Little to fear from US trade deal in short term, says AHDB

Fears about an immediate influx of cheap US food following a future free-trade deal are overstated, while opportunities for British food exporters to the US are encouraging, suggests a new Horizon report from the AHDB.

A US/UK Free Trade Agreement and its impact on UK Agriculture, released on Thursday (18 March), explains that the US enjoys significant economies of scale and already has supply chains to meet a variety of standards, both domestically and across the globe.

See also: Food standards warning as UK-US trade talks begin

But having existing deals and established trading relationships in high-value markets closer to home, such as with Mexico, Colombia and South Korea, the UK is not likely to be immediately attractive to US exporters.

“It is unlikely that, in the short term, a deal with the US is going to mean a flood of US product hitting our shelves,” said AHDB report author Tom Forshaw.

“This is both because of the nature of trade deals, which take time to implement over 10-15 years, but also because of the economics of trading.

“In many sectors, the US already has seasoned markets, with products that are traded at a higher price than we currently import here.”

For example, with beef – for which the US is both the world’s largest exporter and largest importer – the average US export price in 2019 was about $7,200/t, compared with an average import price for fresh and frozen beef into the UK of $5,100/t.

Opportunity

However, a trade deal could provide an export opportunity for niche UK products, which have a point of difference in the US marketplace and satisfy consumer demand for quality, value and consistency, the AHDB suggests. 

Its report includes a special focus on two British companies offering just that – Karro Food Group, which exports pork and pork products, and the Organic Milk Suppliers Co-operative (Omsco), which supplies organic dairy products.

In September last year, the first shipments of British beef for 24 years also landed on US shores, in a deal estimated to be worth £66 million over five years.

Much has also been made by the UK government of opportunities to export sheepmeat to the US, though the AHDB report is more cautious.

“The US is both a small producer and consumer of sheepmeat, with per capita consumption steadily falling since the 1960s,” it notes.

“The current major exporters of lamb to the US – Australia and New Zealand – are highly competitive and have a diverse offering to suit the market. The product mix for UK exports, by and large, doesn’t align with what the US customer wants.”

Complacency

The AHDB also warns against complacency in the longer term, describing the US as a “global agricultural powerhouse” when it comes to trade, and noting the power of the US farm lobby.

“Huge budgets are put behind developing overseas markets. If the US chooses to target the UK, we can expect a highly efficient competitor, with the potential to significantly impact domestic producers,” says the report.

“Regardless of where the UK sets its standards for welfare or any other factor, the US has the ability to meet these standards and still maintain a competitive advantage in many sectors,” it adds.