Propelling trade between Britain and Australia as new agreement begins
31 May 2023 --- The UK enters into a free trade agreement (FTA) with Australia and New Zealand today with a removal of tariffs on some F&B products predicted to unlock export opportunities. There has been a decline in exports from Britain in the two countries so far this year but this is forecast to turnaround as the new trade deal begins.
Notably, removing tariffs in New Zealand is expected to boost sales of “key UK exports” such as soft drinks, sauces and breakfast cereals.
The 2024 outlook could now be more promising, as the FTA is poised to help in the challenging markets for UK exporters, propelling more F&B trade between the countries, flags the Food and Drink Federation.
The fall in exports to Australia (-13%) and New Zealand (-11.5%) is largely attributed by the UK Food and Drink Federation (FDF) to a decline in alcohol sales.
However, this is deemed a “temporary setback,” as the organization expects the removal of tariffs will “pave the way for future growth.”
The Japanese path
Exporters hope the new FTA works as well as the UK-Japan trade agreement, which came into force in January 2021.
Japan saw strong demand for mackerel, salmon and fish roes.The country has been a haven for UK exports, with exports up 58.2% in Q1 2023, compared to 2021 and 15.4% from last year.
Notably, the UK exported almost as much fish in Q1 to the Asian nation as it did in the entire 2022 – £6.6 million (US$8.16 million) for Q1 2023 and £7.4 million (US$9.15 million) for 2022. Exports of UK fish are up 11,863% since 2021.
Meanwhile, Japan’s exports to the UK decreased by 11.8%, leaving the trade balance for the UK up 22.2% from last year.
Competitive markets
However, achieving similar growth numbers as the ones seen in Japan will not be easy, concedes Nicola Thomas, FDF director.
“While markets such as New Zealand and Australia have a strong affinity with UK products, these are highly competitive countries with a strong homegrown supplier base.”
“We welcome lower tariffs, but UK companies still need to research and evaluate each country in relation to their own product category and brand aspirations. As with all markets, companies must create a robust market entry and development plan to succeed.”
The high competitiveness in these markets will increase the effectiveness of the removal of tariffs, given the “relatively low margins in most UK products,” according to the FDF.
Not everyone agrees with the trade deal. Agri-food organization, Copa-Cogeca, voiced concerns earlier this year. Meanwhile, FDF insists it will bring benefits such as access to “competitively priced raw materials that aren’t available domestically.”
Declining volumes
UK producers have been able to trade their products in global markets at increased prices, with exports nearing a double-digit increase for Q1 (9.8%). With the new trade agreement exporters expect to reap the benefits of tariff-free trade in future quarters.
Whisky is the top UK export.
Q1 exports reaching £5.9 billion (US$7.29) was mainly driven by recovering sales destined toward the EU (up 13.4%) after companies failed to capitalize from the bloc’s common market last year.
However, exporters have sold fewer products at higher prices, achieving an increase in sales in dollars but not in volumes.
Nine of the ten leading export products saw a decline in the volume of sales and, in six out of those nine, the fall reached double digits.
Whisky, the leading UK F&B export, saw a sales volume decline of 13.1% but generated US$100 million more in profits for exporters. A more stark contrast between volume and monetary sales is seen in other products, such as cereal (-13.7% volumes while sales up 19.9%) or wine (-9.7% volumes while sales up 22.5%).
“Government is taking important steps to help businesses utilize new export opportunities with the welcome announcement of additional specialist trade attachés,” says head of International Trade at Food and Drink Federation, Dominic Goudie.
“But more could be done to maximize opportunities for growth for domestic manufacturers by dropping costly plans for UK-wide ‘not for EU’ product labeling and providing a dedicated trade portal to improve access to vital information,” he concludes.
By Marc Cervera
