What does post-Brexit free trade mean for UK food and farms?

Since EU exit, there has been intense media scrutiny over the impacts new trade deals will have on the UK supply chain, not least those with major agri-food exporters such as Australia, New Zealand and the USA.

As we enter a new world of bespoke trade agreements with agricultural powerhouses around the world, it is only right that we take a step back and assess how these trade deals may impact our domestic agricultural market.

To this end AHDB has published wide-ranging analysis to cut through the speculation and provide an evidence-based appraisal on the opportunities and risks these new deals may present.

Farming and food production is a highly emotive and often divisive issue, of huge social and cultural importance, far outstripping agriculture’s economic value of just under 0.6 per cent of GDP (2020).

Trade deals always cause a great deal of debate, with predictions of either untold benefits or devastating impacts, depending on the respective viewpoints. Standards are an issue at the forefront of both consumers and farmers minds, encompassing concerns about both animal welfare and the environment.

While agriculture may be the sticking point in negotiations and a high-profile topic, it isn’t always a top priority given the importance to the economy of other sectors. 

As a result, one thing that current trade policy means, from an agricultural perspective, is that UK farmers are going to face more competition and more exposure to the global marketplace.  

Some of the partners we are currently lining up or have signed agreements with are large agri-exporters.

The UK-Australia deal is just first in line of a series of new trade deals the UK will be signing over the course of the next few years and sets the blueprint for future deals, given it is the first the UK has negotiated from scratch.

While current demand from other parts of the world may mean that imports from these partners don’t fire up straight away, developments in the geo-political landscape can soon affect trade flows – UK agriculture needs to be aware of this as we open up our markets. 

Beef and lamb farmer James Taylor commented on AHDB’s analysis of the Australia deal, saying: “If this is an example of the shape of future trade deals with other countries, the take-home message for me is that we have to emphasise our competitive advantage in terms of environment and quality in order to build consumer loyalty, as competing on price alone will be difficult.

“The factors I can control in the here and now have to be my focus. Obviously we all operate in different contexts and different scales but focusing on what we can influence is surely the place to start as we gear up for the challenges ahead.

Do take advantage of AHDB’s free Farm Business Review and together let’s build on the success of the ongoing Eat Balanced campaign to keep the UK consumer engaged and informed.

AHDB is addressing these challenges in three key ways: providing evidence and data to help understand the impact of these deals; creating new opportunities for our products domestically and abroad; and helping to make farm businesses more resilient here at home, giving farmers the right tools to adapt to this period of change.  

Current UK trade deals and priorities

UK-Australia

With an agreement in principle between the UK and Australia recently announced, it is now inevitable that a fully-fledged free trade agreement will be signed.

This will be the first brand new trade deal that the Government has signed with a country that did not have an existing agreement with the EU.

This presents a host of new challenges. Australia is a large agri-commodity exporter, well versed in sending products all over the world, including the EU.

Looking at production and trade, Australia is a significant producer of beef and lamb.

With domestic production larger than the UK but a smaller population, Australia has a significant surplus of beef and lamb to sell to the international market.

Currently, China, the USA and Japan are key markets for Australian beef and lamb, which has been facilitated by the signing of free trade agreements and is unlikely to change in the short term.

However, trade relations with China are turbulent, and this may see some products needing to find a new home should those relationships break down.

For pork, Australia has increasing domestic production but still imports a reasonable amount of pork each year, predominately from the USA.

Strict measures for exporting pork to Australia mean that trade facilitation can be a challenge. Dairy production in Australia is sizeable, and dairy products are both imported and exported in reasonable amounts, with cheese being the major product traded.

Australia is also a significant player in the global cereals trade, given it exports a large proportion of its production.

Read AHDB’s in-depth analysis of the UK-Australia trade agreement or visit the blog for commentary.

UK-USA

A potential deal with the US has arguably been the most widely covered, even though the change of administration in early 2021 put the progress of these negotiations behind others, like Australia and New Zealand.

AHDB has assessed a wide range of evidence, including current production and trade patterns, comparative costs and methods of production, analysis of the impacts of previous trade agreements, agricultural policy in the US and UK, and expert insight from businesses that are already exporting to the US.

