UK trade policy will squeeze farmers

The publication of the UK government’s strategy for trade deal negotiations with Australia and New Zealand crystallises what post-EU trade deals will mean for farmers on both sides of the Irish Sea. The 180 page document lay out how deals with both countries would impact the UK economy, and is clear that the main increase in imports would be for beef and sheep meat, especially if there was a comprehensive deal.

Current favourable access for NZ lamb

Currently, only lamb from New Zealand enters the UK in significant quantities. In the year to 30 September 2019, 38,256t lamb was imported by the UK from New Zealand, with the total imports by the EU 28 at 89,227t. This is because New Zealand has a 228,000t sheep meat quota for the EU at zero tariff, but they don’t have a meaningful beef quota (1,300t). Australia only has a 7,150t beef quota for the EU, with a 20% tariff and a 19,186t sheep meat quota at zero tariff, less than one-tenth of the New Zealand quota.

During negotiations, the UK could limit Australian/New Zealand access with quotas

In a comprehensive trade agreement, the UK is proposing an elimination of tariffs. According to the published UK strategy for these trade deals, there would be an 83% increase in imports to the UK from Australia and a 40% increase from New Zealand, coming mainly from an increase in beef and sheep meat imports.

In practice, that would mean that Australian beef and lamb, along with New Zealand beef, would be as common in the UK market as New Zealand lamb is at present. During negotiations, the UK could limit Australian/New Zealand access with quotas, but this hasn’t been indicated as an opening position and the fact that the opportunity is highlighted suggests the UK thinking of giving considerable access.

Market impact

Australia is currently the largest sheep meat exporter and second-largest beef exporter in the world, with New Zealand coming second for sheep meat, exporting 94% of their production.

While New Zealand isn’t as well known for beef exports, they are consistently in the top six in the world, exporting 415,000t for Y/E 30 September 2019 – 87% of their production. Farm gate prices are usually well below EU, US and Canadian levels, though consistently higher than South American countries for beef at around the equivalent of €3.00/kg in New Zealand at present. Australian beef prices have been rising recently, to the point that they are now at €3.80/kg, but they had been as low as €3.20 at the end of January.

EU also in trade negotiation

A surge in availability of Australian and New Zealand beef and lamb in the UK market will put further price pressure on Irish beef. It will also squeeze UK prices, though they can still expect to command a premium over any imported offering. For Irish farmers, the problem is compounded by the fact that the EU are two years into a trade negotiation with both countries as well.

If, as is likely, this deal concludes successfully, it will also involve a quota at some level for New Zealand beef and Australian beef and sheep meat.

Brexit angle

A UK trade deal that gives another country more favourable access for products than the EU puts a spotlight on the border inspections between the two. In a UK-Australia/New Zealand deal, imported beef or sheep meat could enter Northern Ireland from the rest of the UK, but controls would have to be put in place to ensure that it didn’t cross the Irish border to the EU.

With the administration of this task carried out at the point of entry to Northern Ireland, it suggests that the level of inspection and control would be significant and could be politically sensitive.

The UK negotiating strategy points clearly to enabling a surge of imports of beef and lamb from Australia and beef from New Zealand. This can only weaken the position of Irish beef and to a lesser extent lamb as the import of choice for the UK. Both countries are huge suppliers of forequarter beef to the USA for mince and burgers. The UK and indeed the EU would complement this market by taking steak meat and other hindquarter cuts. This is the logical outworking of the UK pursuing a trade policy independent of the EU and the consequences for Irish beef in particular are grave irrespective of how EU-UK negotiations on a trade agreement conclude.