WRITING ON THE WALL IS BRITAIN JOINING THE FOOD PROTECTIONISTS ?

Press, Volume CV, Issue 30962, 19 January 1966, Page 16

WRITING ON THE WALL IS BRITAIN JOINING THE FOOD PROTECTIONISTS ?

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“Lynceus”

of the "Economist"]

(From the “Economist" Intelligence Lnit>

The relations between Britain’s Labour Government and the other members of the European Free Trade Association have never quite matched up to what might have been expected, bearing in mind, the predominant position of Social Democratic parties in so many of the E.F.T.A. countries. Even more surprisingly it is the Scandinavian members of E.F.T.A . Socialist-dominated to a man, which have caused Mr \\ ilson and his colleagues most of the trouble.

Now there is news of a move by Denmark to arraign Britain before the E.F.T.A. Council. It is not so much Britain’s import surcharge—which looks like lastinr out 1966, at least—that is worrying the Danes: they feel they have special grounds for complaint. They are mainly interested in the export of foodstuffs; and as the price for their co-operation in the aboltion of industrial tariffs they extracted from the previous British Government very favourable terms of access to the British foodstuffs market. Now they feel they are being cheated.

Three Grievances

The Danes have three main grievances. The first is more than six months old: it concerns the British Government’s acceptance of the British farmers’ contention that the Danes were dumping poultry on the British market. The Danes reject this accusation out of hand, and say that if their poultry is dumped, then so are all their other farm exports to Britain: for in every case prices are admittedly affected bj' agricultural subsidies. The Danes are also turning the argument back on the British. Recently the Germans imposed a special tariff on imported beef. The Germans are important purchasers of beef from Denmark; and it is the Danes’ contention that the only reason for this tariff is the recent growth of subsidised beef exports from Britain to Germany. On top of this Mr Wilson has, in the eyes of the Danes, added insult to injury by agreeing, as part of his recent free trade deal with the Irish, to increase their quota for butter exports to Britain. Denmark is the second supplier of butter to Britain after New Zealand: and the Danes reckon that the only effect of increasing the Irish quota will be to depress the price in the British market. Subsidising Common It seems unlikely that the Danes will get much satisfaction even if they do take

their complaints to the E.F.T.A, Council. Almost every country subsidises food exports in one way or another: and as the Americans discovered a few years 1 k in Germany, broiler producers are usually successful in persuading their governments to repel boarders. The truth is that the Danes extracted a king’s ransom for their co-operation in E.F.T.A. and there are growing signs that whatever British Government is in power, they are not going to be allowed to keep it. They obtained specific promises of the right not only to supply almost half of Britain’s bacon and one-fifth of Britain’s butter, but also to share in any future expansion of the market for these products. But in recent months both the main British political parties have come out in favour of a major expansion of home farm production. That is why the current crop of complaints from Denmark may be only the forerunners of a big quarrel between Britain and her overseas food suppliers in the years ahead. The days when Britain freely accepted the surplus products of the farmers of the world are, of course, long past. The British markets for butter and bacon are strictly parcelled out; while imports of cereals are carefully phased and subjected to minimum pricing.

Axiom In Question

But these restrictions were imposed at least as much (if not more) in the interests of the overseas supplier as in the interests of the British farmer. Indeed they went hand in hand with the discouragement of increases in home farm output, much to the fury of British farmers. For it has for long been an axiom of British policy that Britain as a nation can only balance its

: books by exporting manufactured goods, and that the alienation of its additional food suppliers would imperil essential export markets. It is precisely this axiom which is now called in question. This is not only a response to the growing discontent of the British farming community (though it is that). More fundamentally, there is a feeling that the whole calculation no longer makes sense in balance of payments terms.

■ For a study of the British trade returns shows that over the last 10 years it is Britain’s trade with its eight major food suppliers (Australia, Canada. New Zealand. Denmark, Argentina. Ireland. Holland and the United States which has put this country into the red. To the rest of the world Britain's exports have actually grown slightly faster than its imports. But | with these eight countries Britain's adverse balance has increased by around 20 per cent. 1 Commitments To N.Z. | So now it is accepted, on (both sides of British polities, that a reduction in food imports is likely to be needed |if the country is to pay its way. This is bound to be a slow process: Britain’s commitments to the Danes cannot simply be scrapped unilaterally, and its long-term purchasing agreements with Australia and New Zealand cannot be terminated before 1967 at the earliest.

But the writing is on the wall. If Britain cannot get out of the red by a rapid expansion of its manufactured exports to its eight traditional food suppliers (and Australia is now the only one of them which runs a trade deficit with Britain), then it will do so by taking less of their surplus food. Before long the Danes will not be the only ones to complain.