It’s a highly uncertain time in the UK - the draft agreement needs to be approved by Parliament before it can come into effect but it has received some negative response ahead of that vote. There is some political uncertainty too - resignations by two senior ministers and three junior ministers have resulted in political vulnerability. However, Prime Minister May has shown tremendous resilience over the last few days and stands behind the draft agreement 100 percent, arguing that this agreement is the best option for the UK.
The next few weeks will be a crucial time for the UK and the EU, and will determine whether the UK can transition out of its EU membership over a two year period by staying in the customs union(where for NZ red meat exporters, things will largely stay the same), or whether the UK leaves the EU with no deal in place. In a no deal scenario the UK would leave the EU with no trade provisions agreed, and they would effectively become like a third party country like New Zealand with no FTA in place. This scenario would be hugely disruptive to UK exporters, and exporters like New Zealand for which the UK and the EU are important markets. This scenario needs to be avoided at all costs.
The following is a brief outline of what the draft withdrawal agreement means for New Zealand’s sheep and beef exports to the EU and the UK.
What has been agreed?
The UK government has reached agreement with the European Commission on a “transitional agreement” for their withdrawal from the European Union, but this still needs to be agreed by the UK Parliament and European Council. If approved, the agreement will be in force until 31 December 2020.
The deal covers all areas of the relationship, but most importantly in terms of trade it will see the UK and EU essentially continue to operate as a customs union until 31 December 2020. This means trade between the UK and the EU27 will continue as it currently does, with zero tariffs, no fees, charges or quantitative restrictions for all goods traded between themselves.
What does the agreement mean for New Zealand sheep and beef exports to the UK and EU?
This is good news for the sector as it means there will be no change to New Zealand’s sheepmeat and beef market access into either the UK and the EU until the end of the transition period. Importantly too, this means that there is no change to the UK sheepmeat and beef market access into the EU which is vital to ensuring stability and continuity in trade flows during this time of uncertainty.
This is vital as in the 2017/18 production year, New Zealand exported over $2 billion in sheep and beef products to the EU and UK.
What are the next steps?
The deal has been approved by the UK cabinet but still needs to be approved and ratified by the UK Parliament and the European Council. This may take a few weeks/months, but needs to be concluded before the end of this year to ensure it can enter into force before 29 March 2019, which is the deadline for the UK to leave the EU.
During the transition period, the UK and EU will look to negotiate their future trading relationship. It is unclear at this stage exactly what this will look like, however in an accompanying document setting out the framework for the future relationship between the UK and the EU, it states that the it will be a comprehensive agreement, in relation to goods, with zero tariffs across all sectors.
The next few weeks to the end of the year will be critically important. B+LNZ continues to work very closely with the New Zealand government to ensure that New Zealand’s sheep and beef exports are no worse off as a result of Brexit at the end of this transition period. There is still a lot of uncertainty in this process and we will endeavour to keep you updated as things develop.