DESPITE the limited tariff-free quotas given to Australian beef and sheep meat imports, the National Farmers Union (NFU) is still complaining. But despite the all too predictable NFU tantrum, there is a breath of fresh air in the UK’s agricultural industry – the Scotch Whisky Association.
How wonderful it is to hear its spokeswoman say it does not support tariffs and quotas. Admittedly, she was commenting on the lifting of tariffs imposed by the US government due to a WTO ruling, but she also called for a reduction in the tariffs still being imposed on US whiskey entering the UK and the EU. How enlightened for an industry to be happy for its competition to also have tariff-free access to its home market.
Whisky is the UK’s largest agricultural export by a large margin. Should we be surprised that the one agricultural industry in the UK that is not asking for protection through tariffs and quotas is also the UK’s most successful agricultural exporter? Does anyone at the NFU ever wonder if these two things may not be a coincidence?
Both Australia and New Zealand taxpayers can testify that after their governments removed agricultural subsidies, Australian and New Zealand farmers improved their productivity, widened their product range, and expanded their export markets. They also increased their value-added production.
Yet, no doubt the UK’s NFU will complain the whisky industry is only successful because its product is addictive. I would, however, beg to differ, addictive or not, there is more competition in the alcohol industry than in any other food or drink sector – with many lower priced alternative sources of alcohol across the world to feed any addiction. Swedish Aquavit and Italian Grappa do not command the market share of Scotch Whisky and Scotch Whisky is sold in countries with their own comparable products such as Japan and the US, and the UK’s whisky manufacturers were not demanding a protective quota limit on Australian alcohol imports.
Both Australian wine and even Australian Whisky (yes, they make some) were not restricted by quotas or tariffs in the recent UK–Australia trade agreement. The agreement that will, according to the NFU, put the last nail into the coffin of the UK’s beef farmers. Who knew that a measly 35,000 tonnes of beef would be the straw that will apparently break the camel’s back and drive the UK’s heavily subsidised beef farmers into bankruptcy? When, strangely, the 173,000 tonnes of fresh, chilled and frozen beef imported from Ireland annually has never managed to do this.
In a country that consumes over 1.1 million tonnes of beef each year, the NFU claims it is that extra 35,000 tones that will destroy the UK grazing industry. Really? An industry that on average loses money on both its agricultural and diversified income each year. In all likelihood this quota is not even a commercial quantity – and may never be filled. If we divide total UK consumption by the market share of each UK supermarket, even Waitrose with only 5 per cent of the market would require 55,000 tonnes of beef each year.
Yes, what so many critics seem to have overlooked is that wholesalers won’t import something if they can’t get enough to supply their clients. There are some great vineyards in Australia whose wines will never be imported to the UK because their production volumes are too small to supply the big UK distributors. UK wine wholesalers will openly tell anyone who asks they don’t want to introduce their clients to a wine they can’t easily restock. So, no UK supermarket is going to start replacing its UK/EU suppliers with Australian beef, if that means it may find itself out of stock two-thirds of the way through the year. Then it would have the Hobson’s choice of going cap in hand to its old suppliers or paying the UK’s high tariffs on ‘out of quota’ beef.
An average steer carcass weighs about 350kg and so 35,000 tonnes divide very neatly into 100,000 carcasses. However, while some Machiavelli in Whitehall believes they have given Australia a quota that no supermarket would want to use, it is more likely that UK meat wholesalers will only import cuts of Australia’s premium beef. Rather than waste space in a refrigerated container by importing awkwardly shaped beef carcasses, those containers will be stuffed full of fillets and T-bones and other premium cuts – some of which UK farmers still can’t supply for fear of BSE.
Some UK farmers are now complaining Australian beef will cut them out of the premium beef market, this is possibly true, but if so then they only have themselves to blame – if instead of pressuring the Government to restrict Australian beef imports, the NFU had encouraged the DIT to give Australia a larger quota, then cheaper cuts might have been imported instead of restaurant quality beef – replacing beef coming from Ireland and protecting the premium beef market. For some reason, the NFU believes that keeping cheaper producers out of the market will help them sell their own wares and are unconcerned that this would keep prices high for UK consumers.
However, US studies from the University of Missouri on the price elasticity of beef shows that for every 1 per cent increase in price, sales of prime beef drop by 2.33 per cent. Maybe UK price elasticity isn’t so steep, but it would be certainly worth studying. In other meat sales in the UK, most prominently chicken, there have been astronomical increases in the quantity of chicken meat consumed as industrial production methods reduced its price. Chicken is now the most consumed protein in the UK when 60 years ago it was only for Sunday’s roast or special occasions. Similarly, lowering the price of beef through increased imports may not destroy the market as the NFU fears, but instead increase the overall quantity sold.
For UK farmers to benefit from this, however, they would have to increase their herds and unfortunately, they have done the exact opposite. Beef cow numbers have dropped steadily for the last 3 years. Although the Department of International Trade is talking about world domination for UK agricultural exports, since the 2016 Brexit vote UK farmers have been getting out of the beef business. Clever them. But why are the rest of us having to rely on Irish imports? Yes, despite the constant press reports about falling UK agricultural exports due to Brexit, the UK is still a net importer of food. The UK is not self-sufficient in food production – we import 45 per cent of the food we eat. But almost all of this is still being supplied by the EU.
Surely it is time for the NFU to follow the ethos of the Scotch Whisky Association by improving their products rather than relying on protection from imports and subsidies to survive?