16 Nov 2014

Business groups praise free trade deal

6:39 pm on 16 November 2014

Business groups are praising a free trade agreement with Korea, saying it has saved New Zealand dairy and meat from being squeezed out of the market.

The deal, which comes after five years of talks, was announced at the G20 Summit in Brisbane, and would see duties on most exports eliminated within 15 years of signing.

Korea FTA

NZ's John Key and South Korea's Park Guen-hye Photo: RNZ / Patrick O'Meara

Under the deal, tariffs on kiwifruit would be phased out in six years, most dairy products in ten years, and beef over 15 years.

Exporters would save an estimated $65 million in duties in the first year alone.

But some goods, like milk powder, would still incur some levies.

The New Zealand International Business Forum said the Government negotiated hard to get the best deal possible for New Zealand industries.

Its chairman Sir Graeme Harrison said New Zealand meat exports would still be behind the United States, but the agreement meant better access to the market, and increased competitiveness.

"It's a very significant market for items such as beef and items such as kiwifruit, I mean really we were out of the market, now New Zealand is going to be able to ensure that we're level pegging - it's a good one for kiwifruit."

Dairy Companies Association Malcolm Bailey chairman said it brought New Zealand to at least parity with its competitors which already had an FTA with Korea, as well as creating new opportunities for Trade.

Trade Minister Tim Groser said, like other nations that have free trade agreements with South Korea, it had to compromise on milk powder tariffs.

However, he said that should not hurt dairy farmers, as Chinese demand was so strong.

Mr Groser said he expected a significant expansion of New Zealand exports to South Korea over the next decade as a result of the agreement.

Trade Minister Tim Groser.

Trade Minister Tim Groser Photo: AFP

He added that, while the agreement was a good deal, it would be tough getting it ratified due to anticipated opposition from Korea's powerful agricultural lobby.

Talks to achieve the deal resumed late last year after a four-year hiatus, with Korea's reluctance to open its agricultural markets too much as a main sticking point.

Two-way trade between the two countries was worth $3.6 billion dollars in 2013.

Exporters pay $229 million in tariffs each year to Korea, including 89 percent on butter, 45 percent on kiwifruit and 40 percent on beef.

Mixed reaction from industry

Beef + Lamb New Zealand chairman James Parsons said New Zealand had been squeezed out of the South Korean market due to competition from countries that already had free trade agreements in place.

Mr Parsons said trade volumes to South Korea had dropped in recent years.

"What was going to happen is we were just slowly going to get squeezed out of the market because our beef was just too expensive by comparison," he said.

"Thirty-six million dollars is what we paid in tariffs last year, just on beef. There are other sectors too that were paying significant tariffs.

"We see this as a really good deal and we're very pleased to get this across the line."

Winemakers are also praising the deal, saying it represents a big step forward for exporters.

New Zealand Winegrowers chief executive Philip Gregan said wine exports to South Korea make up around $2 million of the more than $1 billion export total.

But he said having tariffs removed would be a big boost for the industry and it was now up to winemakers to take advantage of that.

Stags stand together in a deer farm in central Otago (January 2014).

Frozen deer velvet makes up three-quarters of New Zealand's $20 million in velvet exports to South Korea. Photo: PHOTO NZ

But Deer Industry New Zealand chief executive Dan Coup said frozen deer velvet, which makes up three-quarters of the country's $20 million worth of velvet exports to South Korea, had been left out of the agreement.

He said exporters had worked hard to build a market for deer velvet in South Korea.

"We've had really high hopes the whole time that we would have some relief on the 20 percent tariffs we pay on our products in there," he said.

"And it turns out that at the end of the negotiation, that's not going to change for our main line of product."

Mr Coup said the industry was at a loss as to why frozen deer velvet had been excluded.

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