BRC warns of WTO tariffs hitting consumers

The British Retail Consortium (BRC) has warned the government that failure to strike a good Brexit deal by 2019 could impact retailers and customers disproportionately if the UK has to fall back on WTO rules. It cited Chilean wine as an example likely to see massive price hikes if tariffs are introduced.

It claimed that sourcing goods from outside the EU will push up prices disproportionately once the UK leaves the EU and no longer benefits from European trade deals, as tariffs are likely to be imposed under WTO rules. Once the UK is outside the EU’s trade agreement with Chile for example, imported Chilean wine is likely to be 14% more expensive for importers than it is now, it said.

Although it argued that there will be opportunities to reduce the costs of international trade outside the EU – Australia has already expressed interest in a trade deal with the UK and the WSET has already embarked on exploratory talks with its sister organisation in Australia and New Zealand – it warned that these would take time to be negotiated, typically take five or six years.

“If the UK fell back on to World Trade Organisation rules the new tariff rates that the UK would apply to imports from the EU would be highest for consumer staples like food and clothing,” it said.

Launching the BRC’s Brexit campaign, BRC chairman Richard Baker said the retail sector was the UK’s biggest importer and the sector had great experience that would be of benefit the government.

“We will be supporting the Government through this complex and difficult process, helping them analyse how increased cost pressures on retailers could mean higher shop prices and identifying any opportunities for new trade deals that could benefit individuals and families,” he said.

“We will be engaged in a constructive dialogue with government that will bring our experience to bear on the Brexit talks to the benefit of everyone in the UK” he added.

Anita Jackson of Wines of Chile pointed out that Chile has a free trade agreement with Europe, and said she couldn’t see Chile not negotiating one with the UK post-Brexit. “In fact not being in the EU will benefit some Chilean produce which they currently cannot sell to EU countries,” she noted.

However the immediate concern for producers and retailers is the instability and fluctuations in the exchange rate.

Speaking to db at the recent Chilean trade tasting, Viña Undurraga’s Europe and Africa export manager Jose Masot said Chilean producers were facing a double whammy of problems from the smaller harvest coupled with the high exchange rate, which was making it difficult for Chilean producers to maintain current prices in the UK market and a knock-on effect was likely to kick in next year.

Majestic’s head of buying & merchandising Richard Weaver told db there was pressure on pricing across the world on the back of the currency fluctuation and this was already putting pressure on prices.

“I’ve never experienced a situation where it has affected every currency before,” he said. “Wine from everywhere will be more expensive.”

Catriona Felstead MW of Berry Bros. & Rudd said it was impossible to forecast, but the effect was likely to be significant for the UK wine trade and argued that the exchange rate needed stability above all else. “The volatility that we saw last Friday is very difficult to manage. If [the pound] is low but stable, you can manage it more effectively.”