Credit: Original article can be found here
“We are not looking to compete against British producers – we know there is a requirement in the market for imports and we would like to be able to service that requirement” – this was what Mary Johnson, Meat and Livestock Australia’s (MLA) market access manager for the EU and UK told the House of Lords International Agreements committee last week.
UK place in global market
The UK is the fifth-largest importer of beef in the world and fourth largest importer of sheepmeat.
It is also the world’s third-largest exporter of sheepmeat. This apparent contradiction is explained by the fact that the UK imports high-value legs and loins while exporting the shoulders and forequarter cuts from UK-produced lambs.
New Zealand is the primary supplier of imported sheepmeat to the UK because of its historical favoured quota access position and it was identified as the target competitor for Australian sheepmeat exports after a trade deal.
The MLA representative also indicated that they saw Australian beef’s position in the UK market as going head-to-head with imported beef, not UK production.
Ireland supplied almost 80% of the 246,000t of beef imported by the UK in 2020 and this means Australia is preparing to go head-to-head with Irish beef in the UK market.
Sheepmeat also vulnerable
Australian beef has for a prolonged period been more expensive than Irish beef, largely due to herd rebuilding after prolonged drought.
It is different with sheepmeat. Australian sheep meat prices are currently dramatically cheaper than Ireland, Britain and the EU. Therefore, Australia would able to take advantage of a much higher value market opportunity if they had completely free access to the UK after a trade deal.
However, the biggest threat to disruption comes from the fact that the EU-UK trade deal provides for quota and tariff-free access on all products.
That means that there is unlimited potential for increasing UK sheepmeat exports to the EU if the home market becomes crowded as New Zealand and Australia go head-to-head.
This possibility is also increased by the relative farmgate price of lamb in Australia compared with the UK and Ireland.
Unlike beef, where Australia is ahead of Ireland and almost on par with the UK, Australian sheepmeat is trading at €4.86/kg compared with the Irish price of €7.67/kg and UK price of €7.77/kg (Bord Bia).
This price advantage would make Australian sheepmeat an attractive proposition for British buyers if there is a no-tariff, no-quota trade deal.
If the UK pursues a no-tariff, no quota strategy for beef and sheepmeat imports, it has consequences for EU trade policy despite or perhaps because of the UK no longer being a member.
If the large exporters such as the US, Canada and Mercosur countries have open-door access to the UK, it will make access to the EU less valuable.
Also, given the level of Irish exports to Britain, any displacement of Irish beef in the UK will inevitably lead to increased supplies to other EU markets, creating a potential oversupply.
This is the reality of the UK having an independent trade policy from the EU and many commentators suggest the anxiety for the UK to secure a deal with Australia is to reinforce independence from the EU as opposed to trade benefit.
It also exposes the EU vulnerability in having a similar open no-tariff, no-quota arrangement with the UK. As the UK pursues this policy around the world, it has a knock-on effect on the EU with the double impact of additional Irish products displaced from the UK market combined with potentially unlimited exports from the UK. The impact of UK trade policy on access for agricultural produce will be felt as much with their former partners in the EU as in the UK.