The United Kingdom (UK) will formally depart the European Union (EU) customs union and Single Market on 31 December of this year.
The following is an update on what may happen and the extensive preparation the red meat sector has made for all eventualities. Beef + Lamb New Zealand, the Meat Industry Association (MIA) and the New Zealand Meat Board have been working closely with the Ministry for Primary Industries (MPI), the Ministry of Foreign Affairs and Trade (MFAT), and New Zealand Trade and Enterprise (NZTE) to ensure any disruption to our exports is minimised, and there is ongoing close communication with processing companies.
What may happen on 31 December?
Negotiations between the EU and UK are expected to continue up to the wire.
The two most likely options are:
1) The UK leaves the EU without a deal on 31 December (‘Hard Brexit’). Under a Hard Brexit the UK will face the EU MFN tariff rates and vice versa. This would cause market disruption and impact prices in those markets. The UK is a major exporter of sheepmeat to the EU and the EU is a major exporter of beef to the UK. If a UK-EU trade agreement is not concluded, this will cause oversupply of sheepmeat in the UK; and oversupply of beef in the EU and shortfall in the UK;
OR
2) They are able to conclude a trade deal, but there is a transitional period in order to put the new tariffs and rules in place. The most likely outcome if they agree to a trade deal is that they will agree to free trade on agricultural products between them and this will mean less market disruption.
Both scenarios have significant long-term market access implications for New Zealand’s red meat exports to the EU and UK.
Market access implications
When the UK leaves the EU Customs Union, the EU and UK intend to split New Zealand’s WTO quota access for sheepmeat and beef based on historical trade.
The New Zealand Government, along with B+LNZ and MIA, continue to strenuously object to the EU and UK’s intent to do this as it will erode the quality and quantity of our market access. For example, New Zealand’s high-quality beef quota into the current EU-28 is 1,300 tonnes. If this is split based on historical trade flows then the amount that can be exported to each market is likely to be too small to be commercially viable for processing companies.
We are in discussions with the New Zealand Government about our options through the WTO to rectify the situation if our quotas are split. (A recent op ed from the B+LNZ and MIA Chief Executives on this issue can be found here).
In terms of quota management, the New Zealand Meat Board has undertaken extensive preparations to ensure we are ‘technically’ able to export sheepmeat and beef into the UK and EU under the new quotas, until we reach the new ceilings.
Without prejudice to our strong ongoing objections to the quota split, the Meat Board has put in place new quota allocations, quota compliance verification mechanisms and a new quota management system to comply with the expected changed legal requirements in the UK and EU.
Other regulatory requirements
The New Zealand Government has successfully negotiated the rollover of various existing agreements that New Zealand has with the EU to the UK. These include the Veterinary Agreement and Mutual Recognition Agreement. This means that New Zealand food products can continue to be exported to the UK after 31 December 2020 under similar regulatory requirements as before.
Possible border disruptions
Regardless as to whether there is a Hard Brexit or a last-minute deal, there is likely to be disruption at the border for exporters to the UK and EU due to the application of new rules at the border and expected queues in trade (compounded by COVID-19 delays).
The B+LNZ, MIA and Meat Board teams will be on standby for the period immediately following 31 December 2020 in case of any major issues, and are in close contact with processing companies to ensure they have all the information they need about quota certification and the rules.