The Financial Times’ chief economics commentator Martin Wolf warned business leaders at the Consumer Goods Forum Global Summit in Berlin last month that the global rise in populism – heralded by the global financial crisis, growing inequalities and the pitfalls of globalisation – threatens the world’s “open co-operative world order”. In his view, a spike in populism – in the US, UK and several other European countries – has the potential to harm mutually beneficial trade and collaboration through a dangerous combination of xenophobia, protectionism, and fiscal irresponsibility.
What impact has the rise of populism had on trade in fresh produce and what effect do you see it having moving forwards?
Martin Wolf (MW): So far populism hasn’t had much effect because actual trade policies haven’t changed very much – actual policy always lags political change – however the most obvious area where change surely will happen is Brexit. The farm policies of the UK will obviously have to change because we’ll move out of the Common Agricultural Policy. Nobody knows precisely what the new regulations will look like in terms of trade, safety and all the rest of it but I would expect this to generate a fair amount of disruption in the trading system between the UK, Ireland and the rest of the EU.
How real is the possibility of ‘no deal’ in the Brexit talks and what impact would that have on the fresh produce industry?
MW: First we have to work out what we mean by ‘no deal’. You could break the idea of a deal into four broad elements: the divorce; the long-term future trade arrangement; the transition; and what I call the ‘administrative procedures deal’, which means that the systems that currently govern the flow of goods and services, including fresh produce, will all have to change. That will mean a massive overhaul of computer processing, customs clearance and so on.
So we have to do all of these four things. Some of them we know we can’t do within the time available; some of them we have to do within the time available. But if we get no deal on any of these things, we are completely screwed, trade collapses, that would be the end of the world. That sort of ‘no deal’ is impossible – if we let that happen it’s Armageddon.
You could imagine, however, that we have no deal on the long-term trade arrangements and no deal on the transition, so we would have to fall back on WTO rules. This will be very difficult because we’ll have to know well in advance how these rules will work administratively for every business in the country and the EU.
How would leaving the single market affect trade procedures in fresh produce?
MW: Customs procedures, trade facilitations, inspections, proof of conformity – all of these things have to be overseen by government and/or regulatory bodies recognised by government. Currently these are all EU bodies, but they will have to be replaced by UK bodies, or we accept the continuation of EU bodies, which I think is the only sensible solution – but nobody knows how to do this.
After Brexit our terms of trade will probably be much worse; inspections will be much more obtrusive; and it is unclear whether, after 2019, we will continue as if we were in the single market for some time longer, which seems to be the sensible thing to do to minimise disruption, or move immediately to a WTO settlement.
We have already seen food prices increasing due to the devaluation of sterling. What impact do you think Brexit will have on food prices in the longer term?
MW: That depends on our future farming policy – how protectionist are we going to be, and how are we going to support farmers in future? Do we want to continue to protect agriculture as we’ve done one way or another ever since the Second World War? Are we going to move to a deficiency payment system, which would create all sorts of problems with the WTO? Are we going to get rid of the set-aside programme?
One possibility is that we go for a cheap food policy like we used to have. Some would say that food makes up such a small proportion of people’s budgets and that farming is a concentrated interest so we will continue to provide our farmers with the same level of protection one way or another. But we could go for a cheap food policy in which case we’ll import more food, a lot of farmers will disappear, and a lot of land will go out of protection.
Are you confident that the government will guarantee the farming sector’s access to seasonal labour despite the rhetoric on cutting unskilled immigration?
MW: If we decide to cut out immigration of unskilled labour from Europe, the farm sector will be the most adversely affected – that’s absolutely clear – so what will government do? One possibility is that they’ll do nothing, which would mean a lot of these farms would disappear and we’d import the produce instead.
From an economic point of view, in the broader picture, that’s not very significant because fruit and vegetable production makes up a very small part of the British economy. But it would be devastating for British farmers because I cannot imagine they’re going to get lots of British people to pick their produce. Will that happen? Well if you take Theresa May’s rhetoric seriously, yes, of course it could happen. The rhetoric of her and her supporters has been to cut out unskilled labour.
The sensible thing for them to do is to create a generous permit system that allows the immigration of unskilled workers from Europe on a temporary basis. But the government might feel under attack from the Daily Mail and create a scheme that is so ponderous and so inflexible that it’s essentially unworkable.
So do you really think the government could let fruit and vegetable production collapse because of public opposition to immigration?
MW: My guess is that, in the end, the pressure from business, including farmers, will be so strong that they will have to allow workers in because they can’t tell the British public that they can’t have fresh strawberries any more – it is ridiculous, it would make people upset, but I’m not sure.
You’re asking me to predict what the British government will do in a very sensitive area and I honestly don’t think they’ve thought about it. You cannot exaggerate the extent to which these people, at least at the ministerial level, have no idea. They have no idea how to fix this. They’ve made absolutely crazy promises and now, after the referendum, Theresa May and her supporters, and in her view many of the people who voted Brexit, want the foreigners to go so she has repeated this completely crazy net immigration target.
Then there’s also the problem that the government has to legislate for these Brexit decisions, but they can’t get all of this through parliament – certainly not with their current non-majority. Brexit, in my view, cannot be done in the time available. A sensible government would withdraw the application and say we would have liked to do it but the British people didn’t give us a majority so we cannot perform it without ruining Britain. But, of course, that’s not going to happen.
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