, the manufacturer or retailer of the imported product is more likely to absorb the increased tariff cost to avoid losing market share, further mitigating rises. Moreover, the EU’s farmers (much like its fishermen) are fully aware of the importance of British markets. For all Remainers like to poo-poo the significance of the EU’s substantial trade surplus with the UK, the fact remains that it is European suppliers who stand to lose disproportionately if the UK leaves on WTO terms – giving Brussels another incentive to secure a deal.