A stocktake of selected agricultural markets of the European Union - Opportunities for Australia

Overview
The report A stocktake of selected agricultural markets of the European Union: Opportunities for Australia compiles five articles on EU agricultural industries that were originally published in ABARES Agricultural Commodities quarterly reports between June 2016 and March 2017. These articles were on almonds, beef, dairy, sheep meat and sugar. The report examines EU domestic policies and markets, and trade opportunities for Australia.

Key Issues
• Since the mid 1990s the share of total Australian exports destined for the EU has been declining in favour of more lucrative and geographically closer Asian markets. • Part of the reason for the decline in the share of Australian exports to the EU has been caused by the regulation that supports the EU agricultural sector. EU agricultural imports are subject to restrictive quotas, in-quota tariffs and prohibitive out-of-quota tariffs. • The Australian Government and the European Commission are working towards commencing negotiations for a free trade agreement. As the European Union is one of the largest consumers of agricultural goods in the world, a preferential agreement that improves access to the EU market may present opportunities for Australian agricultural exporters. • The commodities covered in this report are almonds, beef, dairy, sheep meat and sugar. These are high value or growing Australian agricultural industries. • The EU imports agricultural products from a large number of countries and has numerous existing trade arrangements with these countries. Australia therefore faces significant competition in the EU market for the five commodities. • The articles discuss the existing trade trends and EU policies for each of the five commodities. For beef, dairy and sugar it is posited that only a significant reduction in tariffs or enlargement of quotas would precipitate a strong diversion of Australian trade away from the geographically closer Asian markets to the European Union. This is because of weakening EU import demand given growing supplies of lower-priced, domestically produced product. • Australian exports of sheep meat to the European Union are constrained by a relatively small quota of 20,000 tonnes, which it has largely filled in each of the past 5 years. Australian exporters of sheep meat would benefit from improved access to that market given strengthening EU demand for sheep meat and relatively high prices. • EU imports of almonds are subject to a low tariff and import demand has been growing steadily. Removal of the tariff on Australian almonds would improve Australia's relative competitiveness but gains are expected to be modest over the medium term given the dominant foothold of the United States in the EU almond market. • The effect of Brexit on EU agricultural commodities markets and trade is uncertain at this stage.