The impact of the new UK-Australia free trade deal will likely prove “more significant” for British farming than other post-Brexit trade arrangements, AHDB has suggested.
However, it is unlikely to undercut British farmers unless Australia’s access to more lucrative Asian markets is reduced, according to the levy board’s latest Horizon report – which was produced in partnership with Harper Adams University and touted as the first to model the potential impact of the agreement.
Australia’s agricultural exports to the UK “may be subdued”, the report suggested, as it listed “geographical proximity” as “a major factor in determining trade”.
The trade deal offers generous access to the British market compared with Australia’s older arrangements with China and Japan, but those larger and closer markets – where prices were already higher than in Britain – were “probably more attractive than the UK”, AHDB said.
But should Canberra’s volatile relationship with Beijing lead to Australian farmers losing preferential access to China, Australian lamb could “emerge onto the world stage and may undercut our domestic market”, it warned.
Tensions over covid prompted China, Australia’s biggest trade partner, to impose restrictions on some Australian imports last year, though trade in meat and live animals has mostly “held steady” according to a study by Oxford Economics.
“Many Australian agricultural exports are currently going into markets where there can be significant non-economic trade barriers imposed rapidly,” the AHDB report said.
And while the impact of the deal on beef could remain “muted”, with many leading UK retailers committed to only stocking British beef, market fluctuations caused by the planned expansion of Australia’s national herd would lead to “far more imports” than AHDB modelling assumed, it added.
Australian beef output is twice that of the UK and its 1.4mt volume of total exports far exceeds Britain’s 171kt, which is around the same as Australia’s lamb exports to China alone.
Although the deal will increase Britain’s agricultural imports from Australia “by relatively small amounts” in the short term, British farmers needed to prepare for the deal ahead of ratification, after which they could struggle to compete at a commodity level due to the size and scale of Australian agriculture, AHDB suggested.
Further down the line, Britain’s livestock farmers could face “increased competition to the UK marketplace” as the deal would pit them against rivals in Australia who have significant production advantages.
However, British dairy farmers and suppliers had “an opportunity” due to a decade-old decline in Australian production, as farmers in often inhospitable and arid terrain struggled with “climate and profitability issues”.
While dairy is difficult to model, clouding predictions about how the deal could affect the wider sector, British cheesemakers were likely to be the biggest beneficiaries, the AHDB said.
In contrast to its export-powerhouse beef and lamb sectors, Australia “actively imports” cheese – the dairy product AHDB saw as best suited to long-distance commerce.
Britain sent only around £8m worth of cheese to Australia each year, suggesting room for growth, it said. But taking advantage of the deal could require price cuts if British cheeses were “to be competitive in the Australian marketplace”.
The report hinted British producers would struggle to displace New Zealand’s dominant role as supplier of butter and milk to Australia’s £725bn dairy market.
The trade deal will see tariffs on beef and sheep gradually eliminated over the decade after ratification, with dairy products facing a five-year timeframe.
But while British exports would enter Australia tariff-free, the AHDB warned the deal’s “finer details” awaited agreement.
Neither government had so far published the outcomes of modelling of how the deal could play out, because, according to the AHDB, “they both regard results as too sensitive”.
Unlike other attempts at projecting the impact of trade deals, the report factors in “indirect impacts of other trading partners in a network” and “imperfect market conditions”, it added.
It said the agreement could be further modified should Britain join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-country trade deal that Australia is party to and which China has also expressed interest in signing.
The agreement as presented was seen by the AHDB as “both an opportunity and a sizable risk for our domestic agricultural market”, said AHDB director of strategic insight David Swales.