LDN - Business

UK risks 22 percent tariff on EU food imports if no Brexit deal: retailers

[April 20, 2017] By David Milliken

LONDON (Reuters) - British shoppers could face an average tariff of 22 percent on food from the European Union if Prime Minister Theresa May fails to reach a trade deal with Brussels before Britain leaves in two years time, retailers said on Thursday.

Nearly 80 percent of British food imports come from EU member states and if no trade agreement is struck Britain and the EU would have to treat each other as WTO members.

"Such a scenario would put upward pressure on consumer food prices," said the British Retail Consortium, which represents big supermarkets and other stores.

Food prices are already rising at their fastest rate in about three years, as sterling's fall since June's Brexit vote pushes up import costs.

Weaker consumer demand in the face of higher inflation is the major reason why most economists expect Britain's economy to slow this year.

As an EU member, Britain pays no tariffs on the 20 billion pounds ($26 billion) a year of food it imports from elsewhere in the bloc, but after it leaves the default option would be to levy standard tariffs set by the World Trade Organization.

These tariffs rise as high as 46 percent for Italian mozzarella cheese, and around 40 percent for supermarket staples such as Irish beef and cheddar cheese. Dutch tomatoes would face a 21 percent levy - though Britons could turn to drink instead, and pay just 4 percent extra for French wine.

Given the balance of food imports, the BRC estimates the average increase on tariffs would be 22 percent.

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May has said she aims to reach a comprehensive free trade deal with the EU over the next two years - and called a snap election on Tuesday, which she said would strengthen her negotiating mandate.

However, she has not ruled out quitting without a deal if the EU fails to offer Britain good terms.

A Reuters poll of economists published on Wednesday pointed to a roughly one-in-three chance that Britain will default to WTO rules.

Comprehensive trade deals typically take many years to negotiate, and a transitional arrangement - which would largely preserve Britain's access to EU markets, and leave it subject to many EU rules - was a fall-back option recommended by the BRC.

Brexit supporters argue that Britain will in future be able to get a better deal by striking trade agreements with countries such as the United States and China, with which the EU has struggled to reach an agreement. Others have said Britain should unilaterally scrap all import tariffs.

But the BRC said Britain should prioritize retaining EU ties, and follow that by renegotiating existing EU trade deals with developing countries such as India.

"Only then should the government look to realize the opportunities presented by new trading relationships with the rest of the world," BRC chief executive Helen Dickinson said.

(Editing by Richard Lough)

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