There is an opportunity to further develop the New Zealand meat industry’s mature relationship with the European Union (EU), following this week’s announcement that a possible free trade agreement (FTA) with the trading bloc is on the cards.
New Zealand and the European Union (EU) agreed to take steps to deepen their relationship at a meeting earlier this week in the Hague. The news has been welcomed by the meat industry and also the New Zealand International Business Forum.
Prime Minister John Key met with the President of the European Commission, José Manuel Barroso and President of the European Council Herman von Rompuy during the Nuclear Security Summit.
Making the announcement, Key noted that the EU is New Zealand’s third largest trading partner with over $16 billion in two-way trade of goods and services.
“It is also a long-standing close friend and partner. We share common interests, values and history.
“However, we can’t afford to be complacent, especially given the shift in economic activity to Asia. We’ve agreed to consider our options for refreshing our trade and economic relationship over the next 12 months.”
For the first time, the EU has agreed to consider an FTA as one such option – a significant development, said Key, adding that the issue is now on the agenda.
“We’re going to come back to this in 2015 to take decisions on what to do next,” he said Key.
“Our relationship is broader than just trade. We’re working to conclude a new Partnership Agreement, which will provide a blueprint for all aspects of our relationship well into the 21st century.”
The EU’s decision to upgrade its diplomatic mission in Wellington is a positive demonstration of its commitment to the relationship, said Key, who is looking forward to welcoming the EU’s first resident Ambassador in Wellington.
News welcomed by NZIBF
The New Zealand International Business Forum (NZIBF) has also welcomed the news that an FTA is to be further explored.
“New Zealand has important interests in the EU and we have for some time seen the need for a stronger framework for our significant trade and economic relationship,” says NZIBF chairman Sir Graeme Harrison.
Taken together, the 28 EU member states are New Zealand’s third largest trading partner and a single market of over 500 million consumers.
Sir Graeme said that there were opportunities to expand business in agriculture and food as well as technology; services including tourism and education; niche manufacturing; and research and investment.
“As the EU negotiates FTAs with other partners around the world, New Zealand also runs the risk of being cut out from future growth in the market arising from the EU’s improving economy.”
Sir Graeme congratulated the Prime Minister and the Presidents of the EU Council and Commission on their announcement from Brussels, noting this was the logical next step from negotiating a new political framework agreement with the EU.
Opportunity to further develop trade relationship “useful”
From the meat industry’s point of view, the opportunity to further develop the trade relationship could be very useful, says Meat Industry Association chief executive Tim Ritchie.
The trade relationship between New Zealand and the EU is already very mature, he notes. “However, if any FTA were to allow further development – such as full recognition of New Zealand’s regulatory system for food production, including animal welfare, then it could be very useful indeed,”
Ritchie cannot see any inherent threats to the New Zealand meat industry in the announcement to negotiate.
Exports of New Zealand sheepmeat and goatmeat are limited under the GATT Uruguay Round of WTO talks (and subsequent enlargement of the EU to the current 28 member nations) to 228,254 tonnes (carcase weight equivalent or cwe) annually at a rate of zero duty. Any amount over that is subject to an out-of-quota tariff rate of 12.8 percent + €90.2-311.8 per 100 kg/net.
“In recent years, the quota has been under-utilised for sheepmeat and goatmeat as other markets are able to pay better prices and because of declining supply out of New Zealand in general,” says Ritchie.
However, the meat industry is constrained by a very small ‘high quality beef’ quota which is filled early each year, he says. Just 1,300 tonnes (cwe) of New Zealand beef are allowed to be exported to the EU annually and that attracts a 20 percent ad valorem duty. An out-of-quota tariff rate of 12.8 percent, plus €141.4-304.1 per 100kg/net also applies.
“We would certainly be looking to get fully tariff-free access to that segment of the market. It is estimated that New Zealand paid roughly $77 million worth of tariffs in 2012 in the EU – mostly on frozen beef.”
While the WTO’s Doha Round of trade talks are currently on the backburner, the MIA thinks it’s likely that once the Trans-Pacific Partnership (TPP) and the EU/USA Transatlantic Trade and Investment Partnership (TTIP) FTAs are completed, there will be a move back to Geneva to try to deal with the domestic support (subsidies) issues. However, this will require TTP and TTIP to be comprehensive FTAs, says Ritchie.