Summary
The UK is a major export market for EU27 poultry meat producers, in recent years taking 1/3 of extra-EU27 exports. In the absence of a UK/EU trade agreement which preserves duty free access on mutual trade in poultry meat, EU exporters would face standard MFN duties in exporting to the UK, while UK exporters would face standard MFN duties in exporting to the EU. If EU exporters faced the same tariffs as Brazilian exporters, then EU exporters of chilled and frozen chicken meat would rapidly be displaced from the UK market in most product areas. This would be likely to generate a substantial surplus of poultry meat on the EU market, for which markets would need to be found across the globe. This needs to be seen in the context of the current importance of African markets in total extra-EU poultry meat exports.
Recent EC reviews of the EU27’s export trade in poultry meat have highlighted how important the UK market is EU27 poultry meat exports. Over the period from 2016 to 2019 the UK market took just over 1/3 of total extra-EU27 exports of poultry meat. To put this in perspective, in 2019 this was equivalent to the sum of exports to the following six most important EU27 poultry meat export markets: Philippines, Ghana, Hong Kong, Ukraine, South Africa and the Democratic Republic of the Congo (1).
With the UK having left the EU as an institution on the 31st January 2020, in the first three months of 2020 EU27 export volumes to the UK were down 37.8% compared to the corresponding period in 2019 (2), with a slight recovery in export volumes in April leaving EU27 exports down by 30.1% at the end of April 2020 (1). In contrast, in the first three months of 2020 overall EU poultry meat export volumes to all destinations were down only 18.4% (2) while by the end on April they were down only some 15.7% (1). This EU27 export performance needs to be seen against the background of a 1.7% increase in EU poultry meat production in the first three months of 2020 (1), despite the collapse of demand from the Hotel, Restaurant, and Catering (HoReCa) sectors.
The decline in exports to the UK market have thus been particularly pronounced in the first four months of 2020, suggesting EU poultry meat exporters were already seeking to diversify away from the UK market.
This being noted patterns of trade were undoubtedly being impacted by the Covid-19 pandemic. Poultry production certainly felt the impact of the pandemic, with AVEC highlighting in mid-April how ‘the lockdown has put a stop to all out of home consumption’, with this requiring EU slaughterhouses ‘to stop with production for the food service market – which normally represents 20 to 40 % of the production’, with the importance of this market varying from EU member state to EU member state.
With EU imports of poultry meat being sustained despite the hit to demand generated by the Covid-19 pandemic and with it being possible to convert ‘only a limited part of the production intended for food service … to retail’ considerable price pressures began to be felt in the EU poultry sector. By mid-April prices were down 20% compared to the beginning of March 2020 (see companion epamonitoring.net article ‘Restrictions on Poultry Meat Imports Called for in the Face of Covid-19 Impact on EU Poultry Market’, 7 May 2020) (3).
The prospect of a no-deal UK departure from the EU customs union which would see a mutual imposition of MFN tariffs on the UK/EU trade in poultry meat, is only likely to heighten these poultry market fears. This needs to be seen in a context where in the event of a no-deal UK departure from the EU customs union
- the UK would be compelled to impose standard MFN duties of between £15/100 kg to £85/100 kg poultry meat imports from EU27 suppliers, and
- the EU would impose tariffs of between €18.7/100 kg and €102.4/100 kg on poultry meat imports from the UK (4).
This would impact on a total trade in poultry meat between the EU/UK in excess of 1.224 million tonnes in 2019 (883,940 tonnes of EU27 exports to the UK and 340,289 tonnes of UK exports to the EU27) (1).
This needs to be seen in a context where average EU broiler prices are 171% higher than Brazilian broiler prices and Brazil is the worlds’ leading poultry meat exporter (2).
This suggests that if EU27 and Brazilian meat exporters were to face the same UK import tariffs, UK importers would switch sources of supply away from EU27 suppliers to Brazilian suppliers for many poultry meat products, with the exception of fresh poultry meat, where distance prevents Brazilian suppliers from competitively serving this market.
| Comment and Analysis The significance of a no-deal UK departure from the EU customs union in the poultry sector lies in the impact this would have on the EU’s exportable surplus of poultry meat. The loss of the UK market to Brazilian suppliers in the face of the imposition of standard UK MFN tariffs on imports from the EU27, would see EU27 poultry meat exporters searching round for alternative markets. This needs to be seen in a context where the sub-Saharan African market has in recent years accounted for fully 43% of total extra EU28 poultry meat exports. It also needs to be seen in a context where the diversion of these EU poultry meat exports away from the UK to sub-Saharan African markets would more than double EU27 poultry meat exports to sub-Saharan African markets. Ghana, South Africa and to a lesser extent the DRC and Benin/Nigeria would be the most likely target markets for EU27 poultry meat export drives. However, given the scale of trade diversion which would arise in the poultry meat sector from a no-deal UK departure from the EU customs union, a range of other sub-Saharan African markets would be likely to see an increase in EU poultry meat exports. This includes most Central African countries which have become an increasingly important target market, with EU exports having increased 19% between 2017 and 2019 and new developing markets in countries like Mozambique and Zambia (5). If exports do expand as a result of the trade diversion effects of no-deal UK departure from the EU customs union, then these exports would be likely to take place at dumping prices. This needs to be seen in the context of the price pressures the EU poultry meat market has come under as a result of the Covid-19 induced collapse in demand for poultry meat on the HoReCa sector (1). The situation is of course complicated by the different structure of EU27 poultry meat exports to the UK (which are dominated by exports of breast meat) and poultry meat exports to sub-Saharan Africa (predominantly low-cost residual poultry parts). This could see EU poultry meat exporters targeting new premium priced poultry meat market components across sub-Saharan Africa at heavily discounted prices. This could most notably target demand for breast meat in countries like South Africa (particularly the Cape Town market), Namibia and middle class coastal urban markets in West and Central Africa. Given the growing interest across sub-Saharan Africa in developing local sources of supply in the face of Covid-19 related trade disruptions, those sub-Saharan African governments looking to develop local poultry meat production will need to carefully explore the policy space they have for averting sudden import surges of low priced poultry meat which could adversely impact on efforts underway to develop local production. This needs to be seen in the context of the scale of the trade diversion effects, which a no-deal UK departure from the EU customs union could give rise to in the poultry meat sector. In 2019 EU27/UK mutual trade in poultry meat totalled in excess of 1.2 million tonnes. This needs to be seen in the context where for 2020 the global poultry meat trade is projected to fall 0.8% to 13.8 million tonnes as a result of Covid-19 transportation and demand disruptions (6). |
Sources
(1) EC, ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 18 June 2020
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(2) EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets, 27 May 2020
(3) AVEC/ELPHA, ‘The impact of the COVID 19 Crisis on the EU Poultry sector’, 21 April 2020
https://pluimvee.be/src/Frontend/Files/Core/CKFinder/files/2020_04_21%20The%20Impact%20of%20the%20COVID-19%20crisis%20on%20the%20Poultry%20Sector.pdf
(4)UK Global Tariff: Search Engine
https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1
(5) EC Market Access Data Base
https://madb.europa.eu/madb/statistical_form.htm
(6) FAO, ‘Food Outlook, Biannual Report on Global Food Market’, June 2020
http://www.fao.org/3/ca9509en/CA9509EN.pdf