Given that I work for a free market think tank founded by Margaret Thatcher, it’s probably not all that surprising that I support a free trade deal between the UK and Australia (the first of many, we should hope).
After all, competition, innovation and consumer choice underpin the work that we do – and freer trade is an important component of that.
Ah, but aren’t you just some wonk harping on about economic theories without any real knowledge of agriculture?
Well, not quite.
It’s no exaggeration to say I have farming in the blood. I grew up on a small 125-acre family farm in Norfolk that had been run by my family since 1911. Indeed, the Elsdens have been farming in East Anglia as far back as we can trace our family tree – so I’m from what might be termed the traditional yeoman class, which has always been the backbone of the agricultural sector in this country.
I’m well aware of how hard the industry can be. I helped out from an early age and saw my parents struggle to make a success of arable farming. In order to stay afloat, they branched out from just growing crops and started rearing lambs and selling Christmas trees in winter. Eventually, though, they realised that for a small farm – even with subsidies from the Common Agricultural Policy (CAP) – there just wasn’t enough money in arable farming. A wholesale rethink of the business was required.
So, with a hefty bank loan we built a large free range chicken unit. Fortunately, we timed our entry into the market just as free range eggs were growing in popularity and ethical concerns about caged chickens were really coming to the fore. Such was the success of the new farm that my parents quickly expanded from raising 12,000 to 16,000 chickens.
Ours is just one family’s story, of course, but it illustrates neatly that innovation in the face of changing market conditions is just as important in farming as in any other industry.
We ought to avoid too rose-tinted a view of particular types of farming and recognise that people’s habits change and the sector has to adapt accordingly. Of course, production standards are important, and the public rightly expect animals to be treated well, but they are all too often used as a fig leaf for what is really just old-fashioned protectionism.
Just as important though, is that protectionism itself is something of a chimera. Yes, you can keep otherwise uncompetitive industries or businesses on life support with subsidies, tariffs, quotas and the like, but in doing so you make them far less robust to future challenges and changes.
British farming is a good example of this. The UK has always been among the world’s most productive agricultural countries, but entering the European Economic Community and the CAP changed the sector completely by allowing farmers to rely on state handouts for a large chunk of their incomes. Before we finally left the EU, British farms were relying on Brussels handouts for over 60% of their profits. Worse still, the way the CAP payments were calculated benefited already large landowners far more than smaller businesses such as my own family’s.
There’s no reason whatsoever that farms in a developed, wealthy country like the UK cannot be among the world’s leaders. Just look at New Zealand, where in the 1980s the then Labour government removed farming subsidies and opened up their food sector to international competition .Far from being the death knell for Kiwi agriculture, it forced their producers to innovate, and agriculture remains an important part of the New Zealand economy today. In fact, even without European-style protectionism, farming accounts for a larger proportion of New Zealand’s economy than it does Britain’s.
Another oddity in our current debate is the totally overblown claims the National Farmers’ Union is making about Australian exports. To listen to the NFU’s president Minette Batters talking about a “tsunami of beef” arriving on these shores, you would think that signing this deal will destroy the British beef industry at a stroke.
Yet Australia exports an absolutely piddling amount of beef to this country. Matthew Lesh of the Adam Smith Institute has noted, even if Australia exported 10 times as much beef to the UK after this deal, Aussie beef would still amount to just 15,670 of the 1.14 million tonnes of beef and veal consumed here every year. Granted, some of that is because of the trade barriers they currently face, but it’s also because it’s just not economical for them to send meat to the other side of the world. As the head of Australia’s National Farmers Federation, Fiona Simpson, says her members are “just not able to ship our produce in any sort of a quantity to the UK” because “it’s just way too expensive and way too far”.
The truth is that this row is about so much more than one kind of meat from one particular country – and the NFU knows it. If the UK offers tariff-free access to our markets, it lays down a marker for all of our future post-Brexit trade deals that ours is an open market for foreign agricultural products. As CapX regular Sam Dumitriu eloquently puts it, we will be “like Odysseus tied to his ship’s mast, unable to give in to protectionist siren song”.
That would clearly be a thoroughly good thing for consumers, who could look forward not just to lower prices but an even greater variety of products from around the world. But it would also be good for British farmers in the long run. Rather than relying on the sickly opium of quotas, tariffs and subsidies to maintain their businesses, they will have to innovate and produce things that the British public want. Perhaps the real question is, given how confident the NFU are about the quality of British produce, why are they so worried that those same producers will buckle the moment they are subjected to real competition?
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