Summary
EU regulations to combat unfair trading practices along agro-food supply chains, including within 3rd country supply chains serving the EU market continue to make progress through the legislative process. It is estimated EU farmers lose some €11 billion because ‘retail chains change contracts after they’ve been agreed upon or cancel orders at short notice’. ACP exporters also suffer from UTPs particularly last minute cancellations of orders and retroactive changes to agreed sales arrangements. The financial consequences of the UTPs can be quite severe, so operationalising the new UTP regulation as it applies to ACP-EU supply chain could lead to immediate improvements in the financial returns to ACP producers, particularly smallholder horticulture producers. This issue could potentially be taken up in the context of the forthcoming ACP-EU post-Cotonou negotiations. This can be seen as an urgent issue since a ‘no-deal’ Brexit could disrupt triangular horticulture supply chains, with any resulting losses being passed down to primary producers in Africa and other ACP regions. Read more “Calls for Stricter EU Measures Against UTPs”
EU/UK Proposals for Brexit Related TRQ Apportionment Continues to be Challenged
Summary
September 2018 saw WTO members again objecting to EU/UK agreed plans for apportioning WTO agreed TRQ market access arrangements without consultations with the affected partners. While ACP exporters are only marginally affected by this WTO level TRQ apportionment issue, ACP exporters have serious concerns over how the EU plans to apportion bilaterally negotiated TRQ established under EU FTAs. This could for example carry serious implications for ACP banana exporters, who from 30th March 2019 could face a de facto 20% increase in competition from $ banana exporters on EU27 markets. The governments of ACP banana exporting countries need to urgently seek consultations with the EC on what will happen to EU bilaterally negotiated banana TRQs from the 30th March 2019 under a ‘no-deal’ Brexit scenario. Or alternatively, if a Withdrawal Agreement is concluded and a transition period in EU/UK trade relations is set in place, what will happen to these bilaterally negotiated TRQ arrangements from 1st January 2021. Read more “EU/UK Proposals for Brexit Related TRQ Apportionment Continues to be Challenged”
EU Sees Mauritania’s EPA signature as Stepping Stone to an EU-Africa FTA?
Summary
The EU has sought to place Mauritania’s signature of the West African EPA in the context of the ‘new Africa-Europe alliance for sustainable investment and jobs’ initiative. The ultimate aim of this initiative is to secure a comprehensive EU-Africa FTA. The EC wants to see this include a revisiting of disciplines on domestic policy formulation which African governments consciously steered away from under the EPA negotiations. This needs to be seen in the context of the relative failure of the EC in securing FTAs with African countries. After 16 years of negotiations only 15 African governments have signed, ratified and are in the process of implementing EPAs, with this embracing only 24% of the population of sub-Saharan Africa. Against this background the EC appears to be looking to harness the ‘cart’ of its trade and investment ambitions in Africa to the ‘horse’ of the African Continental Free Trade Area. This could potentially complicate efforts to create a pan-African free trade area for agro-food products. In this context, in operationalising AfCFTA commitments, African governments will need to address the challenge of how to ensure the ‘tail’ of EPAs with the EU does not end up wagging the ‘dog’ of pan-African trade integration, simply by virtue of being first on the scene. Read more “EU Sees Mauritania’s EPA signature as Stepping Stone to an EU-Africa FTA?”
Ukrainian Poultry Company MHP Secures Third foothold inside the EU
Summary
MHP has succeeded in purchasing a third EU based poultry company, the Slovenian meat processor Perutnina Ptuj. This needs to be seen in the context of concerns that Ukrainian raised poultry processed in the EU is giving rise to exports of poultry parts which are being mislabelled as EU raised poultry. This could potentially undermine effective SPS controls for Avian Influenza in ACP countries. It is essential all EU exports of poultry parts are properly labelled on the basis of the country of origin of the bird from which the poultry parts were derived. Read more “Ukrainian Poultry Company MHP Secures Third foothold inside the EU”
EU Chief Negotiator Barnier Sets Out What needs to Happen to Avoid a ‘No-Deal’ Brexit
Summary
The Irish border and the framework for future trade and customs arrangements remain the two main obstacles to a negotiated Brexit. For the EU the UK’s departure from the single market and customs union will inevitable mean new controls on imports from the UK. While on the island of Ireland the EU wants necessary checks to be carried out away from the border, the very notion of such checks falls short of PM May’s desire for continued ‘frictionless trade’. Meanwhile the DUP opposes any concessions which treats Northern Ireland differently from the rest of the UK and is willing to block the UK annual budget on this issue. The EU for its part will not accept UK access to the single market if UK tariffs and regulations vary from those of the EU since this would give UK companies a competitive advantage in the EU. At the 17th October EU Summit Prime Minister May offered ‘nothing new’ on the Irish border issue, with EU leaders deeming progress insufficient to warrant the convening of a special EU summit in November. Negotiations are now likely to drag on into December and possibly into 2019. EU officials however continue to be believe an agreement can be reached. Against this background ACP countries may need to step up preparations for a ‘no-deal’ Brexit. This should include: fast tacking preparations for the conclusion of ‘UK-only’ trade deals based on the existing EU EPAs; opening discussions with the EC on the future of EU bilaterally negotiated TRQs for bananas and sugar and the scope for minimising disruptions of ACP triangular supply chains under a ‘no-deal’ scenario. Read more “EU Chief Negotiator Barnier Sets Out What needs to Happen to Avoid a ‘No-Deal’ Brexit”
What Do Current Investment Trends in the UK Poultry Sector Tell Us About the Impact of EU Poultry Sector Trade Policies?
