AS the dust settles after yesterday’s European Union Free Trade Agreement announcement, stakeholders are starting to sift through the detail to better understand how the widely-condemned outcome affects the Australian red meat industry.
In the rush to ‘get something out,’ much of the fine print housed in yesterday’s agreement has so far been overlooked.
Not since the dark days of the Ludwig-led Labor Government decision in 2011 to suspend live cattle exports has beef industry reaction to a Canberra decision been so severe.
As seen in yesterday’s report on Beef Central, without exception, every national red meat supply chain body condemned the decision in the strongest possible terms.
In contradiction with the red meat industry response seen in Australia yesterday, farmers in Europe are already demanding that lawmakers vote against the FTA with Australia, arguing that the cumulative effect of tariff-free quotas for beef exports from Australia (however modest), would compound damage from deals done earlier with Canada, New Zealand and others to local, less-efficient EU beef and sheepmeat producers.
In fact in the lead-up to yesterday’s agreement, European farmers wanted Australian beef and lamb excluded from the negotiation, outright.
European farm lobbyists yesterday accused the European Commission of using EU primary producers as bargaining chips for broader political interests. With some irony, some Australian farmers were accusing our own Federal Government of the same thing.
There is already speculation mounting that EU farmers may force their lawmakers to reject the final FTA terms with Australia, outright. A similar powerful farmer lobby has arisen over moves to establish a separate EU/Mercosur (South American countries) trade agreement.
That is looking increasingly unlikely, however, because the EU has changed its laws over approval of such agreements from ‘unanimous’ (ie all EU member countries in support), to a majority.
In the absence of any FTA, Australian beef exports to the EU last year totalled just 7638t, valued at $197 million. That volume represented less than half of 1pc of total exports last year (1.545mt).
Future trends
Set out below are some important follow-up points that may influence future trade trends.
Firstly, don’t expect anything tangible to happen any time soon. Going on past FTA history, it could be two years, at least, before the European Parliament ratifies yesterday’s agreement (under a process called Entry Into Force) – if it does at all.
Until then, none of Australia’s existing market access arrangements change, with current quota levels and trade restrictions including the EUCAS producer HGP-free accreditation and audit process remaining in place.
Suggestions quickly circulated yesterday that Australia may have the opportunity to review or challenge the terms of the agreement within the next 18 months.
However detail in the DFAT website suggest otherwise. It says Australia may request a review of the beef TRQs no earlier than five years after Entry Into Force. Australia may also request consultations with the EU if there is persistent or systemic underfill of the TRQs to address the underlying causes, the DFAT site says.
Most, if not all of Australia’s other FTAs also include review clauses, but all are considered worthless, and none have ever achieved any significant changes, Beef Central was told.
The ‘headline’ statistic released yesterday that the A-EU FTA guaranteed preferential access of 30,600t of ‘new’ market access (carcase weight equivalent) into the EU on full implementation, overlooks a number of important points.
Industry had anticipated a minimum figure of 50,000t of additional access, just to keep pace with competitors like New Zealand and Canada.
The process for Australian access under the new FTA will in fact start at just one third of that 30,600t figure, or 10,200t/year, where it stays for five years after the agreement’s entry into force.
That means that if the FTA enters into force in say, 2028, it would not be until 2034 that volume would start to grow beyond a paltry 10,200t.
The Federal Government yesterday made the point that the full agreed figure represented “nearly an eight-fold increase” on Australia’s previously guaranteed access (see below).
That fails to acknowledge, however, that Australia’s tariff free access has been miniscule for the last six or seven years – at least since Australia agreed to ‘hand back’ access to the former grainfed quota originally intended to placate the US over challenges regarding HGP use. Prior to that, Australia’s annual grainfed exports, alone, to the EU often pushed close to 20,000t.
