The European Parliament recently passed regulations to split quotas a select group of countries including New Zealand rely on for preferential access to markets of European Union member states.
The quota split is to accommodate Britain’s departure from the EU at the end of next month.
The new allocations are based on trade with the EU between 2015 and 2017.
NZ can export up to 228,000 tonnes of sheep meat to the EU’s complement of 28 member states without incurring tariffs.
Under the new regulations tariff-free access, quotas will be capped at 114,000 tonnes each for the United Kingdom and the remaining 27 member states.
For volumes above that mark for either the UK or the continent NZ exporters will face tariffs as high as 50%.
The quotas will continue to be administered by the NZ Meat Board and are allocated to exporters according to their share of the national kill for the preceding three years.
Meat Board spokesman Dave Harrison said increased Chinese demand means NZ has not filled its European quota for some time.
“That has probably meant we can split it in a way that does not impact too much on too many exporters.”
Harrison said there are a handful of exporters who, by virtue of doing more business in either the UK or continental Europe, will be disadvantaged by the split.
“They end up with a certain amount of quota into a market which they do not operate in and not enough in the market they do.”
It is estimated those exporters will be 3500 tonnes short of EU quota but will have enough for the UK market.
“We are looking to hold back a little bit of quota to make sure that trade is not disrupted for people who have invested in good faith on either side of the channel.”
After consulting with exporters it was decided to keep 5000 tonnes of quota in reserve for the EU.
The same amount will be made available for exporters short of quota for the UK market.
Harrison said allocations will be made according to historic trade by exporters.
“We haven’t tried to look at how a no-deal Brexit might disrupt prices and trade flows for this mechanism but we will be keeping an eye on the situation.”
A report last week from the UK’s Agriculture and Horticulture Development Board predicted a shortage of up to 33,000 tonnes of lamb in EU markets following a no-deal Brexit because of British farmers effectively being locked out of the continental market by tariffs of 50% or more.
Harrison said NZ exporters will be limited in their ability to meet that extra demand and the Meat Board cannot address that problem because it cannot create new EU quota.
“The risks you are talking about are the heart of the reason that we are opposed to splitting the quotas so any impacts along these lines will be relevant to our arguments against quota splitting.”
While NZ has objected to the World Trade Organisation that’s not enough to stop the EU from going ahead and splitting the quotas when Britain leaves.
The Government won’t say if it is considering suing the EU at the WTO.
