Bacon, Lettuce and Tomatoes

Can the market adjust if today’s food supply chains cost more after Brexit?

BLTThe chances of leaving the EU without a deal are now very serious according to the Trade Secretary, Liam Fox, and Bank of England Governor, Mark Carney, agrees. One of the most serious alarms about this possibility was raised a while ago by sandwich makers; a ‘hard Brexit’ will cause a scarcity of ingredients for one of Britain’s favourite sarnies, the BLT. We won’t be able to buy Spanish tomatoes any longer, makers will have to switch to sweet-and-sharp-tasting British tomatoes instead.

The trouble is we haven’t prepared for a no deal outcome so there won’t be enough of the fruit grown in this country and we can’t stockpile them, so there will be a shortage and the price will go up. Farmers will love that so they’ll grow more tomatoes, in due course. Meanwhile the BLT will become a luxury lunch for the rich; common folk will have to make do with (cheddar) cheese and onion or other cheaper fillings. Sniffing extra profits, the wholesalers of Covent Garden will fly in supplies from further afield and lobby MPs to abolish EU regulations on GM foods so they can get cheap American tomatoes.

Air frieghtWith more home-grown and world-wide supplies, prices will stabilise, perhaps at a different level since air freight will cost more than a lorry load travelling under the Channel or across the border in Ireland. That can be minimised by scrapping the CAP and the 21% tariff on non-EU tomatoes. British lunches will have changed by the time supply lines have been re-established and the sandwich makers will have adapted or gone bust.

In Spain the farmers will riot and pelt the Minister of Agriculture with tons (or rather mega-kilos) of their rotten tomatoes. They will demand the socialist-led, Europhile government breaks the unity Brussels requires to punish the British by denying them their tasty snack. They might throw their wilted lettuces while they’re about it, and the Danes might do something unspeakable with their pig manure.

British tomatoesTomatoes are ‘fungible’, that is, another tomato can be substituted for a Spanish one, whether it’s British, American or African. Lots of EU products are also fungible, even manufactured ones like car parts. Of course there will be disruption and some inconvenience or temporary shortages but new suppliers will be found. That is the nature of free markets, they adapt; sellers find new sources or substitutes and buyers find alternatives and more-affordable things if they can. The losers are the ensconced operators, unless they are willing and able to innovate. Some can’t be bothered, they would rather put their efforts into lobbying for protection or no change.

Interestingly, much of the UK’s current export trade to the EU is non-fungible, there’s nothing quite like it. It’s also less elastic, in price that is, than the fungible stuff you can buy from elsewhere. This is why our fluctuating currency doesn’t affect our trade balance all that much, but imagine what would happen to Germany’s trade surplus if it had to return to the Deutschmark. 

Deutschmark imagined



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