AIRFREIGHT capacity could limit the potential for Australia to take full advantage of the new economic partnership agreement with the United Arab Emirates, despite industry welcoming the deal.

Trade and Tourism Minister Don Farrell announced the UAE Comprehensive Economic Partnership Agreement yesterday as Australia’s first trade agreement with the Middle East, stating it would help offset financial losses from the phaseout of live sheep exports by sea.

“The UAE is not only our largest trade and investment partner in the Middle East, but it is also one of our most important strategic, diplomatic and defence partners in the region.

“The deal complements our strategic relationship with the United Arab Emirates, and it’s the gateway for Australian exporters to diversify into the Middle East, with a potential market of 58 million people and a GDP of $1.4 trillion,” Mr Farrell said.

“We have proven in the past that we don’t sign trade deals just for the sake of trade deals. As everyone saw when we negotiated with the European Union, if a deal is not good enough for our producers, farmers and exporters, we won’t do it.

“But this is a great deal for Australian exporters, with over 99 per cent of all Australian products entering the UAE tariff-free,” he said.

“This is a very good deal for Australian farmers and producers, including beef and sheep producers, with estimated tariff savings of $50 million each year for our food and agricultural exports alone.”

When asked yesterday if the CEPA could potentially offset some of the financial losses to the WA sheep industry from the live trade phaseout, Mr Farrell said: “Indeed, it could, and I’m sure it will.”

“I’m sure the UAE understands just how important that trade is, not only to keep the supply of sheep meat into the Middle East, but to now do it in a cheaper way as a result of the drop in tariffs.”

Episode 3 analyst Matt Dalgleish said airfreight access to Middle Eastern markets like the UAE is crucial to Australian sheep meat exporters.

“The consumers there, not just in the UAE, but more broadly in the Middle Eastern region, do prefer sheep meat fresh and chilled, not frozen, and that limits the sea freight potential.

“So to grow that market significantly I think you’ve got to make sure that you’ve got capacity to send it as fresh as you can if we’re slaughtering domestically,” he said.

“There is a real preference for the meat to be consumed only a matter of days after slaughter, or preferably the day of.

“There is going to be an (airfreight) capacity threshold unless they can make sure there is enough space,” Mr Dalgleish said.

“If there is going to be a significant rise in meat volumes they are going to have to be able to get it there and historically it has always piggybacked on those passenger flights as cargo.”

Mr Dalgleish said the daily airfreight capacity out of Australia last year was about 66 tonnes annually and the available capacity out of Western Australia was less than a quarter of this. He said the increase in more efficient direct international flights since COVID also complicates availability of airfreight capacity associated with passenger flights.

“So unless we are getting dedicating passenger flights going to or coming back from the Middle East there is not the layover, which is reducing that airfreight capacity.”

WA processor sources indicate airfreight capacity to the Middle East has only improved marginally, if at all, since last year, and increasing sheep meat trade with the UAE would need more freight space availability. Increasing trade would also depend on sourcing light lambs of the right weight range, traditionally able to be supplied out of Western Australia, but more difficult from the eastern states.

The sources said the sector was still underserviced with airfreight capacity and more would be needed to exploit the potential of the UAE CEPA.

“Any additional airfreight capacity would be welcome,” one processor said.

“We’re still underserviced, we could absolutely do with more.”

ALEC objects to Minister Farrell’s comments

Australian Livestock Exporters Council chief executive officer Mark Harvey-Sutton said any improvement in market access is very positive.

“So the free trade agreement with the UAE is obviously very welcome; it benefits producers, it benefits exporters.”

Mr Harvey-Sutton said industry is still waiting on further details on how the AGREEMENT would impact the live sheep trade, but noted Mr Farrell’s comments that the FTA would offset losses from banning of live sheep exports.

“You don’t have to ban an industry to gain greater market access, at the end of the day we’ve got a very good product across all of the whole red meat spectrum and to try to conflate this with the ban is not appropriate.”

Livecorp figures show that live sheep exports to the UAE increased by 39 percent year-on-year to 70,000 in 2023.

AMIC applauds UAE FTA

The Australian Meat Industry Council, representing the nation’s meat processors, welcomed the agreement as a pivotal development in strengthening Australia’s economic and trade ties with the UAE, and important and growing market for Australian red meat.

The removal of red meat tariff under the agreement marked a significant achievement for Australia’s red meat industry, offering greater access to one of the most vital markets for Australian beef, lamb, and goat meat exports, AMIC said.

AMIC said the FTA and its outcomes also set a strong precedent for future trade negotiations across the Gulf Cooperation Council region.

By removing tariffs on Australian red meat products from entry into force this agreement enhances the industry’s competitiveness and positions Australian exporters to capitalise on the UAE’s demand for premium, high-quality protein, AMIC said.

AMIC chief executive officer Patrick Hutchinson said the FTA with the UAE delivered elimination of tariffs on Australian red meat, and positions Australia’s red meat industry in a strong position for continued growth.

“We commend the Albanese Government for its efforts in securing this agreement, which sets a positive template for future trade deals across the region.”

Mr Hutchinson also said the FTA builds on recent technical market access gains achieved through industry-led research initiatives, that capitalise on Australia’s world-best hygienic meat production systems for extended meat shelf life. AMIC encouraged timely ratification and entry into force of the agreement to take advantage of new opportunities for Australian producers to engage more deeply with the UAE’s meat import sector.

NFF welcomes strategic opening into the Middle East

NFF chief executive Tony Mahar said the federation welcomed the UAE trade deal.

“The Comprehensive Economic Partnership Agreement improves access to an important market for Australian farmers, allowing them to diversify.

“The deal reflects the global demand for Australia’s premium produce and reinforces our reputation for growing sustainable, high quality produce,” he said.

“Tariffs have been removed from key Australian exports including beef, sheep meat, dairy, oil seeds, seafood, canola seeds, nuts, honey, chickpeas and lentils.

“The deal will deliver $50 million each year in tariff savings to Australian farmers and food producers and further support trade diversification, improving their profitability and competitiveness,” Mr Mahar said.

“This agreement also marks a strategic opening into the Middle East, a growing market of more than 58 million people with a heavy reliance on food imports.

“We look forward to seeing further details of the agreement once they are available.”

Alliance welcomes animal welfare consideration

The Australian Alliance for Animals has also welcomed the inclusion of animal welfare in the CEPA.

A statement on the DFAT website confirms: “CEPA includes a firm commitment that both countries will continue to improve their level of animal welfare protection” and “provides for cooperation on this important topic.”

Australian Alliance for Animals policy director Dr Jed Goodfellow said the deal marked a global precedent as the first time a Middle Eastern nation had recognised animal welfare in an international trade agreement.

“This is something the Australian Government can be really proud of – it provides a great example of the way Australia can have a positive influence on global standards of animal welfare.

“It is very pleasing to see animal welfare recognised at this level and we hope to see the Australian Government continue this trailblazing role for animal welfare in the negotiation of future trade agreements,” Dr Goodfellow said.

The UAE was once a major destination for Australia’s live sheep trade, but is now a major importer of chilled and frozen lamb and mutton, with exports valued at $266 million in 2023.

“The successful conclusion of the agreement reinforces the increasingly redundant role of the live sheep export trade, with the UAE agreeing to the elimination of tariffs on frozen Australian sheep meat,” Dr Goodfellow said.

He said the CEPA would further incentivise the shift away from live exports towards more value-adding opportunities in local Australian supply chains.

“We would like to acknowledge the efforts of DFAT negotiators, Trade Minister Don Farrell, and the Albanese Government in prioritising animal welfare on the global stage and securing this historic outcome.”