Signing and negotiating free trade agreements is all well and good. However, signing the agreements should not only be about reducing or removing tariffs, it should also be about attending to the non-tariff trade barriers, says a meat industry leader.
Speaking at the 2014 AgResearch Meat Industry Workshop in Hamilton last week, Meat Industry Association (MIA) chief executive Tim Ritchie noted that the meat industry is responsive to the demands and standards of the large number of markets New Zealand trades with.
“So, we have developed our businesses and regulatory systems to meet the needs of the world’s most discerning customers.”
The standards include: the official regulatory requirements of the importing governments, such as food safety; the particular commercial requirements of major customers such as retailers and foodservice operators; other requirements from non-governmental organisations, religious authorities and consumer groups; and New Zealand’s own standards, including animal welfare, biosecurity and environmental matters.
“Meeting all these different standards can be challenging and, at times, costly for our industry.”
MIA recently spoke to one meat processing plant exporting to a number of different markets, who told them they had some 2,500 on-plant processes. “Their ideal number would be seven!” said Ritchie.
He pointed to a number of current examples of non-tariff trade barriers affecting New Zealand’s meat trade around the world and “raising the cost of doing business significantly.”
Indonesia, for example, requires that products must be labelled in Indonesian on the shrink-wrap on the meat, instead of on the outside of the carton, meaning that companies have to commit product to the market at the time of production. They then are subject to “considerable risk”, especially with the politically motivated market access issues over the past four years.
Mexico meanwhile requires that carcases must be packed in cardboard boxes, meaning that fewer carcases can be sent in a container at the same time, making shipping more expensive and the trade less economically viable. “Therefore removing another source of competitive commercial tension, lowering the overall return to New Zealand,” said Ritchie.
In addition, many countries require audit visits to every plant before they allow trade, rather than auditing the New Zealand system.
“This means that often one company’s ability to compete against the others is determined by a travel schedule or the ability to get the set of auditors to stay on an extra day in New Zealand.”
Finally, although New Zealand is officially recognised as one of the few countries having a negligible BSE risk, the US still requires the New Zealand industry to undertake certain processing methods, such as the exclusion of ‘specified risk materials’ (SRMs) from product destined for that market.
The government’s focus on FTAs has delivered excellent results for the New Zealand meat industry over time. For example, in China, New Zealand pays a 2.7 percent on beef, but competitors pay 12 percent; New Zealand pays 3.3 percent on lamb, while its competitors pay 15 percent. Both products will be tariff free by 2016.
“However, we can see that non-tariff barriers are raising the cost of doing business significantly and in many respects must be the focus of future international negotiations.”
Ritchie said that the MIA sees very few ‘technical barriers to trade’ that are actually technical. “If they were technical it would be relatively straightforward to sort out between expert officials. Instead they are often politically or business motivated and what is required to solve them is political will on behalf of the importing country.”
The meat industry has enjoyed a good relationship with the Ministry for Primary Industries (MPI) on a day-to-day basis, he said. “Often if a ‘solution’ to a market access barrier involves a change of process on plant, it might be more costly than the barrier itself. So it is important that MPI’s work is grounded in technical reality.”
The MIA sees greater scope for the Ministry of Foreign Affairs and Trade (MFAT), industry and MPI to work together to ensure the politics of finding a solution is lined up, said Ritchie. This underlines the importance of having a strategic ‘NZ Inc’ approach to addressing the barriers – MFAT and business have key roles to play as well as MPI, he contends.