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World market fluctuations could benefit New Zealand over UK, warned supplier Wyke Farms

The newly signed free trade agreement between the EU and New Zealand could in time make it trickier for UK-based dairy suppliers to the continent, industry experts have warned.

Agreed last week, the trade pact would “open significant economic opportunities for companies and consumers on both sides”, said the European Commission.

But while the short-term impact of the deal would take time to filter through, allowing greater access for New Zealand-sourced dairy products into the bloc could also displace UK dairy, suggested Rich Clothier, MD of Wyke Farms, which exports cheese to more than 160 countries around the globe.

“If we do get into a situation of over-supply in the world market, then the UK and EU would be subject to world market prices,” said the West Country-based cheesemaker. “And in the past, when this has been the case, New Zealand and the US have been able to supply more cheaply,” he added.

A spokesman for the European Dairy Association echoed Clothier’s comments, adding that the EU-NZ FTA was “a new challenge for UK dairy”, after EU member states last year started implementing border checks on imports from Great Britain as part of the post-Brexit free trade agreement.

British dairy exporters had earlier this year reported delays and confusion around sending goods across the English Channel after changes to the EU’s health certificate requirements, which some said in turn could be resolved if the EU and UK added a veterinary or SPS [sanitary and phytosanitary agreement] to their post-Brexit deals.

The EDA said it hoped a “long-standing commercial relationship between the UK and the EU for dairy would help to limit the impact of New Zealand imports to the EU for British dairy on the EU market”.

Describing the trade deal as “extremely favourable” for New Zealand, the EDA added it “increases the pressure on our European dairy sector” as farmers were already “investing heavily into their environmental sustainability strategies” demanded by EU policymakers.

But Simon Tucker, director of global sustainability and trade at New Zealand dairy co-op Fonterra, last week described the market access offered to New Zealand exports under the agreement as “very disappointing” and “reflect[ing] the degree of protectionism which continues to afflict dairy globally”.

In a statement broadly welcoming the FTA, EU-based industry body Eucolait noted that the “possibilities to grow trade between two extremely mature and beyond self-sufficient markets are limited and export opportunities for both EU and New Zealand lie in growing markets elsewhere in the world”. 

And UK suppliers too should also be looking at far-flung exporting possibilities, according to the National Farmers’ Union, as well as dairy consultancy Kite, which last year assessed there were “enormous” opportunities for British dairy in Asia amid what Department for International Trade described as a “shifting [of] the world’s centre of economic gravity eastwards”.

The deal was signed after the Paris-based secretariat of the Organisation for Economic Co-operation and Development (OECD) last week said that while milk output in Europe, (including the UK) would fall over the coming the decade, overall world output was set to rise, including in New Zealand – which the OECD said would remain the world’s biggest butter exporter and third biggest cheese exporter.

It followed the agreeing of the UK and New Zealand’s own trade deal last year, which was criticised by some in the UK dairy sector for liberalising access to the British market for New Zealand food exports, including butter and cheese.