Australian red meat’s access to the United Kingdom market under the new terms outlined in this month’s freshly-minted Free Trade Agreement won’t happen until at least the second half of 2022, trade sources say.

There will be significant delays as the in-principle deal reached last week goes through the legislative process in both countries, and then formerly enters-into-force. Best estimates suggest it may be October or November next year, at earliest, before the new trade terms come into play, Beef Central was told this morning.

The Australian Parliament might get to address the agreement for the first time through legislation at its October sittings, from 18-28 October, Beef Central was told.

Negotiations over the fine detail in the FTA are ongoing, but last week’s achievement of an in-principle agreement has assisted greatly with the momentum, trade sources say.

Once the agreement enters into force, it will represent the first real increase in red meat access to the UK in 50 years.

“We don’t want to let off the party poppers yet, when the implementation of the deal is still so far away – and we don’t have the pens on the paper under the final deal yet,” a trade source said this morning.

Here are the specific relevant passages from the in-principle agreement for beef and sheepmeat reached last week:

• Increasing TRQ volumes on beef over 10 years, with access to a duty-free transitional quota of 35,000t on entry into force (EIF), rising in equal instalments to 110,000t in year ten. In the subsequent 5 years (years 11-15 after EIF) a product-specific safeguard will be applied on beef imports exceeding a further volume threshold rising in equal instalments to 170,000t, levying a safeguard duty of 20pc for the rest of the calendar year. Out of quota tariffs will remain at MFN until year ten and then be eliminated
• Increasing TRQ volumes on sheepmeat over 10 years, with a duty-free transitional quota of 25,000t on EIF rising in equal instalments to 75,000t in year ten. In the subsequent five years (year 11-15 after entry into force) a product-specific safeguard will be applied on sheepmeat imports exceeding a further volume threshold rising in equal instalments to 125,000t, levying a safeguard duty of 20pc for the rest of the calendar year. Out of quota tariffs will remain at MFN until year ten and then be eliminated.

There has been some general misunderstanding evident within the trade about how the freshly-minted trade deal with the UK will work. Firstly, there will be no gradual decline in tariff level over the period of the agreement, unlike earlier FTA’s with Japan and Korea, where tariffs continue to be adjusted downwards on an annual basis – in some cases eventually getting to zero.

Instead, the in-tariff number on beef and sheepmeat will go to zero under the UK agreement, as soon as the deal comes into force. Note in the above passage that quota volume will be only 35,000t in year one, suggesting there will be no prospect of the UK market being ‘swamped’ with Australian beef. Out-of-quota tariff will remain unchanged until year ten, at (effectively) 20pc – 13pc plus 2.79 pounds per kilogram.

While there has been speculation about how much impact the tariff change will have on future trade volume into the UK, it will certainly improve accessibility to Australian beef, giving UK consumers greater choice for beef and lamb, off a very low base.

To put recent into some context, for the 2020-21 fiscal year about to end, Australia has exported just 764 tonnes of beef and veal to the UK – almost all of it chilled – ranking it twenty-third in size among Australian export customers, and well behind other minnows like Papua New Guinea, the Pacific Islands, Jordon, Qatar and Sweden.

Even if Australia was to fill its entire 35,000t quota in year one (highly unlikely, given Australia’s current severely compromised level of beef production, with weekly kills this year rarely drifting above 100,000 head, and high demand out of established customers in North Asia and North America) it would still only rank the UK seventh largest among export customers, DAF statistics suggest.

Talk of ‘tens of thousands of tonnes’ in trade from year one looked heavily overblown from a practical perspective, trade sources told Beef Central this morning, but tariff adjustments mean the trade will obviously be ‘more than what is currently being traded’, Beef Central was told.

Sources close to the recent trade negotiations suggest the ten year horizon agreed-to in the in-principle agreement represented a compromise between the UK’s bargaining pitch for 15 years, and Australia’s request for five years.

Historically, Australian beef exports to the UK have been weighted towards grassfed, with mainland European countries under the EU banner biased towards grainfed.

Until the new FTA is enacted, Australian beef entering the UK will continue to arrive under the Hilton High Quality Beef quota, attracting a tariff of 20pc. Under BREXIT, the UK’s share of the HQB quota is around 3000t, or 40pc of the original 7800t EU quota. Australia no longer has access to the tariff-free grainfed EU quota, originally designed for supply from the US.

Asked whether there was now a risk of Australian exporters simply ‘abandoning’ trade into the UK, until more attractive terms are brought into play under the new FTA, an export trade contact said that was unlikely.

“There’s been 30 years of trade into the market out of Australia, and everyone wants to maintain those existing relationships – however small they may currently be,” the export contact said.

“It’s just a hard slog at the moment – but the current volumes are proportionate to the access under COVID restrictions in food service and retail,” he said.

“Later this year, we may see a little more product drift into the UK again, as vaccination programs take effect and consumers start getting back to normal. That would be ideal, leading up to the new trade access arrangements. But supply chains that have been supplying the UK for 30 years or more in some cases, are hardly likely to drop the market like a stone, in anticipation of freer access next year some time.”

“They key point with the new FTA will be that it takes tariffs and quotas out of the play as the main consideration in how exporters do business, to a point where market forces – basic supply and demand – are the driving factors in how the market grows. That’s how all markets should function.”

“It will allow supply chains to build programs based on relationships with customers, something they can actually supply on a weekly or monthly basis, rather than the current quarterly system.”