WHERE do burnt goat heads sit, in terms of post-Brexit trade opportunities for Australian meat exports and future access to the UK or EU markets?
That was one of many points of interest explored at a hearing held today for the Trade Sub-Committee of the Joint Committee on Foreign Affairs, Defence and Trade’s inquiry into Australia’s trade and investment relationship with the UK.
Australian red meat industry representatives like the Sheepmeat Council of Australia and Australian Meat Industry Council (AMIC) - which represents retailers, processors, exporters and smallgoods manufacturers - lined up to field questions fired by federal MPs and Senators, at the public hearing in Canberra.
Political representatives like NT Labor MP Warren Snowden, SA Liberal MP Rowan Ramsey and Victorian Nationals Senator and Sub Committee Chair Bridget McKenzie are seeking to understand any potential barriers blocking the pathway for trading Australian farm products like beef, sheep and goat meat into the UK and EU markets, ahead of potential free trade agreements (FTA).
The inquiry was referred to the Committee by federal Trade and Investment Minister Steven Ciobo in December last year and set to hand down an interim report next month.
It has published 72 public submissions including those from farm groups like the National Farmers’ Federation (NFF), ahead of a March 31 cut-off date.
Jason Strong is Chair of the EU and UK Red Meat Industry Taskforce - that’s assisted by secretariat services via Meat and Livestock Australia (MLA) - and made the opening statement at today’s inquiry hearing.
Mr Strong said despite current low volumes of Australian beef and sheep-meat being exported to the EU, the UK remained our single largest destination – with the EU currently importing 46 per cent of Australian beef and 75pc of the sheep-meat that’s shipped to Europe.
He said Brexit and a future FTA with the UK represented a “once in a generation” opportunity to improve on the existing “restrictive” trading conditions with quota volumes primarily in the firing line of questioning, during today’s talks.
But during the hearing, Mr Strong sparked Queensland Labor MP Graham Perrett’s interest when he referred to burnt goat head exports in terms of various trading scenarios.
Mr Strong said at different times, Australia had sent a range of goat products into the UK market including burnt goat heads which was low value, but one of the higher margin products.
He said he was try to make a point about the variety of exported products available to the market and “the decisions that you make when using quota around what’s available or alternative markets that are available and the margin available on those products”.
“The EU for example and the UK specifically provides opportunity for high quality beef,” he said.
“Australia sends in Wagyu Beef at more than $100 per kilo – we send in lamb for the equivalent price that we can get in every other market – we send in beef for the highest value per kilo of any market that we export to.
“We also send in beef trimmings that make burgers, we also send in flap meat that goes into further processing and we also send in what you might think would be the lowest potential value item in a burnt goat head, that goes into stocks and stews and cooking which we use the quota for.
“So the decision made about utilising quota relates to opportunity in the market, opportunity for margin, demand in alternative markets and available product.
“And the combination of those things could end with us sending in the highest value Wagyu Beef you could possibly think of, or the lowest per kilo, but potentially high margin item that you might think of, as far as a co-product goes, like trimming for beef, flap meat or fat or trimmings for lamb – it could be a whole range of items that go into the market.”
Market access is expected to continue as normal for about two years for the Australian meat sector following the Brexit vote that was held in late June last year.
But changes are inevitable.
Mr Strong told the Committee now was an opportune time to consider making the right changes, to aid trading opportunities to grow the market for Australian meat exporters.
“We’ve got to be really, really careful that we don’t respond to a point in time issue when we’re setting up a long-term market access opportunity for us,” he said.
“Why have we got much lower quotas in some of the other countries?
“Because there were decisions made in the early 1970’s, before I went to school, about how we’re going to access the market so let’s be careful that we don’t take snapshots.”
According to the Sub Committee, in 2016, 7,699 tonnes of mostly high quality Australian beef was exported to the UK out of Australia’s total exports of 20,841 tonnes into the EU.
For Australian sheep-meat, 12,378 tonnes of mostly lamb was exported to the UK out of Australia’s total exports of 16,471 tonnes into the EU in 2016.
MLA says the overall value of Australian red meat exports to the UK in 2015 was $221.3 million with beef comprising $120.5m and sheep-meat $100.8m.
Market hasn’t changed much in 40 years
In his opening statement at the hearing, Mr Strong said Australia exported 47,000 tonnes of sheep-meat to the UK in 1955, accounting for 93pc of Australia’s sheep-meat exports.
He said beef exports to the UK reached a peak of approximately 149,000 tonnes in the same year, accounting for 65pc of Australia’s beef exports - a similar size to today’s Korean market.
“Unfortunately, however, Australia’s access to the UK was curtailed when the UK joined the EU in 1973,” he said.
“This resulted in Australian beef and sheep-meat exports being subjected to disproportionately low quota volume access arrangements – which was further impacted by trade restrictive high above quota tariffs
“This unbalanced and trade restrictive access has not substantially changed in more than 40 years.
“Unfortunately, the import regime currently in operation is stifling our industry’s ability to respond to ongoing consumer demand for high quality red meat in the UK.”
