It’s been a momentous weekend for free trade and the red meat sector, which has welcomed two successes for its export trade. Firstly, a nail-biting on-again, off-again run towards completion of the Trans-Pacific Partnership between the 11 remaining nations involved in the pact. Secondly, a World Trade Organisation (WTO) ruling on Friday against an Indonesian appeal against its non-tariff trade barriers that have impacted on New Zealand beef exports to the market since 2011.
Drama followed the TPP-11 around the sidelines of the 29th Asia-Pacific Economic Co-operation (APEC) Summit in DaNang, Vietnam. with last minute amendments including those from New Zealand’s new coalition government being the subject of fast and furious negotiation between the 11 nations involved: Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Mexico, Canada and Japan. After resolution of an earlier dispute from Vietnam, confusion abounded at the first attempt to sign the deal, which saw 10 countries ready to sign but no Canadian delegation.
What has emerged from the trade talks is a decision by the 11 countries to move ahead with a framework for the Trans-Pacific Partnership Agreement, which is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Beef and Lamb New Zealand (B+LNZ) and the Meat Industry Association (MIA) have welcomed the announcement
Sam McIvor, B+LNZ chief executive, says the CPTPP will deliver significant gains to the sector.
“New Zealand’s regions are hugely reliant on revenue flowing as a result of exports. Trade is the lifeblood for our sector, which in turn creates jobs and supports communities around New Zealand.
“Over 90 percent of New Zealand’s sheepmeat and 80 percent of our beef production is exported. These exports support around 60,000 jobs on farms and in processing companies, and a further 20,000 jobs in supplying sectors.
“This deal simultaneously opens up multiple markets in Japan, Mexico, Peru and Canada and puts us on a level playing field with other major red meat exporters in the Asia-Pacific region, such as Australia and the European Union.
Meat Industry Association chief executive Tim Ritchie, says since Australia’s 2015 trade agreement with Japan, their beef exports to Japan have increased by $NZ1 billion, while New Zealand’s have fallen by $NZ30 million.
“Demand in Japan for beef has been growing, but we have lost significant market share. The situation got tougher in August when Japan imposed a World Trade Organisation safeguard on frozen beef, raising its tariff on New Zealand exports from 38.5 percent to 50 percent, while Australia only faces a tariff of 22 percent. Since the safeguard was applied, our frozen beef exports to Japan have fallen by 70 percent.”
The announced agreement captures all of the market access gains of the previous TPP agreement. However, it also addresses some of the concerns of the New Zealanders around TPP – the preservation of PHARMAC, foreign ownership of land and housing, and freedom to regulate for our own environmental protection.
The New Zealand International Business Forum (NZIBF) has also welcomed the news.
“Our new Government has succeeded with CPTPP, not only in preserving elements of the original agreement, particularly in terms of improved market access to Japan, Canada and other markets, but has also softened ts impact in areas that were previously contentious in New Zealand, NZIBF executive director Stephen Jacobi says.
The crucial market access package of TPP remains unchanged, says Jacobi, but other elements including intellectual property (copyright and patents) had been suspended. The Government had also successfully satisfied its concerns related to the purchase of residential property by overseas tax residents and investor state dispute settlement (ISDS).
“This is a major achievement – CPTPP is essentially a new agreement which recognises that aspects of the previous agreement had been problematic for some in civil society, while not diminishing the economic impact and the new opportunities created for New Zealand exporters.”
Meanwhile, the sector is also celebrating the release of a WTO Appellate Body report which upholds the initial findings of the New Zealand-led dispute against Indonesia on a range of agricultural non-tariff barriers.
Ritchie says these barriers have impacted on New Zealand beef exports to Indonesia and have contributed to a decline of over 80 percent since 2010 – costing the sector an estimated $1 billion in lost trade.
“We welcome the Appellate Body’s confirmation Indonesia needs to take action to bring these measures into conformity with global trade rules.
“This reinforces the importance and value of the WTO in disciplining pervasive non-tariff barriers that plague the industry.”
McIvor says the sector recognises taking a WTO case is costly both financially and from a resourcing perspective.
New Minister for Trade David Parker also welcomed the announcement: “This decision from the WTO’s highest dispute settlement body is an important result for our agricultural exporters and should pave the way to grow New Zealand exports to the Indonesian market.”
He pointed to New Zealand’s strong and mutually beneficial relationship with Indonesia.
“This trade disagreement is only a small part of that broader bilateral relationship.
“Indonesia’s approach to these WTO hearings has been exemplary. The tone has been collegial and constructive. In the proceedings Indonesia also underlined the longstanding and mutually respectful relationship that Indonesia enjoys with New Zealand and a desire to strengthen this important relationship.
“I look forward to working with my Indonesian counterpart over the coming months to finalise resolution of this long-standing trade issue,” says Parker.
New Zealand beef was one of the exports most affected by more than a dozen trade barriers. According to the Ministry for Foreign Affairs and Trade (MFAT), these had prohibited all imports of beef, secondary cuts and offal and also restrictions limiting the sale of imported prime beef to hotels, restaurants and caterers, meaning imported beef cannot be sold directly to consumers through key retail outlets, such as supermarkets and traditional markets. Another requirement was that importers had to buy a certain percentage of domestic beef in order to import from overseas. An import licensing regime was also in place effectively closing the Indonesian market to imports for several months a year. This is due to rigid licence application windows at the beginning of licensing semesters that don’t account for the time it takes to prepare and ship product to Indonesia.
New Zealand and the US initiated the case in 2013 in response to a range of next-generation agricultural ‘non-tariff’ barriers applied by Indonesia to imports since 2011. Exports fell by over 80 percent into what was in 2010 New Zealand’s second largest beef export market by volume, worth $180 million in trade a year. The accumulated trade impact on the beef sector alone is now estimated at between $0.5 and $1 billion.
Fourteen other WTO members were also third parties in the dispute, including: Argentina, Australia, Brazil, Canada, Chinese Taipei, the EU, India, Japan, Korea, Norway, Paraguay, Singapore and Thailand.
New Zealand’s beef exporters will be looking forward to looking forward to resuming trade with the populous nation.
“We congratulate Prime Minister Ardern, Deputy Prime Minister Peters, and Minister Parker on their early milestones on trade, and thank the many officials who have been involved in both the TPP negotiations and the WTO case,” says Tim Ritchie.