Summary
Developments in the UK poultry sector in the context of the uncertainties created by Brexit highlight the importance of the EU trade framework for investment and production expansion in the poultry sector. Major UK poultry producers have downsized their capital expenditures and frozen production levels in the face of uncertainties over future UK poultry sector trade policy. This UK investment and production response to the possible loss of the EU’s protective trade policy framework, suggests the EU’s poultry sector trade policy based on high MFN duties and strictly managed TRQ access, has been critical to the phenomenal growth in EU poultry production over the last decade since the financial crisis (+3,289,000 tonnes or +29%). This EU domestic poultry sector trade policy experience is in stark contrast the EU’s insistence under EPAs that ACP governments abandon any use of quantitative controls on imports from the EU, in a context where the EU is their major international agro-food sector trade partner.
Analysis of the UK food supply chains has highlighted how the effects of Brexit are not an event but a process, to which businesses respond within a multi-annual framework. One of the most important effects of Brexit in terms of long term investment, is the uncertainty over the future UK agricultural trade policy framework, once the UK is no longer subject to EU trade policy disciplines. Current developments in the UK highlight just how important the continuity of the EU poultry sector trade policy framework has been to the structural development of the sector over the past decade since the financial crisis.
For example, James Hook the Managing Director (MD) of one of the UK’s largest poultry producers (PD Hook) has pointed out that while the company has been ‘expanding at between 3% and 5% per annum for the past 30 years’, in the face of Brexit related uncertainties the company is ‘holding our volume as it is for this year and next year’. He highlighted how the company was reducing its ‘capital expenditure by half until we know what’s happening’. He said this meant the company was ‘going backwards’, but he held this was ‘the smart decision’ (1). Across the UK poultry sector as whole the most recent EC figures show that up to June 2018 compared to the corresponding period in 2017, production growth had slowed to 1.9%, only some 41% of the EU average production growth (2).
At PD Hook meanwhile central to this ‘smart decision’ According to MD James Hook the main consideration behind P D Hook’s ‘smart decision’ were the uncertainties over future UK trade policy: ‘if we have a hard, cliff-edge Brexit, then (the UK) might have to make trade deals that result in cheap chicken coming in from the US. We might have cheaper product coming from Thailand and Brazil, and that would mean a price drop across the market’ (1).
This reflects broader UK poultry industry concerns. To date the UK poultry sector has benefitted from common tariffs on imports from beyond the EU’s borders, as well as ‘a single legal operating framework’ and the free movement of poultry meat across all EU28 markets (3).
The tariff system which protects UK producers consist of high MFN tariffs with quota restricted access for different types of poultry with no less than 38 tariff rate quota’s (TRQs) being applied to poultry meat imports. Virtually no imports of poultry meat take place outside of these TRQ arrangements unless a company is seeking to establish a track record of exporting to the EU in order to gain access to a TRQ allocation.
This EU trade regime has made a major contribution to the growth of the poultry sector in the UK and other EU member states. Indeed this created a situation whereby between 2008 and 2017 the growth in EU domestic poultry meat production (+30%) was able to exceed the growth in EU poultry meat consumption (+25) with imports of poultry meat falling slightly in 2017 compared to 2008 (4).
While a hard Brexit would put an end to the single legal operating framework and the free movement of poultry meat across all EU28 markets, of particular concern is the prospect of opening the UK market to unfettered competition from low cost poultry producing countries.
