EU trade deal has massive upside

09/01/2020

Column by Stephen Crisp

Acting CEO, Sheep Producers Australia

It is always interesting how governments are keen to kick-off trade deals with some justifiable fanfare, given the benefits of previous trade deals to the Australian economy, particularly in the regions.

Then comes the inevitable picking away at a myriad of issues, usually around corporations being able to hold Australia to ransom or how Intellectual Property (IP) rights are managed.

The number of small issues increases (which are sometimes not based on fact), amplified by those who are pre-disposed to Australia moving further into the globalised economy. The noise can get to a point where a trade deal with the European Union is seen as negative. Nothing could be further from the truth.

In many cases, Australian agricultural products have minimal access to the EU, only about 19,186 tonnes for sheepmeat, and with a split under Brexit, even less. Compare this with New Zealand, which has more than 200,000t, which will be split evenly between the United Kingdom and EU under Brexit.

There are historical reasons for this but there are many commodities in a similar position. Those involved in agriculture and battling the current drought should reflect on why in this drought their stock are still worth good money.

In previous droughts in the 1980s and 1990s, those forced to sell sheep were selling into a few small markets getting overloaded with volume, resulting in fast falling prices.

Due to the many trade options, processors (brand owners), have options for both heavier and lighter animals, with different cuts and types of meat, having better value due to the diversity of consumer requirements in Asia, Middle East and United States as well as the domestic market.

Australian volumes are not large when viewed on a global production and consumption scale. They may seem large if 85 percent of production goes to a small domestic market, which was the case in the 1980s. However, sheepmeat is now exported to more than 60 countries.

The EU prefers a smaller lamb carcase, and has a large population base that is used to consuming sheepmeat. Australia will have limited supplies of some agricultural products for many years, but the point for Australia is having market options for different types of products is contributing to keeping regional Australia alive.

Diversity is key and a trade deal with the EU (and now the UK) is one of the most positive pieces that has been missing from our trade options. Australian producers and those that purport to support them, should be overwhelmingly support an EU Trade deal, as it is vital in allowing incomes to be maximised in times of hardship, and give the best options when decent seasonal conditions return.

Opening Australian markets to their manufactured goods is good for Australian consumers. By far the largest manufacturing base in Australia now stems from further agricultural processing. Trade for Australia is a win-win.