Do Iceland’s food import tariffs actually save shoppers money?

Icelandic farmers have joined the debate on food imports and government hand-outs. They argue that import tariffs and quotas on agricultural products are actually saving Icelanders money. The OECD disagrees.

The chairman of the Icelandic Farmers’ Association told RUV that food prices would be higher if Iceland dropped its restrictions on imported food. On the other hand, a recent OECD report on Iceland recommends that the country work to remove the restrictions as soon as possible.

The OECD report recommends that Icelandic agricultural production should be reorientated to concentrate on areas of production where it is competitive with overseas producers, instead of trying everything. The report suggests that import restrictions keep food prices unnecessarily high for Icelandic consumers. The report also claims that Icelandic government subsidies to farmers are four-times higher than within the European Union. The relaxation of restrictions would therefore be a great help to consumers.

Icelandic farmers were quick to question this, however. “I don’t believe this is a foregone conclusion,” Farmers’ Association head Haraldur Benediktsson told RUV. “I want to point out that from the autumn of 2008 up until now, the cost of food in Iceland which is imported within the tax free quota has gone up by around 60 percent while Icelandic produce, which is produced under the current working conditions, has gone up by 20 percent. That means that the so-called tax barrier has benefited nobody more in the last moths and years than Icelandic consumers. Family food bills would be much higher if we didn’t have the working conditions for Icelandic agriculture to exist.”

It is clear that the collapse of the krona served to greatly increase the competitiveness of domestic produce — and a strengthening currency would presumably have the opposite impact. It is also clear however, that the burning issue of Icelandic agriculture is not going to go away — especially as the country’s EU accession negotiations are now underway. Farmers are, by and large, strongly against Iceland joining the European Union.

Comments are closed.