Sam McIvor: We must not allow Brexit to split our agreed EU quotas

COMMENT:

I have recently returned from a fact-finding mission in the UK as Brexit uncertainty continues. As an observer with the interests of New Zealand farmers in mind, it is a fascinating but tense time. The European Union and the UK are grappling with impending deadlines for Brexit and seeking to negotiate a deal that will hopefully cushion the UK's exit.

From an exporter's perspective, the next few weeks will be crucial as we await some certainty over the terms of trade. Brexit is not only high stakes for the UK and the EU, but for New Zealand's farmers and our red meat sector.

The deal announced by British Prime Minister Theresa May last week would see our access remain the same for the next two years while the UK remains in the EU customs union. But what happens after that is where major risks remain for our sector and where major effort is required in the months ahead.

The EU is New Zealand's largest overall export market for red meat and associated co-products and is worth NZ$1.8 billion. It's also New Zealand's largest market by region for sheepmeat products (worth almost NZ$1.3b), and the UK alone is our second largest market for sheepmeat (worth NZ$445 million).

We have exported sheep and beef products to the EU for more than 130 years, at our highest level exporting around 90 per cent of the sheepmeat we produced to the UK.

This changed for us when the UK joined the European Communities, now the EU, in 1973. The New Zealand Government negotiated our access to the UK and the EU markets through the World Trade Organisation, securing two important quotas for sheepmeat and beef that still represent our sector's market access and are enshrined in the EU's (and by virtue of its EU status, the UK's) WTO Schedule.

It was ironic that in my discussions with some EU and UK counterparts they thought we were privileged to have our 228,254 tonnes worth of sheepmeat. I quickly reminded them we'd had relatively unlimited access up until the UK joined the EC and were exporting 300,000-plus tonnes of sheepmeat and more than 14,000 tonnes of beef.

We made a significant concession in agreeing the legally binding deal of 228,254 tonnes for sheepmeat and just 1300 tonnes for beef.

Now, as the UK leaves the EU, New Zealand's market access and the legally binding results of the WTO negotiation are again vulnerable as the UK still intends to establish its own tariff schedule in the future.

The UK and EU are still proposing to split tariff rate quotas when the UK leaves the customs union. This is an absolutely unacceptable proposal.

The tariff rate quotas form part of the EU and UK's WTO commitments and are legally binding rights and obligations. We expect the EU and the UK to honour their legal obligations and commitments and will not accept any proposal that erodes the quality and quantity of our WTO quotas.

Splitting tariff rate quotas is also unacceptable because it removes our ability to adjust the destination of our exports in order to responsibly respond to the individual country market conditions across the EU's current 28 members.

It is important for our producers, as well as UK and EU producers, that exporters can respond to dynamic markets, domestic production and consumer demand as they evolve. In fact, EU and UK sheep industry concern is that this split will leave our sheepmeat industries and consumers worse off, especially in product availability and pricing consistency.

Thus, the split is not only inconsistent with our WTO rights, but it's bad news for UK and EU farmers, consumers and New Zealand sheep farmers.

The UK might yet end up in a customs union (or a "single market territory" as they're calling it) with the EU, in which case there is no rationale for splitting quotas because a customs union would allow the current trade arrangements to remain in place.

The UK, as it exits the EU, has spoken of its desire to be a more "global Britain" and a champion of free trade. This is an opportunity for the UK and the EU to show leadership and commitment to our rules-based trading system through the WTO by taking a trade liberalising approach, in good faith and with fairness.

Our sector has argued for a neutral outcome that preserves the rights and obligations owed to us through the WTO. If that's not possible, then we need to talk about what compensation is owed. We cannot find ourselves worse off, or collateral damage to the UK's decision to leave the EU, and we certainly refuse to pay twice for the UK's decision to join and then exit the EU.

• Sam McIvor is chief executive of Beef + Lamb New Zealand