EU Consumption, Production Imports and exports (thousand tonnes)
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | + | |
| Consumption | 11,349 | 11,584 | 11,771 | 11,904 | 12,214 | 12,264 | 12,721 | 13,266 | 13,866 | 14,013 | +2,664 |
| Production | 11,380 | 11,660 | 12,134 | 12,371 | 12,706 | 12,793 | 13,271 | 13,790 | 14,477 | 14,669 | +3,289 |
| Imports | 873 | 860 | 797 | 832 | 842 | 793 | 823 | 856 | 884 | 831 | – 42 |
| Exports | 903 | 937 | 1,159 | 1,299 | 1,334 | 1,322 | 1,372 | 1,381 | 1,495 | 1,486 | + 583 |
Sources: Table, ‘Poultry meat market projections for the EU, 2005-2030 (thousand tonnes c.w.e.)’, 18 December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf
This is a particular worry given the views expressed by some UK Ministerial advisors that the best response to solve the food supply challenges thrown up by a ‘no-deal’ Brexit would be to ‘abandon all checks and regulation of food coming into the UK’ (1). While The UK Secretary of State for the Environment, Food and Rural Affairs Michael Gove has repeatedly asserted the UK’s high food standards will not be compromised, the issue of an early elimination of tariffs on poultry meat imports remains.
This needs to be seen in a context where ‘over 50% of all meat consumed in the UK is poultry’ and the UK is around 60% self-sufficient in poultry meat. 95% of UK poultry meat imports consist of ‘whole chicken breast or made-of-chicken-breast products’. ‘The majority of these imports come from the EU’, and reached 456,000 tonnes in 2017 (3).
In addition it has been argued that ‘crashing out of the EU without a deal, means (the UK) would lose much of the EU external infrastructure that allows us to monitor and inspect the food we eat and how it is prepared’. It has been highlighted how while it would be possible for the UK to construct its own regulatory system ‘given the glacial pace of the Government around all elements of Brexit, it seems unlikely that this would happen before we are due to leave next March, exposing consumers to food produced to lower standards’(5).
It is the prospect of the abandonment of this tightly managed trade regime if the UK leaves the EU under a ‘no-deal’ scenario in the context of the limited institutional capacity to enforce high quality standards which is of such concern to UK poultry producers.
At PD Hook meanwhile the market challenges potentially arising from across the board UK tariff liberalisation would be compounded by the cost challenges facing the company arising from a Brexit induced reduction in access to workers from EU member states. Already the company which is ‘dependent on eastern European labour ‘has double the number of vacancies’ it used to have (1). This again illustrates the process nature of the Brexit effects.
The experience of PD Hook in regard to access to EU labour is indicative of broader challenges facing the UK poultry sector. According to the ResPublica report a workforce of some ’37,200 are directly employed by the poultry industry, with around 28,000 employed in poultry meat processing and 9,000 in poultry production and farming. Of these an estimated 60% are migrant workers, mostly form the European Union’. It is estimated that loss of access to this non-UK workforce would increase labour costs by 50% (3).
| Comment and Analysis The downsizing of capital expenditures and the production freeze at PD Hook alongside the slowdown in UK production expansion in 2018 (which occurred despite the flock rebuilding process underway following the 2016/17 HPAI outbreaks), would appear to demonstrate the importance of the EU’s import regime to the past expansion of the UK poultry sector. The maintenance of high MFN tariffs and a system of strictly managed TRQ based access has meant the EU has been able to maximise production and employment growth in the domestic poultry sector in the face of rising consumer demand for poultry meat. This increase in demand has been fuelled by a shift away from red meat consumption on health grounds and the household income pressures arising from the financial crisis. Current developments in the UK poultry sector suggest without the certainty provided by the EU’s tightly managed poultry meat trade regime the expansion of EU poultry meat production would have been much lower over the past decade than has in fact been the case. It is this expansion of EU poultry production which has been a key factor in the growth in EU exports of frozen poultry parts to ACP markets, particularly in Africa, over the past decade. There is only a limited market for these poultry parts in Europe and so overtime African markets have become more and more important to the EU poultry sector, as EU companies come under increasing pressure to maximise revenues earned on sales of the whole carcass. Against the background of the centrality of managed poultry trade arrangements to the growth of the EU poultry meat production, the EU’s insistence under recently concluded economic partnership agreements that African and other ACP governments abandon any use of quantitative restrictions on imports from the EU (including poultry meat) in a context where the EU is Africa’s principal agro-food sector trade partner, would appear to be inconsistent with the EU’s own trade policy practice, which alongside CAP reforms in other related sectors (i.e. animal feed), has played such a critical role in the expansion of EU poultry meat production. |
