PLATFORM:THE RECENT survey by the National Consumer Agency which found that branded goods cost up to 31 per cent more south of the Border has been the cause of much uproar and simplistic comment in the Irish media.

The main reason generally cited for higher grocery prices in the Republic is that the cost of doing business is higher in Ireland than in almost any other European country. The higher minimum wage, rents which are among the highest in Europe, waste disposal charges and energy costs - with electricity charges up to 20 per cent more in Ireland than in the UK - all have an impact.

These explanations are valid to some extent but are not crucial to the higher cost of groceries in the Republic. What many in the media have failed to highlight is the fact that Northern Ireland is, in political terms, part of the UK.

Let us imagine a manufacturer of soap based in Birmingham. He supplies his products to all the large British supermarket chains, which sell his soap in their stores across the UK, from Inverness to Brighton, and from Belfast to Birmingham.

When the soap maker decides on the prices he will charge Tesco or Sainsbury, he charges only one price for delivery anywhere in the UK. It certainly costs him more to deliver his soap to Derry or to Glasgow than it does to deliver to local supermarkets in Birmingham, but he sets one price that will cover all of his distribution costs. In a way, the soap buyer in Coventry subsidises the soap buyer in Newry because the cost of delivery to Coventry is far less than it is to Newry.

The benefit of lower prices as a result of being part of the UK is something that people across the political spectrum in the North would rightly refuse to give up. Comparing prices in a Tesco in Newry with a Tesco in Dundalk is not comparing like with like, although they are only 15 minutes' drive apart.

The fact that thousands of customers are shopping across the Border is understandable but it has had a very tangible effect in many Border areas. Dundalk main street now consists of vacant shop-fronts and many businesses have been forced to close.

The groceries sector in Ireland is in fact highly competitive, with extremely tight margins. The removal of the Groceries Order, which banned below-cost selling, resulted in a wide reduction of prices. In the nine months after the ban was lifted in 2006 the average price of items such as bread, cereal, milk and sugar fell by 1.5 per cent. The Groceries Order was unfair as it kept food prices artificially high.

Unfortunately, this temporary fall in the prices of Groceries Order items was quickly eliminated by the global spike in food commodity prices, which has had a disproportionate effect on those basic items such as bread and milk that were covered by the Groceries Order. Rising food prices are a result of a number of factors, including increasing commodity prices, adverse weather conditions in various parts of the world, and the expanding use of agricultural land to grow biofuels instead of food crops. For instance, ethanol production in the US is a huge factor in the rise in cereal prices, both directly and indirectly. Last September, wheat prices rose to $400 (€257) a tonne, the highest ever recorded.

Population growth and the demand for higher living standards look set to increase the price of foods. There is massively increasing demand for western foodstuffs in developing countries such as China, with meat consumption there more than doubled from 20kg per person in 1985, and other countries are catching up fast.

Consumers in the Republic are benefiting from the intense rivalry between stores, with major retailers forced to match each other's prices. We now have a large number of independent retailers operating alongside the multiples, and we have seen strong growth in the presence of discounters from Germany which has resulted in even more competition in the sector. According to the report by the National Consumer Agency, more than a quarter of grocery shoppers now spread their shopping bill over different supermarkets, and major price and advertising wars are now the norm in the Republic.

The sometimes hysterical headlines and media debate about the price differential between the North and the Republic ignore the essential constituent that results in lower prices in the North - it is, in business terms, part of the UK. The best guarantee of low prices is competition and, as we have seen this week, the groceries sector in the Republic remains as cut-throat as ever.

Feargal Quinn is an Independent member of Seanad Éireann and chairman of EuroCommerce