WE may be neutral but have a stake in the outcome, writes Ray Symons of the British Retail Consortium
The BRC is strictly neutral on the EU referendum question itself, but the retail industry is not indifferent to some of the consequences. Like others, we fully appreciate that many of the issues raised in the public debate thus far go beyond the interests of one industry or indeed simply the economy and that Scottish and UK voters must ultimately decide for themselves how they weigh the different constitutional, cultural and economic elements. However, the retail industry does have a stake in the outcome of the vote and will be affected whatever decision voters take, as will our customers, staff and supply chains. So although we have not and will not offer support for either side in the referendum, we have been engaged in the debate through holding seminars and debates between the protagonists, publishing briefing papers for members, submitting evidence to the Scottish Affairs Committee and other parliamentary inquiries, and writing to the respective campaign groups.
Grocery and food retailers have invested significantly over the years to ensure that they can meet customers’ demand
Scottish retailers are touched by the EU in many different ways. EU rules govern how products are labelled, how we should dispose of our waste, how to protect our colleagues at work, and some of our industry’s marketing practices. Obviously, we have views on all of these and the full list is much longer. However, I will concentrates on a couple of topics that are most relevant to the customers we serve, because they can affect both the availability and price of goods.
Firstly, our home grown food. Grocery and food retailers have invested significantly over the years to ensure that they can meet customers’ demand for quality, good value and often locally-sourced food. Much of that food, especially beef, dairy and lamb, comes from farms that are currently dependent upon EU subsidies. Across farming in the UK as a whole, over half of income comes from EU Common Agricultural Policy (CAP) payments.
So a huge question for our members is over the potential implications of the EU referendum vote for those farm subsidies, and whether they might be more or less generous or merely the same if we remain or leave the EU. There are also questions over the potential implications for the farming and food production supply chain, and therefore ultimately the ability of grocers to supply customers with enough domestically sourced food to meet their demand. These are difficult questions with few easy answers.
Of course, there would be nothing to stop the UK Government in the event of a Leave vote replacing EU payments with national subsidies, and because the UK pays more in to the CAP than it gets out for UK farmers, HM Treasury could presumably fund UK farming at the existing level and perhaps still save money. The proposed policy and financial support for agri-food is an area in which more information from campaigners would be welcome.
A vote to remain in the EU presents a different challenge. It would be a vote to stay in the CAP with its subsidy payments and with its rules. Though many farmers benefit from CAP payments, they find the rules and conditions that accompany those payments burdensome. UK farmers complain that the bureaucracy is stifling, and the rules constrain innovation. We share some of those frustrations and that is why we have challenged the Remain campaign to say how the CAP should change in order to allow UK farming to realise its full potential, and ensure its ability in the future to supply grocers with the food our customers demand.
Of course, not everything on grocers’ shelves comes from the UK, and our relationship with the EU has a significant, if not profound impact, on the price and availability of many of the goods we import, both from Europe and the rest of the world. Since 1992 the “EU Single Market” has meant that goods can be traded around Europe as if inside a single country. This means when lorries cross borders there are no customs taxes, inspections, checks or charges. Goods arrive more quickly and customs charges are avoided. This can and does all translate into wider choice for consumers and lower prices.
There is enormous debate at the moment about whether outside the EU we would be able to continue to trade with Europe as freely as we do now in the Single Market. Some argue that we could have an arrangement like Norway, outside the EU but with continued access to the Single Market, but others consider the political price for this (continuing influence from Brussels over many issues) to be too high. Some say we can negotiate a free trade agreement with the EU, whilst others suggest that trade negotiations take more time than we have available in the Brexit negotiations and in any case, the rest of Europe will be in little mood to cut as good a deal.
The BRC’s top priority in the event of a Brexit vote will be for the UK to replicate as far as possible the benefits and freedoms that come from the Single Market, whether that is through a Norway-style solution or through a free trade agreement. This may be challenging to deliver, but failure to secure some kind of deal with the rest of the EU could mean that our imports and exports with Europe fall back on to the WTO’s so-called “most favoured nation” (MFN) terms. This actually is something of a misnomer. In reality these are least favoured nation terms, because countries that trade this way apply their highest rates of duty to one another. This could put upward pressure on prices in the supply chain.
At the moment the EU sets the UK’s MFN customs charges. Outside the EU the UK would set its own. No one can say for certain now what charges it would apply, but for reasons of political expediency, WTO rules and practicality it is very likely that the UK would adopt an “external tariff” very similar to the one it applies at the moment through the EU.
Looking further afield, there has been much talk about the UK’s ability to trade with the rest of the world if it leaves the EU. Advocates of remaining within the EU have warned that in such circumstances we will be at the back of the queue to negotiate terms with other partners, while those who want to leave emphasise that as one of the world’s largest economies we would have little trouble attracting others to the negotiating table.
Actually, a vote to leave the EU might not have the impact on trade with the wider world that many imagine, at least in the short term. That is because at the moment the EU does not have special trade agreements with many of its largest trading partners. It has nothing in place with the US (although the “TTIP” negotiations aim at a deal) or China, Japan, India, Russia and Brazil. Trade with all of these countries is conducted under the MFN terms mentioned earlier. So, if the UK left the EU it wouldn’t be leaving any special deals with these countries. It is very likely that customs charges and rules on trade between the UK and these other countries would stay much as they are.
In the longer term advocates of leaving the EU believe that the UK on its own would be able to strike better deals with other countries than it could as part of the EU. It is certainly true that the UK has always seemed to want trade with the rest of the world to be freer than others the EU. Whether outside the EU the UK would have the negotiating muscle to deliver this remains to be seen. In any case, this must be seen only as a longer term opportunity as trade deals are notoriously slow to conclude.
• Ray Symons is Head of EU & International Affairs at the British Retail Consortium