Sources:
(1) Guardian, ‘Food and Brexit will our cupboards be bare?’, 15 Sept 2018
https://www.theguardian.com/food/2018/sep/15/food-and-brexit-will-the-cupboard-be-bare-jay-rayner
(2) EC, ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 20 September 2018
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(3) ResPublica, ‘Coming Home to Roost: The British Poultry Meat Industry After Brexit’, 5 September 2018
https://www.respublica.org.uk/wp-content/uploads/2018/09/ResPublica-Report-Coming-Home-to-Roost-Sep-2018.pdf
(4) EC, ‘EU Agricultural Outlook for Markets and Incomes 2017-2030’, Tables, ‘Poultry meat market projections for the EU, 2005-2030 (thousand tonnes c.w.e.)’, 18 December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf
(5) ResPublica, ‘Coming Home to Roost: The British Poultry Meat Industry After Brexit’, press release, 5 September 2018
https://www.respublica.org.uk/our-work/publications/coming-home-to-roost/
EU Poultry Exports to South Africa In the Face of Avian Influenza Based Export Restrictions
Summary
The introduction of Avian Influenza (AI) based restriction on imports from the EU has reversed the expansion of imports of EU poultry meat to South Africa which has been underway since 2010. However with local AI outbreaks depressing South Africa’s own poultry meat production imports increased from Brazil and the USA. SAPA continues to argue a major reduction in import volumes is needed if the South African poultry sector is to fulfil its potential as a creator of jobs and promoter of rural development. South Africa continues to call for an international initiative to address the problem of surplus ‘dark meat’. However the EU is unlikely to respond favourably to such suggestions given the potential threat to the EU poultry sector posed by Brexit related trade disruptions. Indeed under a ‘no-deal’ Brexit scenario the pressure to find new export markets for both EU27 and UK poultry meat is likely to increase. Read more “EU Poultry Exports to South Africa In the Face of Avian Influenza Based Export Restrictions”
How Close is the UK to ‘Rolling-Over’ EPAs into UK-Only Trade Agreements?
Summary
During her August tour of 3 African countries Prime Minister May reiterated the UK’s desire to ‘roll-over’ existing EU EPAs into UK-Only trade agreements as a way ensuring continuity of market access. However the joint statement signed in South Africa recognised there are a range of technical issues which still need to be resolved. In reality these range from: how precisely existing duty free access to the UK market is to be maintained from 30th March 2019 onwards; how complex rules of origin issues are to be addressed in ways which enhance export opportunities for ACP exporters and avoid disruption of current UK exports; the precise UK SPS controls to be applied post Brexit and whether this could reduce current non-tariff barriers to ACP exports; whether steps will be taken to eliminate unfair trading practices along ACP-UK supply chains and whether quantitative restrictions will be applied to South African exports to the UK where the UK has no or only limited domestic production interests. Read more “How Close is the UK to ‘Rolling-Over’ EPAs into UK-Only Trade Agreements?”
Will 2018 Be The Last Time South Africa Calls An Early Halt to Citrus Exports to Europe?
Summary
The South African season for the export of Valencia oranges to the EU has been terminated early to maintain the zero level of interceptions for citrus black spot achieved this year. The withdrawal of the UK from the EU could make this the last year such action is needed. However this would require the South African government to secure under any ‘UK-only’ trade agreement the waiving of citrus black spot controls on exports to the UK and the lifting of quantitative restrictions on citrus exports to the UK market. The removal of CBS controls on exports to the UK would not only benefit South Africa but also neighbouring Swaziland and Zimbabwe and, in the Caribbean, Belize. Read more “Will 2018 Be The Last Time South Africa Calls An Early Halt to Citrus Exports to Europe?”
Could Irish Led Discussions on Transiting the UK ‘Land Bridge’ Help Address Some ACP Triangular Trade Issues?
Summary
If suitably modified the Irish government proposals for the establishment of special customs clearance arrangements in EU channel ports to facilitate the continued use of the UK ‘land bridge between mainland Europe and Ireland could potentially offer solutions to some of the cost increasing post-Brexit complications which will arise along existing triangular supply chains (e.g. for goods exported from an ACP country via a EU27 member state to the UK). ACP governments should keep a close eye on the development of this Irish government proposal and at an early stage raise the issue of the possible elaboration of similar arrangements for ACP goods enjoying the same duty free-quota free access to both the EU and UK markets and facing the same health and food safety inspection requirements. Read more “Could Irish Led Discussions on Transiting the UK ‘Land Bridge’ Help Address Some ACP Triangular Trade Issues?”