20 March 1981 Guide to E.E.C. regime prepared at Lincoln

While New Zealand believes that with quotas higher than past years, it has negotiated a good deal for the sale of its sheepmeat to E.E.C. countries, there is no room for complacency, and no guarantees for the future. Things could change drastically at any time, either through renegotiation or the operation of straight market factors.

That is the opinion of economist, Ms N. Blyth, of the Agricultural Economics Research Unit at Lincoln College, who has recently prepared a paper on the arrangements and implications of the E.E.C. sheepmeat regime. Intended as a guide for producers and exporters, and for laymen interested in this vital factor in New Zealand’s economy, Ms Blyth’s report sets out the conditions of the current regime, which came into operation in October last year, and discusses the implications for “third country” producers such as New Zealand.

Alongside this, the report explains the wider European context of meat production and consumption.

The report will be of value for all those who have to cope with the labyrinth of quotas, regulations, tariffs, and premiums which trade with the E.E.C. involves. Ms Blyth hopes her paper will clarify a lot of the difficulties, but she makes no apology for the complexity of the regulations. They have to be complex, she says, because so many different types of farming and different consumer tastes are involved within the Community.

For much of the E.E.C., the sheep industry is essentially a small-holdings operation, and traditionally has been relegated to “less favoured” hill and mountain regions. Overall sheepmeat production is a very minor income earner, making up just 2.4 percent of total meat production. This compares with a New Zealand figure of around 50 percent. Only the United Kingdom and France have significant numbers of sheep; together they account for 79 percent of E.E.C. sheep production.

Consumption factors differ widely from New Zealand’s — while out there is a high per capita level of meat consumption, sheepmeat makes up only 3.4 percent of this. The level of lamb and mutton consumption has, in fact, been declining since 1960 which, along with a marginally increasing level of production, means that New Zealand is being slowly squeezed out of the market.

Consumer attitudes are diverse, and a generalisation which may hold for the United Kingdom might be far off the mark for, say, Greece, the newest member of the Community. Consumption levels are relatively high in the United Kingdom and Ireland, but there is only a sporadic “festive” consumption in Italy and the Netherlands. Elsewhere ethnic groups and migrant workers favour mutton and lamb over other meats, while in France the upper middle class eat lamb as a high-priced luxury item.

The diversity of consumption patterns is reflected in wide price differences, both between member states and in relation to other meats. Lamb sells for much the same price as beef in the United Kingdom, but in France it is substantially above the price of other meats.

New Zealand exporters must consider factors like these alongside the agreements which the politicians make, says the report’s author, Ms Blyth. In her opinion the very militant producers are the internal market factors are currently just as strong as the Community’s institutions. The arrangements made with New Zealand could be outweighed by market factors.

The importance of the arrangements for New Zealand is well understood locally, as around 70 percent of lamb exports go to E.E.C. countries. But from the E.E.C. point of view, the interest in New Zealand’s importance is less as general trade. New Zealand sheepmeat can be seen as making up 15 percent of one Community’s imports, or one of its total requirements, including home-produced lamb.

This means that New Zealand’s closest link is with the United Kingdom, but as the single E.E.C. regime gets underway New Zealand will have to prepare a co-ordinated marketing approach to all E.E.C. countries.

The objective of the present regulations is to harmonise Community sheepmeat prices and bring about a single free internal market by 1984. This would bring sheepmeat into line with other products and fulfil the conditions of the Treaty of Rome.

Yet there is far from total agreement between member states either about the merits of the common policy or about the best systems of market intervention to be used to put the policy into action. France operates an intervention system of purchasing all supplies at a guaranteed price if prices fall below a fixed level, while in the United Kingdom producers are offered a variable premium to make up the difference between the market price and an agreed guide price.

The aim is that by 1984 the French price will have fallen and the United Kingdom price risen to the extent that, together with the prices of other members, there will be a common price for sheepmeat throughout the E.E.C. Other measures involved in the scheme include incentives for wholesalers to store meat when prices are poor and return it to the market when conditions improve, a move which will reduce New Zealand’s seasonal advantage as an exporter.

Over the same period New Zealand has agreed to restrain its quota to an annual 245,000 tonnes. This is higher than the amount New Zealand has sent in the past few years, but considerably less than in the early 1970s. Even with that quota, Ms Blyth expresses reservations that New Zealand exporters will reach the allowed maximum without being deferred by the terms and conditions to be fulfilled. Other markets with long-term guarantees could look increasingly attractive.

At any stage there could be a call within the E.E.C. to reduce imports if prices were not coming together and stabilising as readily as planned. Likewise, there could be pressure to change the means of market support, with the Community already finding it difficult to justify its high agricultural spending.

If consumers were forced to pay higher prices to subsidise farmers, consumption could be cut dramatically, taking imports with it.

In all, the lack of reliable long-term guarantees puts New Zealand in an insecure position, says Ms Blyth. While the agreement has positive aspects for New Zealand — chiefly the guaranteed access to E.E.C. countries until 1984 at least — there is always the possibility of renegotiation, when the last-minute dashes to Europe will be on again.

It looks as though New Zealand will have to continue to take every opportunity to plead its case before the E.E.C. For while new markets can be opened up, it will be a long time before the E.E.C. is replaced as the country’s most important lamb export market — while we still have access.

Source: Press, Fri 20 Mar, 1981
Headline: Guide to E.E.C. regime prepared at Lincoln