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All eyes on Brexit as Australia negotiates FTAs

08 December 2020

As Australia continues to negotiate free trade agreements (FTAs) with the European Union and the United Kingdom, trade talks between the EU and the UK are also being closely watched as they look to strike a post-Brexit trade deal.

MLA Europe Market Access Manager, Mary Johnson, said with the Brexit transition period due to end on 31 December, the outcome of a deal – or potentially no deal – between the EU and UK has big implications for Australia’s exports, including those of red meat.

“As a consequence of the single market, trade between the EU and UK has been intrinsically linked. The post-Brexit trade deal will dictate any changes in the red meat trade and is obviously an important outcome,” Mary said.

“Australia’s EU tariff rate quotas (TRQs) are going to be apportioned between the EU and the UK, so from 1 January 2021 our access into the markets is actually being further constrained. As a consequence, the two separate, but parallel FTAs Australia is negotiating are really the best mechanism for us to secure long-term preferential access into these high value markets.”

FTA negotiations continue

The ninth round of negotiations of the Australia-EU Free Trade Agreement (A-EU FTA) and the third round of negotiations of the Australia-UK Free Trade Agreement (A-UK FTA) have just been held, both virtually in the era of COVID-19, and over two-week periods.

“While red meat products, classified by the EU as ‘sensitive’, are yet to factor into negotiations, all reports from the European and Australian negotiators indicate there is high ambition from both sides, that talks are progressing well and they are keen to continue negotiations in 2021,” Mary said.

“There is optimism that the deal could be done next year but we’re more interested in the substance of the deal, as it will dictate our trade terms for years to come, as opposed to meeting a deadline. There is also a new EU Commissioner for Trade, Executive Vice President Dombrovskis, who would have slightly different objectives and ways of doing things, so that changes the dynamic as well.”

Mary, who is based in London and has just experienced England’s second COVID-19 induced national lockdown, said the UK appears keen to secure FTAs and reposition itself as ‘Global Britain’.

“They’re talking about the A-UK FTA being a ‘gold standard’ deal that’s very comprehensive and a kind of template they can use for other trade deals going forward. However, that doesn’t mean it’s going to be an easy conversation,” Mary said.

“Market access offers were made for the most recent round of negotiations, so they’re progressing.

“There is ongoing work in both markets. In the EU, the key policy topic of interest is sustainability, the Green Deal in Europe, and how they can filter that out in the EU and also in their relationships with other trading partners.

“Australia and the EU have shared values when it comes to sustainability and farming. Our CN30 target and Beef Sustainability Framework are extremely valuable programs, because they are a clear illustration of the good work Australian farmers are already doing.

“In the UK, the topical issue is standards – meeting UK customer requirements for high animal welfare, and HGP-free beef.  It emphasises the importance of our red meat Integrity Systems program and having our robust traceability systems in place.”

COVID-19 prompts protectionism

Among the many impacts of COVID-19 has been the emergence of a protectionist sentiment in both the EU and UK.

“The rhetoric is ‘buy local, or shorten supply chains.’ There is a review of trade policy being done in the EU at the moment and shortening and securing supply chains is certainly the sentiment,” Mary said.

“As part of the COVID-19 recovery strategy, there is a strong drive to protect certain areas of domestic production, but there is also a recognition that trade is necessary, so facilitate trade where it works.”

Two highly influential European representatives, Andreas Schneider, a Policy Advisor in the Cabinet of EU Agriculture Commissioner, and George Lyon, a former UK Liberal Democrat MEP and an influential member of the European Parliament’s Agriculture Committee, agreed COVID-19 had influenced the outlook of both markets.

“Exports and imports are very important to trade, but on the other hand, you can see with the Farm to Fork Strategy the EU is bringing in, there is a call for shorter, more local supply chains, and I think this is one of the outcomes of the whole pandemic, this will be a way forward. Whether it will be realised or not, we don’t know yet,” Andreas said.

“It may be even an advantage for Australia in the Farm to Fork Strategy.

“The Farm to Fork Strategy and Biodiversity Strategy could be the end of any livestock production in Europe, not immediately but in the longer term. That would give other countries a huge advantage, not only Australia.

“Next year, the EU Commission comes forward with a methane strategy, and all those little strategies add up and could make it more difficult, at least for some livestock producers.”

Both Andreas and George agreed sentiment towards Australia as a trade partner was generally positive.

“Speaking to politicians and some of their key interest groups and stakeholders, they’re not as worried about an EU-Australia trade deal or UK-Australia trade deal as they may well be about the Mercosur deal and the implementation of that,” George said.

“So I think in general, an Australia-EU trade deal is looked on not as a great threat to EU food production.”

Andreas Schneider and George Lyon recently featured on MLA’s On the Ground podcast discussing the opportunities in the EU and UK thanks to Free Trade Agreements.  To listen to the full interviews visit mla.com.au/marketing-beef-and-lamb/international-markets/feedback-on-the-ground/.