Friday, March 29, 2024

MEATY MATTERS: No need to panic over Brexit

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In spite of the fast-approaching deadline of March 29 when Britain is due to leave the European Union, not to mention the latest shipment date able to meet that deadline, there might be no need to get too concerned.
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There is a huge amount of media-inspired speculation about the potentially dire consequences of Prime Minister Theresa May’s inability to achieve an improvement of the exit terms leading to a no-deal Brexit but word from Britain suggests that is highly unlikely. 

After all, both the EU and the British Parliament have specifically ruled out leaving without a deal.

The most likely short-term outcome will be an extension of membership terms under Article 50, which would give time for legislation to be passed either in the improbable event May succeeds in obtaining a new deal acceptable to her own Parliament or further negotiation is required to reach a final agreement.

Affco sales and marketing manager Mark de Lautour says the attitude among major retailers is typically British. 

In his view no-deal isn’t a viable option and his customers are convinced it will be all right in the end (and to quote Slumdog Millionaire “If it is not all right, it is not yet the end”). According to de Lautour, New Zealand is in danger of jumping at Brexit shadows and we would do well to breathe deeply and await developments, which are likely to be slower and less dramatic than the worst expectations. 

That doesn’t mean the parties haven’t done any contingency planning.

For example, the United Kingdom has already signalled its intention to recognise the equivalence of NZ’s veterinary agreement with the EU for six months after Brexit as well as signing a mutual recognition agreement during Jacinda Ardern’s recent visit there.

British retail chains have been working on a frozen thaw-back programme bringing frozen product back to chilled and labelling it as such, using mostly domestic product and though there will be a shortage of product availability and capacity, at least during the early part of the season, it would be sufficient to get by in event of a no-deal, hard Brexit.

NZ exporters are doing their own contingency planning by seeking alternative markets, which could take excess product previously sent to Britain, as well as remaining in very close contact with their UK customers.

Only so much risk avoidance is possible. 

The last ship arriving in Britain before March 29 leaves NZ on February 27, meaning lambs processed to a UK specification after mid February run the risk of port delays. 

However, exporters have contracts for Easter and beyond, which, if unable to be unloaded in Britain because of port congestion, might be shipped to a continental port. That product would then have to be sold at a discount in the EU, both by reason of unsuitable specifications and reduced shelf life. 

Alliance sales general manager Shane Kingston emphasises the importance of remaining flexible, being able to change plans at short notice. 

Remaining vigilant to developments in the countdown to March 29 will be of critical importance. 

He points to the potential trade distortion impact of the annual shipment of 65,000 tonnes of UK lamb carcases to Europe, starting in mid May, which would have to be sold on the domestic market. Though that would not have an immediate effect on product from this side of the world it might reduce demand in the UK but conversely open up opportunities in the EU.

In case NZ is too concerned about the impact of a hard Brexit, have some sympathy for the Irish. 

The Republic of Ireland exports 90% of its beef, half of which is sold to the UK. It has no time to find alternative markets and would require massive intervention buying from the EU to compensate. 

The Irish border question is the main stumbling block in the efforts to negotiate a suitable outcome because the EU wants to retain the backstop arrangement where Northern Ireland would still be part of the EU for customs purposes until Britain finally exits. 

The alternative of a physical border is politically and physically impractical, both because it would hark back to the troubles and many products cross the border several times during the assembly and production process. The British Parliament will accept neither outcome.

In answer to my question about UK retailers’ commitment to their NZ suppliers of lamb, both de Lautour and Kingston are adamant the retailers are totally committed to meeting their contractual obligations. 

There is no great sense of impending disaster on the part of their respective customers, more a realistic assessment of the need to be cautious and flexible on both sides. 

Concerning quota, Meat Industry Association chief executive Tim Ritchie says NZ wants market stability and preservation of what was negotiated, not a straight split of our quota between UK and Europe. 

Of present export volumes of about 150,000 tonnes or just below 66% of the quota, a third is chilled and half of it goes to the UK so there is ample headroom while this is sorted. It is important for the future of trade with both UK and EU to retain flexibility within the total quota tonnage.

It’s too soon to panic, we must keep talking to trading partners, hold our breath and wait.

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