In conversation with Jason Strong

01 March 2018

Jason StrongWe speak with Jason Strong, Chair of Australia’s EU and UK Red Meat Market Access Taskforce, about the role of the Taskforce and why 2018 is such a crucial year for positioning the Australian red meat industry for improved access to the European Union (EU) and United Kingdom (UK) markets.

Q. What is the EU and UK Red Meat Market Access Taskforce and what role does it play?

A: The Taskforce is the Australian red meat industry’s steering committee responsible for guiding and driving improvements in beef, sheepmeat and goatmeat market access into both the EU and UK.

The Taskforce has been established by industry through the Red Meat Advisory Council (RMAC) and comprises representatives from each sector across the supply chain – that is producers, processors, exporters and the industry service providers – and draws heavily on the collective commercial expertise.

Our core role is to proactively identify and monitor any issues arising from potential changes to current market access conditions, taking steps to mitigate potential risks and strongly advocating favourable trade reform.

The Taskforce takes a multifaceted approach to assessing the potential implications from changes in the market.  This includes using the intelligence we get from strategic alliances and trade contacts as well as leveraging the unique position of MLA’s on-the-ground market access representation.

We then work together to determine actions as well as developing a program of engagement that ensures a common industry view is taken forward to the Australian Government – who are ultimately responsible for prosecuting positions on behalf of the industry through the formal negotiations.

Q: What are the Taskforce’s priorities in 2018?

A: 2018 is shaping up to be a big year because of the potential changes in the way that we access the EU.  There are three clear and immediate priorities for our industry and the Taskforce to focus on - favourably positioning Australia for positive outcomes in the EU free trade negotiations, defending the high quality grainfed beef quota, and ensuring industry has a strategy for the UK Brexit process.

Australia and the EU have been working towards a free trade agreement (FTA) for several years, and now there is optimism that these negotiations will officially start in the second half of this year.

The EU is a very limited and controlled market due to its low volume import quotas, which hinders our ability to respond to market demand. This looming FTA dialogue represents a positive step forward in not only helping the EU with its imported red meat requirements, but also in securing improved Australian access to the 500 million strong EU consumer market.

We are also closely monitoring Australia’s ongoing access under the grainfed beef quota, which Australia got access to in 2010.  This avenue has allowed us to more than double beef exports into Europe in response to consumer’s embrace of our products high quality attributes. What’s happening now is there are discussions underway around possibly changing the way that eligible countries access the grainfed quota, and we must be ready as an industry to respond to any developments.

One of the challenges is that nothing has officially started yet. We know all of these things are coming, so what the Taskforce is doing right now is ensuring that we and the industry are as well prepared as possible. Our collaborative relationship with the Australian Government is critical so that when any of these activities kick off, we’re able to jointly respond in a fast, nimble way as required.

At a high level, there’s absolutely no question that as a Taskforce and industry we’re ultimately after improved access to the EU and UK markets out of any formal discussions.

Q: What are the aims of the Taskforce in helping to secure a Free Trade Agreement with the EU?

A: The EU is not self-sufficient in red meat production, and the Taskforce is working towards positioning our industry to help meet Europe’s import requirements. The European Commission estimates an additional 229,000 tonnes of sheepmeat and 354,000 tonnes of beef will be required per annum to meet projected EU domestic meat consumption over the next decade.  With the EU being an importer of high quality food, Australia is well placed to help meet this demand.  You might say we are natural trading partners with many shared values.

As the outcome of these negotiations will shape the Australia-EU trade for years to come, we will be working towards securing access arrangements which are beneficial for the Australian red meat supply chain as well as European consumers.

Put simply, there are two components in any formal negotiations for Australia – one is volume and the other is the type of product and how we get it into market. The EU is one of the most onerous of our export markets and as part of any of these discussions, it’s important it’s not just about volume but how we access that market as well – that is what are the restrictions and constraints around the supply process.

There are challenges around the way quotas are administered - who has access to it from an importer’s point of view and an exporter’s point of view, but also there are the supply conditions on the cattle side. We have an EU-specific cattle supply program so you end up with a designated supply line which gives security around tracing and tracking those cattle - but it also increases the cost of those cattle as well and reduces the flexibility of the industry to capture value out of that market or to respond to market demand.

When that system was put in place, it was before NLIS was mandatory in Australia for example. The Australian industry now has a much higher quality and more effective mandatory individual animal identification traceability system than most other countries in the world and yet we still have this over-riding, onerous EU system on top of that. Australia put NLIS in place but we have to respond now to this opportunity to improve that process as well in accessing the EU market.

There’s certainly scope to significantly increase access into the EU, but importantly, also being able to respond to demand for higher quality product. At the moment, an animal identified as being an EU animal and travels through that production system, because you’ve got all this investment in this EU animal and it costs you more on an overall per kilogram basis, you want to try to sell as much of that product as you possibly can into the EU. While we might be selling high quality tenderloins and cube rolls, and strip loins in the market, we’re also trying to sell them knuckles and topside. There are some markets for that in different parts of EU as well, but it would be much better if we were able to build high quality supply lines for restaurant cuts and create a real niche and premium position for us.

Q: With the UK set to leave the EU in March 2019, what are the aims of the Taskforce in the UK market?

A: Brexit has created uncertain times for the UK as they prepare to leave the EU and the current negotiations are extremely politically charged.  The Taskforce is constantly monitoring any developments and assessing how Brexit may impact our trade into the future.  Our aim - in partnership with the Australian Government – is to ensure our trade is not disadvantaged.

The UK has traditionally been an important market for Australia, however, when the UK joined the Common Market in 1973, our ability to respond to ongoing UK demand was constrained.

A key part of our efforts is ensuring the Brexit process does not erode our existing access into the EU. What is being proposed at the moment in Brexit discussions is a splitting of the current quotas between the EU and the UK on a proportional basis. We certainly don’t support that view and our government doesn’t support that view because it disadvantages us and doesn’t give us the flexibility that we’ve had previously to service consumers within what is currently a single market.

As the UK establishes its own import regime, we are advocating that all supplying nations be granted more equivalent access – necessitating a regime that does not simply replicate the currently unbalanced EU quota construct.

Put simply, what we need with the UK is guaranteed access subsequent to Brexit and ultimately an FTA with the UK which gives us better access into that market than we’ve had under previous quota regimes.

Q: What’s the biggest challenge to the Australian red meat industry in achieving its desired outcomes in the EU and UK?

A: Similar to other trade reform issues the Australian red meat industry has faced, discussions on red meat market access into the EU and UK will undoubtedly be complex – especially if we are to secure agreements that are comprehensive, liberalising and ambitious.

Specifically, one of the biggest challenges is that we may get treated like some of the other large exporting countries when they think about how much access to give us or on what basis that access is. We’re not this massive commodity producer that’s trying flood product into a market. We’re a specialist exporter that identifies and responds to the most appropriate and best market needs around the world.

We export to 100 different countries of which the EU is our highest per cut value market out of all of those countries. And the reason why that’s the case is there’s a need in that market that’s largely unmet by anyone else that’s quick enough to respond to and provide consistently high quality, high value product that consumers are building a taste for. Our position into that market is very very different to South America for example.

I think our position has to be very strongly pushing the fact that we’re professional exporters to 100 countries - this isn’t just a case of trying to find some opportunistic market to dump some product into. It’s a case of us building really high quality supply chains and customer quality relationships which we then collectively build a really strong, long-term, sustainable business around.

Ultimately, given the strong support of the Australian Government coupled with productive and long standing trading relationships our industry has with both parties (EU and UK), we remain optimistic that strong agreements can be achieved.

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