Trading in the European Meat Market
The EU is one of the largest markets for meat consumption in the world. In terms of its trade rules, it balances protection of local farmers and meat suppliers on the one hand with securing affordable supply of meat products on the other, by imposing tariffs on imports entering the Single Market whilst also entering into some tariff-free arrangements with non-EU states.
The EU's current access arrangements date back to a 2002 Council Directive and the quotas on the importation of meat products into the EU were established as part of the 1995 WTO Uruguay Round. More broadly, the rules governing the bulk meat trade into Europe stretch back to 1882 when some New Zealand sheep farmers first shipped 5,000 frozen lambs into Great Britain in the hull of a re-purposed passenger ship.
The legal framework is now in flux as a result of the UK's decision to leave the EU and this brings both challenges and opportunities. With Brexit day (29 March 2019) approaching, we summarise some of the issues that are relevant to the meat sector.
The EU's existing administrative procedure
The EU has a well-established and detailed administrative process for assessing whether meat products from non-EU states should be permitted to enter the EU. While the process is complex and lengthy, reflecting the complexity of food safety, public health, and animal health issues which need to be considered under EU law, it is a single, harmonised approach which enables access to the whole of the Single Market. Once meat has lawfully entered any Member State, it can generally move freely within the EU's Single Market.
Currently, all authorisations for the importation of non-EU derived meat are granted by the EU Commission, with the help of the European Food Safety Authority (EFSA). Decisions in each case follow an extensive review of each non-EU country's health and safety regulations and a long list of other criteria.
Following EFSA reviews, audits are carried out at the direction of the Commission in the non-EU countries to ensure that provisions laid out by the relevant legislation are complied with in practice. Once the reviews and audits are complete, the non-EU country is added to the list of authorised countries.
After being authorised, meat products imported from non-EU countries are subject to border inspection by Member States' official veterinarians at EU Border Inspection Posts (BIP). Additionally, routine compliance monitoring is undertaken as both a paper-based exercise and through audits to ensure that the requirements of authorisation continue to be met.
As a member state of the EU, the UK places substantial reliance on the EU's harmonised regulatory framework and administrative arrangements. A key challenge post-Brexit will be who picks up that regulatory burden inside UK, in order to facilitate ongoing cross-border trade in meat.
While there have been suggestions that the UK's food safety law is likely to remain the same, at least in the short term post-Brexit, there are legal parameters that will circumscribe what is possible. For example, veterinary inspection audits are carried out in non-EU countries by the EU are an important component of the EU's regulatory approach. After Brexit day, and absent a new or transitional arrangement, the UK will no longer be able to legally depend upon those EU inspections because it will no longer be party to the agency which undertakes them. Even if a UK agency were to place reliance upon EU assessments, it will effectively require the UK agency to fetter an essential aspect of its regulatory discretion to an agency over which it has no formal influence. Therefore, in the absence of the UK negotiating a strategic partnership in order to maintain participation in EFSA and other agencies, the UK will need to establish, empower and resource its own regulatory bodies to replicate the EU's functions.
It is difficult to predict what the specific impact of this will be, but it is possible that the follow-on consequences for stakeholders may include increased compliance costs (which may be passed onto consumers), a greater administrative burden (i.e. importers having to undergo audits by both EU and UK regulators), and increased risk of administrative errors.
EU Trade Arrangements
The EU Commission's exclusive legal competence and structural capacity to negotiate trade agreements on behalf of the EU (and the EU Member States) means that there are currently no standalone agreements between the UK and third party states regarding meat importation.
The long standing trade arrangements between the EU and various non-EU states for meat are bilateral: that is, they apply between the EU and each non-EU state, and are not therefore contingent on the UK's continued membership of the EU.
For example, looking specifically at the beef industry, the EU has established arrangements which authorise a number of major beef exporting states (including Australia, Argentina, Brazil, Canada, Paraguay, Uruguay, the United States and New Zealand), to import 118,000 tonnes of beef into the EU market with reduced or zero tariffs.
Decoupling these arrangements as a result of Brexit gives rise to some very contentious trade issues in the meat sector.
A good illustrative example relates to the EU's arrangements for sheep meat. New Zealand accounts for the largest tariff-free quota with around 80% (or 230,000 tonnes) of the sheep meat imported into the EU market. These arrangements between New Zealand and the EU (including the UK) will continue to have legal effect after the UK leaves the EU. Given that the UK typically accounts for 40% of New Zealand's lamb imports into the EU, there is concern that EU27 farmers could be faced with an excess of tariff-free New Zealand lamb supply post-Brexit. EU27 and UK negotiators have suggested a solution whereby the current quota is divided between the UK and the EU27 (tariff-split). However, this is opposed by agricultural exporting countries in Latin America and Australasia who argue that the EU's arrangements cannot be modified or amended unilaterally by the EU.
In this dispute, the EU27 have already sought to rely on WTO rules which allow WTO members to seek legal remedies only if they can show that they are "worse off" under the new distributions of quotas between the UK and the EU27. Indeed, the US, Brazil, Argentina, Canada, New Zealand, Uruguay and Thailand expressed their discontent and rejected the tariff-split proposal in a letter delivered to the UK and EU27 representatives at the WTO. The letter's main point was that the modification of tariff rate quota access arrangements cannot credibly be achieved through a technical rectification and none of the arrangements should be modified unilaterally, without the agreement of all parties to the agreement.
While the market is rightfully concerned about potentially substantial disruption of trade as a result of Brexit, history tells us the European meat market has overcome substantial changes and shifts in direction in the past, not least, the introduction of frozen meat over a century ago. For clients in the sector, some practical points to bear in mind include:
- It is likely that the UK (or perhaps its devolved administrations) will need to resource or establish a government agency to carry out new administrative functions relating to the certification of meat producers and imported products (including products derived from the EU).
- There will be supply and distribution issues for meat producers, processors and importers (both EU and non-EU-based) as a result of Brexit. You should start planning now to understand how these issues might impact on your existing business arrangements, and that could be looking at leveraging opportunities as well as mitigating risks.
- The trade issues are inconclusive at this point and there remains substantial potential for upset in the existing market dynamics of the meat market. If you produce, import, process or trade in meat products in a significant way, you should keep your business informed about the current status of trade disputes and discussions which have been triggered by Brexit.