Current position
Up to now, Australian beef exports to the EU have been constrained by the volumes that could be exported under:
- Our existing WTO ‘Hilton’ country-specific quota (CSQ) of just 3389t shipped weight (4400t carcase-weight equivalent), which has a 20pc in-quota rate, and
- The global high-quality beef grainfed TRQ, which Australia can access along with other eligible exporters, totalling 5851t, tariff free.
The A-EU FTA announced yesterday will deliver eventual guaranteed preferential access (not fully implemented for ten years) of 35,000t (cwe) into the EU market – including new preferential access of 30,600t cwe – through two new TRQs and improvement to the existing CSQ.
That includes:
- Duty-free access for 16,830t of grassfed/grain-finished (up to 70 days) beef after ten years, starting at 5610t on the agreement’s entry into force, with a five-year grace period
- 13,770t of ‘any’ beef (effectively meaning grainfed +70 days) after ten years, starting at 4590t in year-one, with a five-year grace period – which will carry a 7.5pc in-quota rate.
- Removal of the 20pc in-quota rate for Australia’s existing WTO Hilton Country-Specific Quota from year-one.
Any exports above these levels would attract the standard Most Favoured Nation (MFN) tariff rate, which Beef Central was told by senior trade sources this morning would effectively make trade into the EU prohibitive – with the possible exception of small quantities of high-end Wagyu beef.
All these limitations come at a time when the European Union’s own beef production has been on a long-term declining trend, due in part of lack of efficiency and scale, and constant environmental regulatory pressures.
EU’s own view
The European Union’s own media release on the agreement issued yesterday also includes some enlightening passages, describing the agreement as ‘ambitious’ and ‘balanced.’
It highlights EU dairy exports to Australia likely to rise almost 50 percent, with the freer access provisions provided.
It also provides reassurances to EU constituents that Australia’s tariff free red meat exports to the EU would be highly capped and constrained under the agreement.
“The FTA also includes strong sustainability commitments, which will contribute to greener and fairer trade, and ensures that imports into the EU are more aligned with the EU’s own production standards on climate, environmental and animal welfare,” the statement said.
The EU’s release also talks about a safeguard mechanism (details not yet provided, by either the Australian Government or the EU) that could turn off Australia’s access for red meat at any time.
“As an additional layer of protection for EU farmers, the bilateral safeguard mechanism will be operationalised in a self-standing EU regulation that will see swift and effective protections kick into gear, in the unlikely event of an unforeseen and harmful surge in imports or an undue decrease in prices for EU producers,” it says.
Under a section titled ‘Extra protections and safeguards’, the statement says the EU has recently announced a reinforcement of controls on food, animal and plant products entering the EU, increasing the number of audits carried out on non-EU countries by 50pc, and those carried out on EU Border Control Posts by 33pc in 2026-2027.
The EU has also launched impact assessments to analyse potential alignment of production standards between domestic and imported products, notably on pesticides and animal welfare.
Reader reaction
In strong Beef Central reader reaction published at the bottom of yesterday’s FTA announcement story, reader Stephen Carpenter suggests the EU now mandates that all new FTAs include binding commitments to the Paris Agreement on climate change, making adherence an “essential element” that allows for agreement suspension if violated.
“This strategy aligns trade policy with the European Green Deal, aiming to enforce global emissions reductions and sustainable development,” Mr Carpenter said.
“The EU can now use water use, land clearing, nitrate use and a host of other excuses to cancel any part of the FTA,” Mr Carpenter suggested. He provides the following link to support his comments: policy.trade.ec.europa.eu
As the level of industry scrutiny on yesterday’s trade deal accumulates, it’s evident that the result is more about politics and geopolitics, rather than any win-win trade deal.
it doesnt seem like there was alot of negotiating with old Ursula. I think we should hand the fta back. I think they have more to lose through dairy, pork, and general goods that they force onto us. they want our rare earth’s for bugger all. let them get what they need from clearing the rest of the Amazon if they are so smart. i would love to know how much money has been wasted (all in) to get to this point? complete failure from both parties that governed over this 10 year period. cheers Matthew Della Gola