The president of Mars Food has warned the UK and the European Union (EU) to replace their free-trade agreement after Brexit or face the risk of job losses and price rises.
Fiona Dawson has told the American Chambers of Commerce to the EU in Brussels that so-called ‘protectionist trends’ in the UK, Europe and US are ‘threatening to undermine global trade and make the world less connected’.
It said that barriers to free trade would lead to higher business costs, and would affect the retail price of some of its best-known products including the Mars, Snickers and Twix brands of chocolate.
Dawson has also pointed out that inhibited trade would undermine integrated supply chains, which she called ‘vital’ to the global food industry.
“Brexit clearly poses some problems, but the fact is Britain has decided to leave the EU and the task now is to look forward and ensure that the decisions taken from this point forward achieve the most positive outcome for all concerned,” she said.
“The absence of hard borders with all their attendant tariff, customs and non-tariff barriers allows for this integrated supply chain, which helps to keep costs down. The return of those barriers would create higher costs which would threaten that supply chain and the jobs that come with it.
“If Britain ends up trading with the EU on the basis of WTO rules, ‘Most Favoured Nation’ rates would come into force. In the area of confectionery that alone would mean tariffs of around 30%. For animal products, it would be 20%; for cereals over 15%; and for fish and fruit over 10%. Significant new tariffs would also apply outside the food sector, notably in the area of clothing and textiles. Unfortunately there is no way that those costs could be absorbed without flowing through to consumers in the form of higher prices.
“It is a fact that Europe after Brexit will remain a critical market for UK exports and likewise the UK will remain an important market for goods produced and manufactured in other European states. There can be no economic advantage either side restricting trade with a large market situated on its doorstep. In simple terms, if the UK and the EU fail to agree on a new preferential deal, it will be to the detriment of all.”
Analysis: ‘a stark warning’
It’s a stark warning from the president of Mars to the UK’s politicians: negotiate a robust trade agreement with the EU or face an increase in the price of some of the country’s most popular confectionery products. The 30% that Fiona Dawson has mentioned, which would take the price of Mars’ most expensive single-pack item beyond £1, makes the argument even clearer.
And if there’s one thing that we can learn from the past six months, it’s that consumers don’t like the cost to be passed on to them. In October, Unilever – the company behind Marmite and PG Tips – found itself caught in a very public dispute with the UK’s largest supermarket chain, Tesco, over wholesale increases to the price of its products. The company had sought a rise of 10% to compensate for the devalued pound but found in Tesco a retailer, with hard-pushed margins, which was unwilling to accept a dent in its profits. Eventually they reached a truce, likely with concessions. Will Mars pull a similar stunt if Brexit negotiations go badly – and, more to the point, does it have a choice?
“Reaching an agreement will require compromise and an appreciation of the economic interdependency between the UK and EU. It requires an acceptance of the benefits that common regulatory standards and the movement of labour can bring, and an understanding that the imposition of significant trade barriers would ultimately hurt everyone and undermine, rather than strengthen, European unity.
“Other member states should remember this is not about ‘punishing’ Britain for her decision to withdraw but rather about finding the best solution for European and UK workers and consumers. That consideration must come first as we build the future.”
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