Brexit uncertainty and red meat risk continues
14 March 2019
Host to a deep pool of wealthy consumers, the EU is a high value but heavily protected red meat market. Improved access remains the key priority for Australia as Brexit politics play out.
On Tuesday, the UK House of Commons overwhelmingly rejected the latest Brexit deal. Despite Theresa May winning last minute assurances from the EU which mitigated the risk of a permanent Irish backstop and the UK remaining in the EU indefinitely, legal advice from the attorney-general that the scenario could not be ruled out killed the deal prior to the vote.
On Wednesday, the House of Commons narrowly rejected an alternative to leave the EU with no deal at all on 29 March.
Tonight (UK time), the House of Commons will likely vote on whether to ask for an extension to negotiate a better deal or buy Theresa May time to win over the House with the current one on offer. If this vote fails, the UK will again be looking to a hard Brexit. If it wins and an extension is conceded by all other EU member states, it would likely only be too late for May to avoid a clash with EU parliament elections.
What’s at stake for Australian red meat?
Brexit has short and long-term implications for Australian beef and sheepmeat meat, as highlighted in December. Host to a deep pool of wealthy consumers, the EU is a high value but heavily protected red meat market and improved access remains the key priority for the Australian cattle and sheep industries. The UK is Australia’s largest red meat market within the EU.
The EU and the UK have (separately) proposed splitting all country specific tariff rate quotas (TRQ) between the EU and UK following the UK’s departure from the customs union. This proposal would see Australia’s existing HQB Hilton beef quota split 65% and 35% between the UK and remaining EU respectively, and the sheepmeat quota split 80% and 20%.
The proposed quantitate restrictions between both markets is an erosion of Australia’s access as it reduces exporters’ ability to target the most attractive consumer market in either region – until now, Australian beef and sheepmeat has been able to shift between the UK and remaining EU seamlessly under a single quota.
If a hard Brexit ensues, quota separation will likely come into play. The EU has published TRQ splitting regulation (Regulation 2019/216) which will see the unilateral apportionment of TRQs apply in the EU, reducing Australia’s EU-27 access to 3,837 tonnes of sheepmeat and 2,481 tonnes of Hilton beef. The remainder of Australia’s existing country specific quota volumes will be allocated to the UK.
If a Brexit deal is agreed, Australia’s access will remain unchanged during a transition period while the UK remains within the EU customs union. During a transition period Australia and the UK would be able to commence negotiations on long-term market access, through an Australia-UK Free Trade Agreement (FTA).
Meanwhile, Australia commenced FTA negotiations with the EU mid last year. Trade deals are a long-term aspiration, as they notoriously can take years to conclude. In the meantime, the proposed quota split could come into play as an interim avenue for access.
A lot is at stake for Australia in the UK and EU but, for now, a lot remains up in the air.
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