US election’s knock on effects for NZ beef in Japan

The new President-Elect of the United States, has played the biggest Trump card of all. It’s too early to tell whether the result of the US election will impact on New Zealand’s NZ$1.7 billion worth of red meat exports, predominantly beef, to the country. While there’s no immediate impact evident, the red meat industry is  watching to see what happens with the wider trade access ripples, especially in Japan.

James Parsons, B+LNZ chairman.
James Parsons, B+LNZ chairman.

The election is an interesting turn of events, says Beef + Lamb NZ Ltd chairman James Parsons.

“New Zealand has good access into the US already for beef and sheepmeat, consequently the US is New Zealand’s largest meat market by a large margin.  We can expect that access to continue,” he believes.

According to the Meat Industry Association (MIA), nearly 202,000 tonnes of New Zealand beef, mainly for manufacturing, worth over NZ$1.3 billion was exported there in the year to end September 2016. At $74.4 million, the market also ranked sixth in the top 10 most valuable markets for co-products. The volume of New Zealand lamb exported to the US is lower, but still worth $262.8 million during the same period, Beef + Lamb NZ figures show.

Beef processing has yet to start this season and the meat companies will be gauging activity over the next month or so to work out what this latest new scenario will mean for trade.

Beef – short to medium term concern about scope for trade liberalisation

Trump is unlikely to do any freewheeling backflips on anti-Trans-Pacific Partnership (TPP) promises he made during the campaign, so it’s clear that the free trade ship is badly holed. If it does manage to stay afloat, the SS TPP might have to continue without the US, or maybe renamed to the ‘Pacific Partnership’.

Sirma Karapeeva, MIA trade and economic manager.
Sirma Karapeeva, MIA trade and economic manager.

MIA trade and economic manager Sirma Karapeeva echoes Parson’s thoughts in that she expects US market access to continue, but says the trade association’s short to medium term concerns are with the potential impact on the scope for further trade liberalisation, including ratification of the TPP agreement.

“If there is a significant delay in the ratification of  TPP, this will impact on the beef and sheep sector, not so much into the US (as the US tariffs are already relatively quite low) but most importantly on our beef exports to countries like Japan,” she says.

She points to estimates that if/[when] fully implemented, TPP would significantly reduce the current Japan beef tariff from 38.5 percent to nine percent over 16 years, providing safeguard levels are not exceeded.

“This equates to a 77 percent reduction in Japan’s tariff for beef which is the lowest beef tariff Japan would have agreed to in any trade agreement. If Japan’s tariff reductions on beef are realised, the saving to New Zealand exporters are estimated at NZ$18 million on entry into force and NZ$48 million in duties per year after 16 years.

“TPP would have put us on an equal playing field in the Japan market particularly as the free trade agreement between Japan and Australia entered into force on 15 January 2015 and now Australia now enjoys an eight percent advantage over New Zealand in the market for chilled beef and eleven percent for frozen beef.  This has already had an impact on our exports which will likely magnify as time goes on as the tariff on Australian beef imports goes down,” notes Karapeeva.

The Ministry of Foreign Affairs and Trade’s review of its trade policy direction is timely and all the more urgent in the new world order.

Unlikely to be access issues for venison

Dan Coup, CEO Deer Industry New Zealand.
Dan Coup, CEO, Deer Industry NZ.

Deer Industry NZ (DINZ) figures show the US is also the number two market for high quality venison cuts with 2,260 tonnes worth $29 million exported during the year ending August, an increase of 14 percent in volume and 21 percent in value over the period. Just under half is chilled.

While it’s too early to say, DINZ chief executive Dan Coup says there is unlikely to be any market access issues for venison. “So, any issue would relate to demand and the general health of the US economy and I’m not sure if anyone is predicting how that will go.”

Hope that common sense will prevail

The prospect of Donald Trump as US President should be a worry for New Zealand firms, said the NZ Institute of Economic Research (NZIER), last week, when it released a pre-election report ‘Trumponomics: what it means for the New Zealand economy‘. [Interestingly, this has been taken down from its website]. In it, NZIER deputy chief executive John Ballingall predicted that markets will be “bigly volatile” in the short-term, that the outlook for Kiwi exports to the US was “hairy” and Trump’s trade policies were “terrible news”.

The win signals a bumpy ride for currency markets and lost opportunities to reduce trade barriers for New Zealand products. However, financial markets seemed to have learned from the Brexit experience and managed to contain some of the damage, though volatility is predicted.

“We hope that, in reality, common sense prevails and there will be a return to a more orthodox position on international affairs,” says ExportNZ’s Catherine Beard. This would include the US taking a leadership role on trade in the TPP region.

Challenge for progress in climate change mitigation

Climate change hardly registered a mention during the post-election analysis, yet is a matter of importance that  affects the whole world, which has achieved momentous agreement post the Paris climate change summit late last year. Ministers are currently meeting at the scheduled COP22 meeting in Marrakech, Morrocco, and the aims of the President-Elect, who seems to be a climate denier, will be a hot topic of discussion. Unless people can persuade him otherwise, it looks like the rest of the world will have to get on with their ratified Paris climate change agreements, without the US. But, any gains made could be negated by the US strengthening its own fossil fuel consumption.

The learnings from the seismic event are that the neo-liberalism of the past generation has been trumpled and there’s a big shift towards blue collar workers concerns about the massive changes underway in workforces and society, globalisation and a boiling mistrust of the elite. In addition, pollsters are no longer able to get a grip on national moods with all the new social media avenues available today – all of which was prefaced by the Brexit vote in Britain in July.

The certainty is with Trump taking his seat behind the big desk in the Oval Office on 22 January, 2017 will be a bumpy ride for New Zealand, especially alongside Brexit.

Strap in.

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