E.E.C. FOOD LEVIES UNITED KINGDOM MAY HAVE TO PAY £200 MILLION A YEAR

Press, Volume CVI, Issue 31318, 14 March 1967, Page 16

E.E.C. FOOD LEVIES UNITED KINGDOM MAY HAVE TO PAY £200 MILLION A YEAR

(By J

JOHN CHSRRINGTON.

CReprinted from the ‘'Financial Times" bp arrangement)

agricultural correspondent of the "Financial Times"!

Entry into the Common Market would cost Britain the best part of £2oom. annually. This is because 90 per cent of the levies imposed on food products imported from third countries has to be sent to Brussels. (The levies being sums needed to raise the import price, or world price, up to the E.E.C. target prices.) Estimates of the actual cost of this are bound to be highly conjectural and depend, for instance, on whether Denmark and Eire enter the Community with us.

An E.E.C. including Britain, but without these two countries, would have an overall deficiency at the present production levels in milk products, pig meat, beef, sugar and grain. Their inclusion would mean a continuing deficiency in sugar and grain, but a much reduced one in meat and milk products. To simplify this hypothetical exercise I have included Denmark and Eire, and the table shows the probable amount of levies to be collected on imports into Britain from third countries in this case. The products are those fully guaranteed under the Common Agricultural Policy. Incentive These levies could well provide the incentive for a fundamental expansion of British farming, both to extinguish the direct cost of the levies and to replace imports from other E.E.C. countries. Most

farmers would welcome a chance like this, and it is worth speculating how far the industry could go in this direction. Although the cost of the sugar levy will not be the highest, sugar beet represents a most important arable crop, giving a high return in cash and two valuable by-products —the pulp for livestock feed, equal to a ton of barley an acre, and a residue of fertility. The present British acreage is 420,000, limited by quota and by factory space, and this produces 900,000 tons of sugar out of a total British consumption of about 3m. tons. A further million acres would make us completely self-sup-porting in sugar, and would be within the present resources of mechanised farming, but would be dependent on the provision of at least treble the present factory space, a very considerable investment The advantages of animal feed and fertility would compensate for the land this crop took from root crops, grain, grass and fallow.

Britain’s grain deficiency is at present Bm. tons, half wheat and the remainder coarse grains, mostly maize. Hard wheat, about 3m. tons, would have to be imported, unless bakers could manage with a Continental type loaf, and so would the 2m. tons of maize used for human and industrial consumption, leaving a balance of 3m. tons of wheat and barley to come from home production. The attractions of the present E.E.C. price range would probably mean this was produced sooner rather than later.

The over-all British deficiency in milk products, principally butter and cheese, amounts to the equivalent of 2,700 m. gallons, which is more than the total domestic production; and of this about a third comes from E.E.C. countries, including Denmark and Eire. This would seem to leave room for a considerable

expansion of British dairy farming, were it not for the fact that there is a continuing butter surplus in the E.E.C. which amounts at present to about 250,000 tons. N.Z. Butter To Be Replaced This surplus is being disposed of at present by subsidised exports and subsidised internal sales, but would undoubtedly replace New Zealand and Australian exports to Britain after our entry. Adoption of the E.E.C. milk system based on the butter price would mean the complete reversal of our present system of milk marketing, which consists of pooling lowpriced manufacturing milk, with high-priced liquid milk, together with marked seasonal differences to encourage winter milk production. If these seasonal differences were removed, it is possible that winter milk production would fall, and consumers would turn to substitutes.

It is doubtful if enough account is being taken of the

probable effects on consumption that the doubling of our present butter price to the E.E.C. level would entail. The only guide we have is the British housewife’s resistance to high prices for beef and bacon. A market price of £lO per live cwt seems to be the limit at which the British housewife turns from beef to pork and poultry; and at about 320 s a cwt for bacon she stops buying that as well. The present beef deficiency in Britain is about 300,000 tons, the E.E.C. is practically self-supporting, and Irish and Danish supplies would reduce that to about 200,000. The E.E.C. intervention price of £ll 10s per live cwt is higher than ours, but once the British calf and suckler cow subsidies are added in there is no great difference. It is doubtful if E.E.C. membership will do much to encourage higher production here, except from grassland districts. There is, at present, no intervention system for pig and poultry products in the E.E.C. The only form of protection is based on the manipulation, by levy, of the threshold price for barley, a complicated arrangement which has not yet demonstrated its effectiveness, if in fact it has been put into effect at all. British producers are technically well up to the standards of the best E.E.C. producers, Including probably the Danes. An enlarged E.E.C. would be completely self-sufficient in both, so obviating the need for third country imports. The only other substantial temperate food import outside these calculations is muttor and lamb, which would bear a tariff of 20 per cent, bringing New Zealand lamb up to the present British guarantee level. This is a market which is showing a falling tendency, and although there is a possibility of Continental sales, it is doubtful how far they could be extended. In any case sheep, although more efficient converters than beef animals, are of very low productivity. In present circumstances then, the liability for levies on third country imports could probably be cut by at least £120m.-£lsom. over quite a short transitional period. The key to this saving would be the extension of the beet crop and the substitution by E.E.C. milk products of those from the Commonwealth. Arable farmers, particularly those using their own cereals for pig and poultry production, will do particularly well in competition with E.E.C. Beef, because of its poor conversion factor, will have no chance of increase except from farming systems based on grass, and milk production might well remain static, except again in grass districts such as the West of England and Eire.

LEVELS 0F E - E - c - LEVIES ON IMPORTS FROM THIRD COUNTRIES, PROVIDED EIRE AND DENMARK WERE E.E.C. MEMBERS.

Product Deficiency Levy Total GRAIN Tons 8m £ 10 £m 80 SUGAR 2.1m 30 63 BEEF 200,000 108 21.6 BUTTER 220,000 300 66 230.6 »o% payable to E.E.C.—£207m. POSSIBLE CUTS IN LEVIES BY HOME PRODUCTION OR E.E.C. ALTERNATIVES. Product Saving Levy Total GRAIN 3m tons £ 10 £m 30 SUGAR 2.1m tons 30 63 BUTTER, ETC. 220,000 300 66 BEEF .. No change 159