In January 2011 the International Trade Committee of the European Parliament endorsed an EC proposal to ‘raise the EU import quota for beef from animals not treated with hormones’ as a means of resolving the long-running beef trade dispute with the USA and Canada. A vote in the plenary session is scheduled for 13 March 2011. Since 1999, as part of this dispute, the US and Canada ‘have imposed retaliatory tariffs on a wide range of EU exports worth US$116.8 million and C$11.3 million respectively’, affecting such products as ‘chocolate, pork, Roquefort cheese, mustard, onions and truffles’.
When finally approved, ‘the regulation will allow third countries to sell the EU 48,200 tonnes of duty-free high-quality beef from animals not treated with growth-promoting hormones’. This new import tariff quota would come into effect from August 2012.
Industry press reports also indicate that Brazilian beef exports to the EU market fell by 10% in 2011 (from 121,700 to 109,500 tonnes) as a result of ‘the reduced supply of animals for slaughter’. Only 2,000 farms are now certified to EU standards, down from 26,000 in 2008. This equates to a decline in available supply from 26 million head of cattle to 4.3 million head. However in 2012 Brazilian exports of beef to the EU market are projected to increase, with agreement having been reached on local accreditation of farms to EU standards.
The trade with the EU could also be affected by the Russian embargo on meat-exporting establishments in Brazil, which saw Brazilian beef exports to Russia decline by 19.45% in 2011. Brazilian exports to the US also fell in the first half of 2011 as a result of the closure of the US market to Brazilian beef following the discovery of drug residues above permitted levels.
At the international level, analysts suggest that 2012 will be a good year for beef prices as a result of ‘tight cattle supplies’. However higher cereals prices could put pressure on feedlot input costs, at a time when economic recession is squeezing demand in many developed country markets. The deepening debt crisis could also raise financing costs, with this serving to accelerate ongoing processes of mergers and industry consolidation within the beef sector.
The expansion of this import quota for high-quality beef increases duty-free imports on a specific component of the EU market, which ACP beef exporters such as Namibia are increasingly seeking to supply. It remains to be seen what commercial consequences the expanded tariff-rate quote will have for ACP beef exporters, particularly given the producer support programmes in place in some OECD countries that would be eligible to export under the quota.
In the case of Namibia, and to a lesser extent Botswana, this is a particular source of concern, in view of the uncertainties raised over the future basis for access to the EU market as a result of the EC’s September 2011 proposals to modify market access regulation 1528/2007. It remains to be seen whether this new expanded duty-free quota for high-quality beef could be utilised by both Namibia (which has in place domestic legislation prohibiting the use of hormones in livestock production) and Botswana to sustain beef exports.
Overall, the window of opportunity for ACP beef exporters to reposition themselves in the EU market on the basis of tariff preferences for high-quality beef is rapidly closing.
The likely recovery in Brazilian exports of beef to the EU market projected for 2012 is relatively small compared to the decline in Brazilian export levels since 2008. In this context, the expanding duty-free quota for high-quality beef exports from OECD and advanced developing country suppliers is likely to remain the main area of concern.