Although the US has, in many cases, lower costs of production, gained from their huge economies of scale, it also has lucrative markets much closer to home.

However, if and when it decides to target UK markets, it is clear it could do so effectively and profitably.

Given the level of spend behind developing overseas markets, this is something that UK producers need to be acutely aware of. Opportunities for UK exporters in most cases are likely to be limited to high-value niche products, which have a point of difference in the US marketplace.

Trade relationships already established show that US customers are specific in their needs and demand a high-quality and consistent product

Read AHDB’s in-depth analysis of a potential US-UK deal.

UK-New Zealand

While full details are yet to be agreed, it is understood that the New Zealand deal would remove all import tariffs on its agricultural goods, allowing New Zealand producers much greater access to sell their products into UK markets. 

We should acknowledge that UK farmers will also get improved access into New Zealand, although in reality this access is likely to be of limited value. This is because with a population of only five million the marketplace is very small – and as we know from the figures above it is a major agriculture producer and exporter in its own right.

There will be opportunities for UK agricultural exports to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) – a bloc of 11 countries around the Pacific Rim.– so the deals with New Zealand and Australia might represent short-term pain before we get some gains in the longer term.

Read AHDB’s analysis of New Zealand’s current agricultural production and trade relationships or visit the blog for commentary. 

UK-Canada

We already have a trade agreement with Canada, as a roll-over of the previous agreement the EU has with Canada (Known as CETA). However, as part of that agreement both sides agreed to revisit the text and negotiate ‘upgraded’ deals that better suit the two individual countries.

Canada has a reasonably sized beef industry, producing around 1.3 million tonnes of beef per annum. Much of this is consumed domestically, however, there is still a significant proportion of production that is exported.

The main destination for Canadian beef is the United States while exports of beef to the EU are limited. Canadian farmers have previously suggested that meeting the two differing standards is an unprofitable exercise.

Currently there is a negligible amount of pork exported from Canada to the UK, or even to the wider European Union market place, despite a free trade agreement between the two being signed, highlighting the fact that often a trade deal doesn’t necessarily lead to an increase in trade of particular products.

Compare the UK’s and Canada’s agricultural trade for livestock and cereals & oilseeds.

UK-India

An Enhanced Trade Partnership (ETP) between the UK and India was agreed in May 2021 with investment from India creating jobs in the health and technology sectors in the UK, as well as lowering non-tariff barriers of UK fruit and medical device exports. 

Negotiations for a UK-India Free Trade Deal (FTA) are due to start in November, with a vision of agreeing an ‘Early Harvest Agreement’ by March 2022 as a precursor to the full FTA.

The Early Harvest Agreement would set out goods and services that would qualify for tariff free access into the UK and Indian markets.

For the UK, there are certainly opportunities available, particularly in the dairy sector, where the market for value-added dairy products, such as cheese, in India is increasing against a backdrop of a growing middle class and huge population. There are also opportunities for sheep-meat.

However, aside from market dynamics there are other issues to consider. Usually in trade deal negotiations, animal welfare standards are highlighted and brought to the fore, especially if there is a high likelihood of increased meat imports into the UK.

This is not the case for a potential UK-India FTA, but human rights and welfare are perhaps more fitting.

Read AHDB’s analysis of the UK-India deal or visit the blog for commentary.

Overview

With several new trade deals to be struck in the coming months and years, combined with reductions in BPS payments beginning this year, taking a wait-and-see approach isn’t an option for farmers and growers.

AHDB’s free Farm Business Review service, funded by the Defra Future Farming Resilience Fund, is designed to help businesses prepare for the biggest agricultural policy shift in a generation.

Aimed at beef, sheep, dairy and cereals and oilseeds producers across England, this free and impartial service provides expert advice and an online tool. It’s designed to support you through this transition period and help you prepare for a prosperous future:

• access tools and resources, tailored to you
• keep a record of how your business is performing
• connect with a consultant for free advice and support  

Visit the Farm Business Review for more information. 

In April 2022, AHDB will be asking all eligible levy payers to shape their work and priorities. Your views will help guide what AHDB delivers over the next five years.

Have your say on the vital support we offer your business and the industry. Registration opens December 2021, email shapethefuture@ahdb.org.uk