Thread by @SamuelMarcLowe

I often find myself thinking about the claim that UK food prices will fall post-Brexit so long as the UK removes the existing EU tariffs on food imports (which can be quite high) either unilaterally or via new free trade agreements.

I'm sceptical, for a few reasons.

The first being that vast majority of our imported food comes from EU. Even if we unilaterally dropped tariffs on all imported food, we would still import a lot of food from the EU. EU food will be more expensive than now, if only because of new bureaucracy (ignoring tariffs).

Second, currency.

The IFS estimate that unilateral tariff removal could reduce household prices about 0.7–1.2%. This benefit has already been negated by a ~2% depreciation in sterling post-referendum.

ifs.org.uk/uploads/public…

(I would note that the IFS study is too optimistic on price reduction as it assumes a 100% pass through of tariff savings to consumers. There is little evidence to suggest this happens in practice.)

Third, despite much of the noise you hear in the news/from politicians, there is little evidence that tariff removal/FTAs translates to lower consumer prices in practice. (Benefit = increase in quality, rather than lower prices).

voxeu.org/article/consum…

Fourth, the UK still produces ~50% of the food consumed in the UK. So what are the probable Brexit impacts here:

- more expensive imported inputs (fertiliser etc)
- more expensive labour (end of FoM plus weaker currency reduces UK's appeal as a destination for migrant labour)

In conclusion, I think at best you'd see food prices stay about the same even if you removed all import tariffs. More probably, it would get more expensive on aggregate.

Happy new year.

An important addendum to one of my earlier points:

https://twitter.com/GeorgeMRiddell/status/1080807906902241281