UK tariff quota battle begins

UK tariff quota battle begins


Sheep
Australian exports, excluding the UK, to Europe were valued at about $2.3 billion in 2015 with import tariffs averaged 1.2pc, while EU tariffs averaged more than 12pc. Source: Australian Farm Institute

Australian exports, excluding the UK, to Europe were valued at about $2.3 billion in 2015 with import tariffs averaged 1.2pc, while EU tariffs averaged more than 12pc. Source: Australian Farm Institute

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The Australian sheepmeat industry is campaigning United Kingdom to remove country-specific tariff quotas which have given New Zealand (NZ) a $500 million trade leg-up annually for the past four decades.

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The Australian sheepmeat industry is campaigning the United Kingdom to remove country-specific tariff quotas which have given New Zealand (NZ) a $500 million trade leg-up annually for the past four decades.

United Kingdom’s (UK) decision to join the European Union (EU) in 1973 sent aftershocks through Australia’s red meat industry which had previously enjoyed an export market equivalent to China’s trade today.

In the 1950s, Australia exported 200,000 tonnes of red meat to the United Kingdom, including 46,000t of sheepmeat.

However tighter export regimes were put in place in 1973, based on the prior three years of trade performance. This gave NZ unprecedented market access to the EU in a time when wool dominated Australian exports.

During MLA’s recent Sheepmeat Outlook conference, Meat and Livestock Australia Europe and Russia international business manager Josh Anderson said the country’s red meat industry had a game plan to renegotiate trade quotas with UK once Britain had withdrawn from the EU in 2019.

While Mr Anderson said there were “no rules” when it came to trade negotiations, lessons had been learnt from the past.

“That three year snapshot impacted (trade) for the next 40 years,” Mr Anderson said.

“Now is the time to take action. We as an industry can saw what happens when we didn’t  get market access.

“In March 2019, we will access the UK under a different regime so we want to make sure that access is as attractive as possible.”

He said Australia would leverage from the UK’s process of “rectification” in the World Trade Organisation which aimed to replicate EU “schedules” - referring to tariffs and non-tariff barriers to trade.

“What will make it even more difficult is splitting tariff rate quotas on a country specific level,” Mr Anderson said.

Exports, excluding the UK, were valued at about A$2.3 billion in 2015 with Australian import tariffs average 1.2pc, while EU tariffs average more than 12pc. Source: Australian Farm Institute

Exports, excluding the UK, were valued at about A$2.3 billion in 2015 with Australian import tariffs average 1.2pc, while EU tariffs average more than 12pc. Source: Australian Farm Institute

“What we are saying is… just set compensation in the market for all countries to access that is fair and equal.

“We are not looking for a preference here, we are looking for equal market access.”

Market access is the main restrictor in the European market, with Australia’s suffering from low volume quotas and prohibitively high tariffs.

NZ’s trade agreement is 10 times Australia’s at 228,000t quota, of which they fill about 69 per cent annually.

To put that in perspective, NZ’s underutilised quota is three times Australia’s entire quota.

Access to the market beyond the quota imposes a tariff of about 75pc, which would add about 520 cents a kilogram on the average export price of 790c/kg.

“Why is this in place? It is a very, very protected European market,” Mr Anderson said.

The average livestock farm gets in excess of 50pc of its income from the UK government’s common agricultural policy, equating to $59billion worth of subsidies a year for European farmers. 

Australia’s red meat quota has been stagnant at 19,000t, of which 98pc is filled year-on-year.

“We haven’t had the opportunity to meet the demand and grow where our competitors, particularly NZ, have,” Mr Anderson said.

It is a market worth pursuing though with one-fifth of Europe’s 507m population expected to earn over $35,000/year by 2020, making it the top 14pc of earners in the world.

Mr Anderson said with Europeans consuming about 1.7kg per person of red meat annually, which resulted in a production shortfall of 230,000t, the Brexit fallout had provided “unprecedented opportunity” to regain access to the market.  

Meanwhile, he said the “silent achiever” in increasing Australia’s access to Europe’s was the EU-Aus Free Trade Agreement, with the first round of negotiations starting later this year.

“… It won’t be easy - a number of member states will be quite opposed,” Mr Anderson said.

“While it is a bilateral agreement between the EU and Australia, there are 27 other countries that have a voice and some of those countries are large suppliers of beef and sheepmeat into Europe and will want to keep that preference.”  

However, the agreement was attractive with the EU’s agricultural trade surplus to Australia valued at $1billion.

“On a red meat basis they send us twice as much as we do – for every kilogram of beef and sheepmeat, they send us 2kg of pork in return,” Mr Anderson said.

“They need to understand they also have an offensive interest. This trade is growing and is highly lucrative at about 500m euros/year.”​

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