Mr Strong said current Australian exports represented just 6pc of the UK’s total red meat imports (EU and non-EU) and less than 0.3pc of total UK red meat consumption
“A potential new import regime, to be established as a consequence of the UK’s decision to leave the EU, offers our industry an opportunity to complement UK domestic production,” he said.
“It should be noted that the UK is not self-sufficient in red meat production, importing around 250,000 tonnes of beef and 90,000 tonnes of sheep-meat to fulfil consumer demand.
“Our industry is ready, willing and able to help supply some of this requirement.”
Mr Strong said over the past decade, Australian beef had represented on average, just 2pc of all UK’s beef imports, compared with approximately 67pc of beef imports being sourced from Ireland.
He said in that same time-frame, Australian sheep-meat had represented, on average, 13pc of the UK’s sheep-meat import requirement, compared with approximately 73pc of imports being sourced from NZ - due to their disproportionally larger EU quota access, or 11 times that of Australia’s.
There were no shipments of Australian goat-meat to the UK in 2016 – in part because the existing quota regime involves a combined sheep-meat and goat-meat quota, he said.
“In moving the Australia-UK trade relationship forward, in our view there are three key priorities for which we seek the Australian government’s assistance,” he said.
“Firstly - we must secure non-discriminatory access into the UK from day one of Brexit
“The ‘divorce’ between the UK and EU will require the UK to establish its own import tariff schedule - separate to the existing EU arrangement.
“Our overarching aim is to work with the Australian government and the UK to establish an import regime which allows all eligible supplying nations access to the UK on equivalent terms.”
Mr Strong said secondly, in establishing this access to the UK, Australia’s existing access to the EU must not be “diluted”.
“Quite simply our existing access must be retained and used as the base as we move towards negotiating a free trade agreement with the EU,” he said.
“Explicitly for Australia, until there is an agreement for an EU FTA, the EU must remain obligated to permitting access for 7150 tonnes of beef and 19,186 tonnes of sheep-meat/goat-meat.
“Third and finally, our industry is strongly supportive of moving as quickly as possible to commencing FTA negotiations with the UK.
“While we appreciate that the commencement of FTA negotiations between Australia and the UK cannot begin until after Brexit - we welcome working closely with government in this preliminary effort.”
Opportunity for Australia to “reinvigorate” relationship
Mr Ramsey said an aspect of the inquiry that surprised him was Ireland’s dominance as a supplier to the UK, with 67pc of the beef market at the moment that was about 400,000t, of which Ireland took about 260,000 and “we’ve only got 2pc”.
Mr Strong said it was one of the more complex aspects of the Brexit “carve-ups” and had to consider the geographical positioning of other markets like Ireland, compared to Australia
“We have to differentiate between reality and hope – there’s a reality around Brexit – there’s a reality around the specific requirements of what has to happen around this specific process,” he said.
“This is the first time ever that a trade negotiation has happened on a time-limited basis.
“The average time frame for a trade negotiation is normally seven years - we’ve got 24-months of which we’ve already (cut) into, to get everything completed.
“Businesses can have a view about what they’d like to happen but a lot of those views are going to be run over by what has to happen, in that period of time.
“Ireland is the largest supplier and they’ll have a big voice in the EU negotiations around access to Europe but we also have a great opportunity to negotiate with the UK as well.”
Mr Strong said there was an opportunity for Australia to “reinvigorate our relationship with the UK”.
“I think there’s an opportunity for us to remind our counterparts of our longstanding relationship that we’ve had with the country in general – not just in a trade basis but even more broadly,” he said.
“They’re looking for friends; they’re looking for people that want to have a long term, long standing mutually beneficial relationship with them.
“Ireland provides a lot of value in volume to their market at the moment – but Ireland is also looking for alternative markets.
“Ireland has access to the US now in the last couple of years which they didn’t have previously.
“We’ve got an opportunity to reinvigorate and refresh the relationship that we’ve had with the UK for a long time on a trade basis and we can be a very good and mutually beneficial partner, for them.”
Sheepmeat Council of Australia CEO Dr Kat Giles said in the 1970’s when the UK entered the EU, the sheep-meat industry was in a “very different place” but could now take advantage of its development and had the capacity to compete against major exporters like NZ.
“Over the last 30 to 40 years the sheep-meat industry has really developed – we were second or he cousin to the wool industry and we’ve really developed to now produce a premium product with high standards that is able to access a number of markets right across the world,” she said.
“From that perspective we are now able to compete very easily with NZ with their product.
“There are other countries that hold quotas into the EU currently for sheep-meat – Argentina, Chile – but they do not fill those quotas.
“But NZ is by far our largest competitor into that market.”
Mr Snowden asked if two FTA’s were negotiated simultaneously, which one was a priority, with Mr Strong saying they’d have to be done “in parallel”.
“They’re obviously not equal because they’re different markets but they’re equally important for us,” he said.
“I don’t think we can prioritise one or the other – the EU FTA is not time bound or as constrained by what has to be included, as the UK.
“We have to be looking at both of them in parallel.”
Mr Strong said largely the product Australia sent into the UK and EU was “high quality” sheep-meat or beef like grain fed that was equivalent to the “absolute best” available product in the market.
“We don’t actually go head to head with them very often on quality – we’re going head to head with them on access,” he said.