Hard Brexit would be a gamble for farmers

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This week’s Balmoral Show was notable as the 150th anniversary of the show and the centenary of the Ulster Farmers’ Union.

Barring something cataclysmic in terms of Westminster politics, it will also be the last when we will be members of the EU. That is a reminder that time is going in quickly to 11pm on March 29 2019, when our membership of the EU will end. For the record that time was picked because it will be midnight in Brussels. Also for the record, we joined the then EEC, along with the Republic of Ireland, on January 1 1973, and on June 6 1975 voted to remain a member. Soon our departure and the referendum vote on 23 June 2016 will also become footnotes of history.

That is all very interesting for anyone into quizzes. But it does not take us any closer to feeling confident there is a solution that will allow the UK a negotiated exit from the EU. We are all becoming experts in things we had not even heard of a few weeks ago. These include customs partnerships and a max fac – maximum facilitation – customs strategy. The problem is that neither appear to offer a solution, meaning the high risks game of who will buy what we produce is set to continue. This was due to be resolved by the time of the EU Heads of States summit in June, but that is looking increasingly doubtful.

Relations between Brussels and London are getting worse. Theresa May is learning in a very uncomfortable way what it means to be squeezed between the proverbial rock and a hard place. On one side she has Brussels rejecting all her customs plans, and insisting on a customs union. Ireland holds the trump card, in that the UK guaranteed last December there would be no hard border in Ireland. On the other side are the Brexiteers in the Conservative party, led by Boris Johnson and the DEFRA Secretary, Michael Gove. That Mrs May tolerated Johnson dismissing her customs plan as ‘crazy’ confirms how weak her position is. She cannot please or even find compromise between her Brexiteers and Brussels. This is not helping any part of industry, including agriculture, that needs to plan for a long term future.

Go back to last December, when the government rushed into an early hours of the morning deal not to have any border here. That now looks like something officials agreed without thinking out what it meant. It is not possible unless the UK is in a customs union, and Theresa May cannot deliver that politically. This means that for the first time farmers and the rest of UK industry have to contemplate the prospects of a hard Brexit. This is one where the UK would leave the EU with no trade arrangements in place. That would mean World Trade Organisation tariffs on goods exported from the UK to the EU-27 and on imports into the UK. To the EU the UK would be another third country, and it could take a long time to put a trade deal in place.

This is a gamble that might pay off for agriculture, if everything fell the right way. However that is a big if. A hard Brexit would increase the cost of the 30 per cent of food imported into the UK. Some economic analysts have suggested that with a hard Brexit farmers could gain, because supply and demand would drive up prices for UK food. That reflects classic economic supply and demand theory, but there is a big difference between that and the real world, particularly when there is a political dimension.

When it comes to Brexit that dimension is huge. It is why the government cannot allow Brexit to be linked to a rise in food prices. Trade is always a double-edged sword, and just as EU-27 member states would face WTO tariff rates, so too would other countries. They would see the gap left in the UK market by priced-out EU-27 countries as an opportunity to exploit. This is why a hard Brexit would be a gamble for farmers. It could work out well, but it would create the perfect conditions for a flood of cheap imports from every low cost agricultural producer. The government might say it will enforce standards, but the need to avoid rising food prices would eclipse that. For farmers the safe option remains a form of customs union deal.