On 22 February 2018 ACT Alliance convened Seminar on the Implications of Brexit in the agro-food sector for ACP countries and for the forthcoming ACP-EU Post-Cotonou negotiations. A series of twelve 2 page summary notes were produced for the seminar covering both substantive issues arising within the Brexit process and the current state of play in the Brexit process. Note 7 explores the potential trade displacement effects of Brexit, whereby current mutual EU27/UK trade in agro-food products is displaced to ACP markets. This issue is explored with specific reference to the poultry meat sector, in the light of the earlier African experience of trade displacement in the poultry meat sector arising from the imposition of a ban by Russia on agro-food imports from the EU.
Sources of Trade Displacement
The displacement of current mutual agro-food sector trade between the EU27 and the UK to ACP markets could arise from two inter-related causes:
- the displacement of EU27 agro-food product exports to the UK arising from the UK’s pursuit of a more liberal agro-food sector trade regime in its relationships with non-EU countries;
- the displacement of mutual EU27/UK agro-food product trade as the result of a failure to conclude a successor EU27/UK agreement and the resulting imposition of MFN duties on mutual EU27/UK trade.
The policy choices made by the UK government in regard to future trade relations with non-EU countries will have a major bearing on the extent to which EU27 agro-food markets remain open to UK exports.
Current Trajectory of UK Trade Policy
In this context the UK governments has repeatedly expressed its ‘ambition to become the global leader in free trade’, which raises the question: in pursuit of its highly liberal trade regime, what will the UK be able to offer prospective partners to make the opening up of their markets to UK exports of goods and services attractive?
Given the structure of the inherited EU tariffs the UK intends to apply, the agro-food sector is the main area where the UK could offer improved access for 3rd country suppliers in exchange for improved access for UK exporters.
If the UK government liberalized tariffs on agro-food products imports below current EU levels this would intensify competition for competing EU27 suppliers.
It would also greatly reduce the likelihood of a continuation of EU27/UK free trade in these products, with these products probably being subject to standard MFN duties under any future EU27/UK trade agreement.
The poultry sector is a case in point, with an MFN tariff scenario being likely to lead to the displacement to ACP markets of UK poultry part exports to the EU27 markets and EU27 poultry part exports to the UK market.
The Lack of Competitiveness of EU Poultry Production
Analytical reports have repeatedly highlighted the lack of price competitiveness of EU poultry production compared to international competitors.
The latest analysis from 2017 put poultry production costs after slaughter in Brazil at 70% of the EU average costs, in Ukraine at 74%, in the US and Argentina at 81% and in Thailand at 83%.
EU27 poultry meat producers would thus be vulnerable to increased competition were current EU protective trade arrangements for the poultry sector to be dismantled (as could occur in a post-Brexit UK).
The Poultry Sector, Brexit and Trade Displacement
Currently EU27 member states export 580,000 tonnes of poultry meat to the UK, while the UK exports 250,000 tonnes of poultry meat to EU27 markets.
Given the greater price competitiveness of major 3rd country suppliers this EU27/UK trade would be disrupted if it had to be carried out under the same conditions as trade with any other 3rd country.
Analysis undertaken by Lawless and Morgenroth at the Economic and Social Research Institute in Dublin suggests the imposition of MFN duties on mutual EU27/UK trade could see over 90% of the EU27-UK mutual trade in meat being halted.
The Poultry Sector, Trade Displacement and Russian Import Restrictions
Sub-Saharan African countries already have experience of how the displacement of EU poultry meat exports can lead to a massive expansion of poultry meat imports from the EU.
In 2010 Russia was the main export market for EU poultry meat exports taking some 208,401 tonnes.
However from 2011 the Russian government began to restrict imports from the EU, culminating in a complete import ban in August 2014. As Russian imports declined so EU poultry meat exports to sub-Saharan Africa increased.
Trade Displacement: Declining EU Poultry Meat exports to Russia, Increased exports to Sub-Saharan Africa
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Extra-EU Total | 885,289 | 1,124,301 | 1,266,244 | 1,274,794 | 1,268,956 | 1,330,487 | 1,331,506 | 1,442,683 |
| Sub-Sahara Africa (SSA) | 205,789 | 333,461 | 447,204 | 503,882 | 531,438 | 601,899 | 627,279 | 674,831 |
| % share SSA | 23.2% | 29.7% | 35.3% | 39.5% | 41.9% | 45.2% | 47.1% | 46.8% |
| Russian | 179,758 | 208,401 | 85,083 | 82,736 | 73,714 | 52,130 | 2 | 50 |
| % share Russia | 20.3% | 18.5% | 6.7% | 6.5% | 5.8% | 3.9% | 0.000% | 0.003% |
Source: EC Market Access Data Base
This highlights the vulnerability of sub-Saharan Africa poultry sectors to the displacement of trade arising from policy changes in major markets.
Putting Brexit Poultry Sector Trade Displacement in Context
To place the potential trade displacement effects of Brexit in context: between 2017 and 2022 the EU is projecting a 91,000 tonne increase in total EU28 poultry meat exports. In contrast the imposition of MFN duties on the current EU27/UK poultry meat trade could displace some 747,000 tonnes of poultry meat (90% of current mutual trade) onto extra-EU markets.
The need to find alternative extra-EU markets could see the EC insisting on the full implementation of EPA provisions requiring the complete removal of quantitative restrictions on poultry meat imports from the EU.
Given domestic ACP trade policies influence EU poultry meat export patterns, Agriculture Commissioner Hogan has already committed the EC to a more active engagement in this area.
In this context the trade displacement challenge arising in the poultry sector from a ‘hard’ Brexit would appear to be a particular concern to sub-Saharan African poultry producers.