Why change to the EU grainfed beef quota is so desperately needed

Despite the US being unable to use the quota access they already have, on January 1 next year the US portion will increase further to 27,800 tonnes and the 'other country' portion will decline further to 17,200 tonnes.

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The zero tariff grainfed quota came into existance in 2010 as a trade-off between the EU and the US for resolving their long standing disagreement over the EU's hormone growth promotent free requirements.

Because EU policy required new quotas to be open to all countries on a 'most favoured nation' basis, the US set a specification for the quota that they thought no other country could match commercially.

Given the limited access that Australia had to the EU, the Australian processing sector set about meeting the US standard such that they had no choice but to let Australia supply against it.

That set the platform for other countires like Uruguay and Argentina to gain access as well, much to the US's chagrin.

Because the US industry was not structured to supply large quantities of HGP-free beef, Australia and Uruguay were initially very competitive.

In 2015 Australia exported 16,482 tonnes against the quota and in 2017 just over 17,000 tonnes.

The US could not match Australia and Uruguay in a 'first come first served' quota market and soon found the quota they originally negotiated for themselves was being competed away by other countries.

This led to the US negotiating a country specific portion for themselves and leaving the much smaller remainder to the other eligble suppliers to compete for.

This has led to the US portion never being fully utilised while the 'other country' portion sees a mad dash each quarter to time shipments to arrive and be ready for immediate entry as soon as the next quarter allocation is announced.

The 'other country' portion is always used immediately and exporters have to wait another two and a half months to get access again.

This gives the US a considerable advantage in being able to market their product in an orderly manner throughout the year at peak condition while competing countries are always in a mad dash to get what quota access they can.

If Australia is to develop and maintain a more long term quality market presence, this commodity approach to market access has to stop and access be provided by the EU on a basis that better reflects the quality of the product concerned.

As an example, last week the EU website was showing over 6000 tonnes of 'other country' beef was waiting allocation in the first week of this new quarter but there was only 4,900 tonnes of quota available for the quarter.

The purpose of this explanation is that after 40 years of miniscule access to the EU, the grainfed quota has shown that a market for high quality Australian grainfed beef exists in the EU and that Australia can be very successful in meeting that demand.

Once again, however, we are being limited by quota access that can only be ultimately resolved with a Free Trade Agreement that grants Australia all-year guaranteed access for this quality end of the market sector.

The EU FTA with NZ has shown a couple of things. One, that greater access for imported red meat will be a tough negotiation.

If they want to put their cars into Australia at zero tariff and for Ausralia to contemplate some of their more contentious geographical indicators they will have to compromise.

Secondly, even with the NZ agreement already announced it will be at least 2024 before it comes into force.

With delays in the Australian FTA with the EU already occuring, we can not expect any finalisation before 2025 or later and by then the access through the 'other country' portion of the grainfed quota could be down to sharing just 10,000 tonnes with five other countries.

The UK sheepmeat quota this year has run into some strong headwinds.

Under the post Brexit arrangements the EU Sheepmeat quota was split between the EU and the UK leaving UK access at 13,335 tonnes.

The quota has always been fully utilised but as Christmas is one of the major marketing periods during the year, exporters have to manage their quota carefully to ensure product arrives and is cleared before December 30 in order to gain quota access in that year.

It is normally a six week shipping period to the UK from Australia so product usually needs to be on the water by early November to ensure entry within the quota year. In 2021 with the COVID crisis at its worst, port congestion and shipping delays became so great that many Christmas shipments (up to 3000 tonnes) missed entry in 2021 and had to return the 2021 quota they carried and replace it with 2022 quota in order to gain entry at the preferential rate. Using 2022 quota to cover what were 2021 shipments automatically reduced our overall UK access in 2022 by that amount.

This week we then found out that the UK calculation of Australian sheep meat quota access was out of sync with Australian Government calculations to our further detriment by 2500 tonnes.

Our Department of Agriculture has an impeccable record of managing quota access in the EU and identified with UK authorities where they believed the error lay. The UK has been slow to respond despite the Australian High Commission in London emphasising the importance of the issue.

The UK is new to quota management as it was all done by Brussels before the UK left the EU.

The costs (security payments) being incurred by Australian exporters and UK importers at present are substantial now the quota has gone into a critical stage with less than 500 tonnes of quota remaining by UK calculations.

At time of writing, the UK had advised there was an error at their end but the issue was still to be finalised.

In a further effort to get a hold on exploding food inflation in Korea, the Government has announced a plan to open a 100,000 tonne beef quota at zero tariff to come into effect on July 20 and remain open until December 31.

All of Korea's major beef suppliers have preferential tariff agreements at various points of transition from the bound rate of 40 per cent to the US at 10.7pc, Australia at 16pc and Canada and NZ at 18.6pc.

The new zero tariff will remove any tariff advantage the US has or for that matter any other country with Mexico and Uruguay likely to benifit most given they are without an FTA with Korea. They both currently pay the full 40pc duty.