Farmers among exporters crossing fingers for no vote on Brexit

Miles Anderson says sheep farmers' businesses would not be able to withstand 'anything calamitous'.

JOHN BISSET/FAIRFAX NZ

Miles Anderson says sheep farmers’ businesses would not be able to withstand ‘anything calamitous’.

South Canterbury sheep farmer Miles Anderson is hoping Britain votes to stick with the European Union when the country goes to the polls this month.

Although campaigning has been put on hold after the death of MP and anti-Brexit campaigner Jo Cox,  which way the country will go on June 23 has been described as a 50-50 call.

If the country were to decide to extricate itself, it has been estimated that New Zealand’s exports to the UK could drop by $190 million per year, due to slower British income growth. Brexit could also dampen investment flows out of the UK, restrict the movement of people between the two countries and put a roadblock in the way of existing free-trade talks with the European Union.

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The UK accounts for $1.7 billion of New Zealand’s goods exports, or 3.4 per cent of the total. But in some areas, it is dominant. About 50 per cent of our sheep meat exports go to the European Union and 50 per cent of those go to Britain. Other prime exports are wine, apples and honey.

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Most primary products enter the UK under preferential agreements negotiated with the European Union. Were Brexit to happen, these agreements would have to be renegotiated.

The UK would have two years to negotiate its departure, during which our trade would officially be unaffected. But Britain’s economy could be dented by the uncertainty of what was ahead, which would flow through to less demand for imports.

Anderson said it was something that was on farmers’ minds as potential future threat. “The hope is that in the interim there could be a New Zealand-negotiated deal. How long that takes is anyone’s guess. Everyone will be lining up for a trade deal with them.”

What it could mean in dollar terms for his business is not clear.

But he said it would be substantial and sheep farmers did not have the capacity to deal with a significant blow to their business. “If dairy farming carries on the way it is for another 30 years then they’ll know what sheep farming is like.”

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Ben O’Brien, general manager of market access at Beef + Lamb New Zealand, is watching the situation closely.

New Zealand has a quota to ship 228,000 tonnes of lamb to Europe.

While more demand from China has meant New Zealand hasn’t always fulfilled that quota over recent years, most of the highest-value exports go to Britain.

“[Brexit] could have an impact on our ability to maximise the value we get out of our quota,” O’Brien said.

“During that two-year divorce period there could be considerable uncertainty with how things are likely to turn out and a potential slowdown in trade with the UK. We are concerned about it but there is probably not much we can do.”

He said discussions had already been held with the Government about the possibility of entering a rapid dialogue with the UK and European Community.

It was possible that exports to other markets, such as China, could increase to help offset a dampening in demand, he said. But he said selling to other markets would probably mean getting a lower price.

Any British economic turmoil could also affect financial markets and factors such as interest rates.

But economist Shamubeel Eaqub said there could be a silver lining. “If the UK retracts back to an insular world there could be an opportunity to rekindle our old colonial ties. New Zealand was very disappointed when Britain joined the European Community and we lost preferential access. If the UK removed itself it might be that New Zealand exporters will be a little more competitive and can expand and deepen the relationship we have with them.”

John Ballingall, of the NZIER, agreed that was possible, although not as likely as a negative outcome.

“In an ideal world for New Zealand, New Zealand and the UK could quickly negotiate a bilateral free-trade agreement that reduced tariffs on industrial goods and possibly expanded quota access for key agricultural products such as lamb.

“But it’s hard to see New Zealand being near the top of the UK’s list of potential free-trade partners, due to our limited market size, an export profile that tends towards some of the UK’s more sensitive sectors and the fact that we are currently seeking to open negotiations with the European Union as a priority. It would take a bold bid from New Zealand’s politicians and officials to put a ‘take it or leave it’ agreement in front of their UK counterparts to secure a quick but high quality deal. Alternatively, the UK could unilaterally lower or remove all of its tariffs to all World Trade Organisation members, including New Zealand.”

 – Stuff

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