UK-China dairy deal: Export boost as Chinese dairy appetite pushes up demand

24 Aug 2018 --- The UK dairy sector will receive a multi-million-pound export boost as China agrees to import UK dairy products made with milk from third countries. The £240 million (US$308m) five-year deal was secured in China yesterday (August 23) as International Trade Secretary Dr. Liam Fox MP met with China’s General Administration of Customs to reach the agreement. It comes amid a high period of uncertainty around British exports with the possibility of a no-deal exit from the EU at the end of March 2019 looking increasingly possible.

With demand for most dairy categories growing by more than 20 percent each year in China, it is one of the country’s fastest growing areas of food demand. The UK exported over £96 million (US$123m) of dairy products to China in 2017 and there has been significant interest in the market following Prime Minister Theresa May and Dr. Fox’s visit earlier this year.

Imports into China of products such as yogurt, flavored milk and cheese have seen rapid growth as Chinese consumers increasingly associate these items with nutrition and wellbeing.

This deal means that producers will have increased flexibility in sourcing the dairy they use for their products and the agreement for UK dairy in China could benefit Northern Ireland dairy producers, according to Dr. Fox. 

The UK government claims that it is determined to open up agricultural opportunities to British businesses. This latest deal follows the lifting of a two-decades-long ban on beef that came in June when China ended its longstanding ban on exports of beef from the UK, in a landmark move for British producers estimated to be worth £250 million (US$320m) in the first five years alone.

More than 20 years after the Chinese government first imposed a ban on British beef in the wake of the Bovine spongiform encephalopathy (BSE) outbreak, commonly known as “mad cow disease,” the lifting of the ban was hailed a “milestone” that was the culmination of several years of site inspections and negotiations between UK and Chinese government officials.

China is currently the UK’s eighth largest export market for agri-food, with more than £560 million (US$718m) worth of food and drink bought by Chinese consumers last year.

Imports into China of products such as yogurt, flavored milk and cheese have seen rapid growth as Chinese consumers increasingly associate these items with nutrition and wellbeing.

Earlier this month, UK government data showed that food and drink exports hit a record level of £10.6 billion (US$13.5 billion) for the first half of 2018 – up by 4 percent compared to last year. This comes as the date for Britain's exit from the EU (March 19, 2018) draws ever closer. 

The US, China and Hong Kong were among the top countries importing British products, according to new figures from the Department for Environment, Food & Rural Affairs, illustrating how the country's manufacturers may be able to look further beyond prioritizing their EU trading strategy in the future. Demonstrating a clear global desire for British taste, quality and high standards, UK food and drink businesses are now selling their products to more than 200 global markets.

“I’m delighted to see the completion of this deal, bringing significant benefits to dairy producers across the UK at a time when British food and drink exports are at a record high,” says International Trade Secretary Dr. Liam Fox MP.

“China is the UK’s fifth largest trading partner, with exports growing by 28.5 percent in 2017 when compared with the previous year. As an international economic department, DIT is working with our partners across the world to liberalize international trade by removing barriers to commerce, helping businesses and ensuring greater choice for consumers worldwide. This announcement will boost our £67.5 billion (US$86.6bn) trading relationship even further.”

While in China, Dr. Fox is attending a meeting of the UK-China Joint Economic and Trade Commission (JETCO) in Beijing, as well as meeting companies and senior Chinese government ministers to discuss trading opportunities between the two countries.

Environment Secretary Michael Gove MP adds that the UK’s “world-class dairy producers” already export £1.7 billion (US$2.1 bn) worth of produce per year. 

“This milestone will help to unlock the UK food and drink industry’s full potential forging new trading relationships around the globe. This step shows we can be a truly outward-looking Britain outside the European Union,” he says.

Her Majesty’s Trade Commissioner for China, Richard Burn, adds: “The appetite in China for UK produce is clearly already strong. However, there remains untapped potential across all food and drink categories.”

The UK-China dairy deal also comes as leaders from America’s dairy industry travel to China to promote trade cooperation with official agencies in Beijing and Chinese dairy buyers in Xi'an. In Beijing, a delegation will discuss the flow of Sino/US dairy business amid months of trade tension that has led to tariffs on a long list of US exports, including dairy.

By Gaynor Selby

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