Trade Blog: Brexit two years on

// International Trade

In this Trade Blog, the Meat Industry Association’s Senior Manager Strategy reflects on Brexit’s impact on the food industry two years on.

British flag behind EU flag

The Meat Industry Association of New Zealand (MIA) is the voluntary trade association representing New Zealand's red meat processors, marketers and exporters. MIA and Beef + Lamb New Zealand (B+LNZ) work closely together, especially on trade related issues where we share common goals to reduce trade barriers and improve returns for MIA’s members and New Zealand sheep and beef farmers. 

This post below was written by Esther Guy-Meakin, Senior Manager Strategy, Trade Policy and Advocacy at MIA. It was originally written as an article appearing in the New Food Magazine ahead of the Food Integrity 2022 Webinar in March where Esther will be speaking on a panel about Brexit’s impact on the food industry.

The B+LNZ Trade team also recently recorded a podcast on Brexit, looking at what has happened since the UK voted to leave the EU and how it has impacted our sheepmeat and beef exports. The podcast recording can be found on the Knowledge Hub. 

Brexit implications felt globally, but there are silver linings too

The ripples of Brexit have been felt across the world including 18,000 kilometres away in New Zealand.

New Zealand businesses experienced the impact of this significant decision with Brexit contributing to a sense of global instability at a time where there was increasing anti-globalisation, nationalism and trade tension among big economies.

It resulted in almost five years of uncertainty and disruption as the United Kingdom and the European Union (EU) sought to negotiate the terms of their ‘divorce’. Importantly, it led to a material change to the New Zealand red meat sector’s market access to the United Kingdom and the EU. 

At a time where a dangerous trend against globalisation was emerging, the reaction to the Brexit referendum in New Zealand was one of surprise and disbelief. Brexit was a setback to the economic integration and alliances that have served consumers, business and the wider global community so well for decades. As a small Pacific nation, reliant on trade and the relationships and international institutions (e.g. the WTO), a level playing field that allows fair competition, is critical. 

We have been encouraged by the United Kingdom’s ambition to be “Global Britain” by strengthening existing and new trade relationships, and championing the rules-based international order.

For export businesses, certainty and predictability are paramount - they allow companies to build strong and enduring relationships, brands and customer bases. Almost five years of negotiations, however, made it challenging for businesses to plan strategically and meaningfully for the United Kingdom market.

Compounding this uncertainty was the question of how the United Kingdom and the EU would “split” the Country Specific Tariff Rate Quotas at the WTO. For the New Zealand red meat sector, this crucially involved quotas for sheepmeat and beef. These two quotas were negotiated at the establishment of the WTO and have, since 1995, allowed New Zealand exporters to trade with the EU (and the United Kingdom as an EU Member) and benefit from complementary seasonal production that allows European and British consumers to enjoy New Zealand’s high quality, nutritious red meat in their off season as Europe moves into winter and New Zealand enjoys summer. 

The terms of these quotas have only just been formally agreed, almost six years later. The result is that New Zealand’s market access has been split between the United Kingdom and the EU. This outcome has removed the flexibility companies had to export across the United Kingdom and the EU, optimise supply chains and respond to consumer demand and dynamics. 

This loss of flexibility has been compounded by ongoing challenges with exporting to Northern Ireland as a consequence of an administrative decision by the United Kingdom not to allow New Zealand product to utilise access under United Kingdom tariff rate quotas into the Northern Ireland market. Because of the rules and procedures laid down in the Northern Ireland Protocol, third-country product is considered to be “at risk” of entering the European Union “through the back door” and accordingly United Kingdom authorities have said that New Zealand cannot utilise quota access into Northern Ireland in order to manage this risk.

It is a clear breach of the United Kingdom’s WTO commitments and we continue to work through this issue.

Despite these challenges, there are always silver linings and Brexit also presents significant opportunities to the United Kingdom and its trading partners like New Zealand. 

When the result of the Brexit referendum was announced in 2016, the implications and uncertainty echoed that of 1961 when the United Kingdom applied to join the European Communities. 

In many ways, the United Kingdom’s red meat sector (as well as other parts of the United Kingdom’s economy) was facing a very similar challenge and opportunity as New Zealand’s red meat sector did during that time. 

In 1961, New Zealand’s red meat sector only exported to 34 countries globally and sent approximately 86 percent of its sheepmeat and 12 percent of its beef (by volume) to the United Kingdom. We had too many eggs in one basket and had neglected to nurture other relationships and opportunities. 

With the announcement that the United Kingdom would be joining the EC and taking on all the obligations that went with that membership, New Zealand’s access to the United Kingdom market would become significantly more constrained. 

When the United Kingdom finally officially joined the European Community more than 10 years later in 1973, together with other significant economic challenges facing New Zealand, a once in a generation reform got underway. 

Facing an open economy after unilateral (and almost universal) tariff elimination, the loss of all agricultural subsidies and the loss of our biggest export market, our sector had to rethink our approach to trade, production, efficiency, competition and to New Zealand’s geo-political relationships and place in the world. 

Now, some 40 years later, New Zealand’s red meat sector exports to 108 countries worldwide, contributes approximately 15 percent of export revenue to the New Zealand economy, and represents 4.7 percent of national employment. 

Productivity, innovation and agility through-out the supply chain have driven the success of New Zealand’s red meat sector and transformed it into the sophisticated, world class industry it is today. 

By way of example, despite having a 55 percent decline in New Zealand’s sheep flock since 1990, the amount of lamb that we export has not changed. This productivity growth has been achieved through leading genetics, world class farming practices and innovation in the processing sector. 

What was a painful and challenging time for New Zealand’s economy and agriculture sector was also an opportunity for reinvention, innovation and prosperity.

The parallels between the evolution that the United Kingdom is undergoing and New Zealand’s experience in the 1970s-1980s are clear for New Zealanders watching from our corner of the world. 

And it is with this benefit of history that we also see the huge opportunity for the United Kingdom, and New Zealand as its long-standing trading partner. 

New Zealand and the United Kingdom have been negotiating A Free Trade Agreement (FTA) since 2020 and in October 2021 announced an Agreement in Principle which set out the key elements of a new high-quality, comprehensive and progressive free trade agreement. 

The FTA marks a significant opportunity to forge a new chapter in the long-standing trade partnership between New Zealand and the United Kingdom and demonstrate the United Kingdom’s credentials as a high-quality, ambitious trading partner. It will provide the foundations for deeper cooperation and relationships between New Zealand and United Kingdom industries, companies and the two governments. 

Without a doubt Brexit has had its challenges, and the implications have been felt globally. But it also presents an opportunity for the United Kingdom to become a more outward looking, competitive, export focused economy and more integrated with partners around the world as Global Britain.