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What Factors Will Influence Competitiveness of UK Livestock Markets?

18 February 2016

ANALYSIS - The prospects for livestock markets over the next 10 to 20 years will be in the developing and emerging markets.

Andrew McLay, from the agriculture and agrifood consultancy Promar International, speaking at the Agricultural and Horticultural Development Board’s Outlook 2016 Conference said that in future world livestock market competitiveness will hinge on free trade agreements.

He said that competitiveness in export markets is multifaceted and not just about the cost of production.

Other influences such as tariffs, exchange rates, transport costs and consumer demands also come into play.

Mr McLay said there has been a proliferation of free trade agreements that is changing the global trade landscape.

Since 2000 there has been an average of one FTA coming into force every month and the format of these agreements is changing to see more deep and comprehensive free trade agreements (DCFTAs).

“There has been almost an arms race in the terms of free trade agreements,” Mr McLay told the conference.

He said that countries want to negotiate with the EU because it is such a big trading block, but he added that the EU had come into the world of free trade agreements late.

“Negotiating a free trade agreement between two countries is hard enough but negotiating where 28 countries are involved is very complex,” he said.

The conference heard that FTAs are already dominating trade for some key exporters.

A total of 80 per cent of poultry from Thailand goes to countries where there is a free trade agreement and 50 per cent of New Zealand’s dairy exports goes to FTA countries.

“FTAs matter and they are important,” Mr McLay said.

However, he added that they take a long time to negotiate and to sign off.

He said that Europe is accelerating its efforts on FTAs but its negotiations are dominated by three big issues – agreement with China, the effects of the Trans Pacific Partnership (TPP) involving North America, Oceania and some South East Asian and South American countries and the Transatlantic Trade and Investment Partnership (TTIP).

He said that TTIP is “potentially the mother of all trade agreements”, because it is ambitious in its size and it is a classic deep and comprehensive trade agreement.

However, it is taking time to negotiate because of stumbling blocks over the status of Protected Geographical Indications (PGIs) in the US, the question of hormone use in beef and livestock production and the use of genetically modifies organisms as well as the use of chlorine in slaughterhouses.

Mr McLay said the TTP agreement potentially will put the EU and other countries at a disadvantage in many growing markets and further FTAs will have to be negotiated to level the playing field.

He added that it will be essential to negotiate FTAs with China despite the caution shown by the EU in this area, because it is expected to become the largest economy in the world by between 2020 and 2030.

Outside of the FTAs Mr McLay said that exchange rates can make or break a country’s trade and all countries are affected by swings in the rates.

Future trade in livestock products is also going to be affected by the way that goods are transported around the world, and Northern Europe is well placed with its large container ports and the growing number of ever larger ships that is servicing them.

He said that large trade vessels and routs create economies of scale and bigger ships, bigger ports and busier freight routes add up to competitive freight rates for UK exporters.

To succeed in export markets, the cost of production remains key as he said that ta competitive price remains the basis for everything.

However, he added that on average, the UK is a high cost, high quality producer of livestock products and while it is competitive in the EU, in the rest of the world it remains a high cost producer.

Mr McLay said that the needs and voice of eh consumer also have to be taken into consideration when competing on the world market, because market access does not mean guaranteed consumer demand and actual trade will be influenced by what consumers want.

Overall, he said, the UK could be commercially excluded from attractive markets without free trade agreements and the successful implementation of TTIP and other FTAs would open UK markets to more competition in products such as beef.

However, access to the UK market from countries such as the US would be modifies by the size of the tariff rate quota and in the case of the US, the willingness of the country to supply hormone free beef as well as by the consumer and retailer preferences.

But successful implementation of TTIP could provide market opportunities for selected meat products in the US where those products are competitively priced, such as pork ribs.

Mr McLay concluded that the UK livestock sector is in a favourable position to compete on a number of issues, whether it is supplying the domestic market or Beijing.

While the UK on most livestock products is a high cost, high quality producer, increasing production and processing productivity must be the core strategy to defending local markets and expanding exports.

He said the livestock industries need to focus on the areas they can control or influence – increasing production efficiency, engaging in the FTA negotiation process and influencing consumer preference.

Chris Harris

Chris Harris



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