The price of some foodstuffs in Iceland could drop by half if the country enters the EU. As a result state subsidies to farmers would need to be massively increased if domestic agriculture was to remain competitive.
Last year the government supported Icelandic farmers by ISK 9 billion (EUR 56.5 million) but a new report claims that figure would need to rise to ISK 11-15 billion (EUR 69-94 million) if Iceland wanted its own farmers to be able to compete against imports on the domestic market. The potential figure is based on uncertainty surrounding the future strength of the Icelandic krona: the stronger it is, the cheaper imports become.
University of Iceland economist Dadi Mar Kristofersson and Erna Bjarnadottir from the Farmers’ Association of Iceland created the report which was commissioned by the negotiation committee on agricultural issues in Iceland’s EU accession talks.
Unlike the EU Common Agricultural Policy subsidies to farmers, Icelandic subsidies are still very much linked to production levels and Icelandic farmers are protected from imported goods by very high import duties on foods like meat, dairy and fresh vegetables. Such import tolls on goods from European Union states will have to be abandoned if Iceland joins the bloc.
According to economists’ predictions, the free flow of products into the country could see the retail cost of chicken, eggs and pork drop by 40-50 percent and on dairy products by 25 percent. The price of lamb, tomatoes and cucumbers would barely change at all and the cost of beef would go down only marginally, RUV reported.
If Icelandic farmers wanted to remain competitive, they would need to drop their prices in line with the imported goods — something that would be extremely difficult without increased agricultural subsidies.