1 Jul 2022

Meat and dairy industries very disappointed with New Zealand European Union trade deal

12:19 pm on 1 July 2022

The meat and dairy industries are very disappointed with the outcome of the free trade deal struck between New Zealand and the European Union saying it falls far below their expectations.

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Photo: 123 RF

The agreement which covers 27 EU member states was unveiled by Prime Minister Jacinda Ardern and President of the European Union Ursula von der Leyen in Brussels.

Dairy Companies Association of New Zealand chairperson Malcolm Bailey said the association was very disappointed in the outcome.

"We will get very little volume and some of that volume will still be constrained by in quota tariffs and we're yet to know the full extent of the constraints imposed by quota market administration which could be inhibiting the usability of some of that volume."

There is some modest opening up of trade initially, but the government's calculations seriously overestimate the benefits, he said.

"I say that because we're selling all those tonnes of product somewhere in the world already and it's only the increment in price that we could achieve from selling into the EU which is a benefit from the FTA and it's nothing like the big number that the government has indicated."

New Zealand would be able to sell cheese into the EU but its share of the market would be tiny, he said.

That was disappointing because while the European Union had about 15 percent share of the New Zealand market, New Zealand would only have about 0.14 percent of the EU market, Bailey said.

The EU deal was completely different from the trade deal New Zealand has with China because "it remains tightly constrained and the ability to grow will not be there beyond these quite small volumes", he said.

In terms of use of trade names, Bailey said there was what is called grandparenting of some names which meant existing New Zealand users of the names could continue to do so.

However, this was not the case with feta cheese and New Zealand producers would no longer be able to call it feta.

"In the case of feta there will be a phase out, so that's going to hurt.

"When we come to the conclusion that the meaningfulness in commercial terms of this deal are modest, we have to factor in what we lose there as well and that's very hard to quantify, but overall it's very disappointing."

It was good that some other sectors such as seafood, kiwifruit and mānuka honey did well out of the deal, but the country's "big engines for export growth still remain dairy and meat", Bailey said.

"When we're looking at how do we try and close the trade imbalance between New Zealand and the European Union which is heavily in their favour, you know circa $4 billion of exports from New Zealand versus $9 billion of imports from the EU into New Zealand, it's really the big sectors that can close that gap and you know we're the ones that have had a very very modest outcome."

Meat Industry Association chief executive Sirma Karapeeva who is in Brussels for the negotiations said the deal falls far below the expectations of meat exporters.

"The very small quota that we have been allocated or given as part of this deal is only 10,000 tonnes and to put that in context the European market or the European consumers consume 6.5 million tonnes of beef annually, our 10,000 tonne quote equates to about 0.1 percent of that consumption."

"I don't see how that can be classified as commercially meaningful access or an access that has any growth opportunities going forward."

Karapeeva paid credit to the New Zealand negotiators despite her disappointment at the deal's outcome for beef and dairy.

The EU negotiators are very tough and have a different mindset to New Zealand's negotiators and view trade from a very different perspective, Karapeeva said.

"I think our negotiators did an exceptionally good job of getting to this point, and having been on the ground for the last week or so I know that they have worked tirelessly, very long hours, very tough discussions to try and land this deal which in fact they have landed."

Unfortunately the European's protectionist mindset was very firm and that could not be shifted, she said.

Trade Minister defends deal

Trade Minister Damien O'Connor acknowledged that the trade deal was not at the high end of meat and dairy exporters' expectations.

Many other sectors were getting tariff elimination, particularly across horticulture, that would offer hundreds of millions of dollars of benefit, he said.

"Yes in beef and dairy not their expectations, but we've opened up markets in butter, in cheese and milk powders that have been non-existent for them, that is they've been there in theory but commercially they haven't been available."

Not all these benefits were available immediately, he said.

"But after seven years over $600 million of opportunities and benefits for those two sectors - that's not to scoff at."

There were still some tariffs that the government would have liked to see removed in beef and dairy, O'Connor said.

"But we couldn't negotiate those out exclusively, we negotiated them all done and it has provided greater access for those two sectors in particular."

Tariffs were immediately removed in other areas though including kiwifruit, seafood, onions and honey, O'Connor said.

The government had battled hard for beef and dairy in the negotiations, but they were very sensitive areas in the EU, he said.

"The 27 (EU) countries have all expressed views through the EU that they don't want to completely liberalise access to these agricultural markets, but they have provided greater access and that's huge progress in a market like this that's highly protected."

The deal puts New Zealand's traditional sectors in a good position over time, but also those sectors which are growing, O'Connor said.

The negotiations were complex and took four years to complete and New Zealand did not get everything it wanted, he said.

"But it opens the door for huge opportunities, as I say in dairy, in meat as well as the horticulture sectors and services, so this is a comprehensive trade deal of huge value."

There is a clause saying neither party will deviate from the Paris Accord for climate change for trade advantage and New Zealand would be taken to task on that if it did, O'Connor said.

New Zealand is not a large market but it shares many of the values espoused by the EU such as better animal welfare standards, emissions reduction and better standards of labour management, he said.

They were considerations through the agreement, he said.

Zespri and onion growers welcome deal

Former trade negotiator and independent chair of Port Company CEO Charles Finny said on balance he was positive about the deal, but he felt the meat and dairy industry sectors' pain.

"I have to say for everyone else, you know for apples, kiwifruit, onions, wine, honey, fish, industrial products and actually for the services sector - this is a very good deal and the negotiators do need to be congratulated for that."

Finny was dubious the deal would get across the line, but said he understood that the government may have changed its negotiating mandate to agree to go for a less ambitious deal on dairy and meat allowing it to go through.

Kiwifruit exporter Zespri is welcoming the deal which will immediately eliminate all tariffs on kiwifruit exports into the bloc.

Zespri chairman Bruce Cameron said the group paid around $46.5 million in tariffs, on sales of more than $1 billion into the EU last season.

The agreement would allow Zespri to expand its exports to Europe - which was already one of the company's largest markets, he said.

Zespri already had partners with growers in Italy, France and Greece and the deal would help to create more job opportunities there, he said.

Onions New Zealand chief executive James Kuperus said the industry group had also welcomed the deal.

It would put the New Zealand onion industry on a level footing with competitors such as Chile and South Africa, he said.

The trade deal would help the onion sector with its goal to scale export revenue from about $150 million a year to $210m, in the next five years, he said.

New Zealand feta still up for re-brand under deal

Oamaru cheese company Whitestone managing director Simon Berry said the new trade deal with the EU was not as restrictive as the industry initially feared.

Under the deal, cheese exporters will be able to continue using the names gouda, mozzarella, halloumi, brie and camembert - but feta is off the table. Producers who have been using the name 'gruyere' for five years before the deal was signed can continue to.

Berry said it was a relief that only feta would need re-branding.

The re-brand could create a stronger, unique identity for New Zealand cheese on the international stage, he said.

But New Zealand Specialist Cheesemakers Association board member Daniel Shields said losing the feta name could have huge impacts on producers.

It was concerning that the EU had the right to restrict new cheese names at a future date and it created uncertainty, he said.

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