Fonterra welcomes trade deal with China

Fonterra chairman Henry van der Heyden has welcomed the New Zealand/China trade deal despite its products facing the biggest delays in tariff removals.

Fonterra is the single biggest exporter into China mainly exporting milk powder and that is the most protected of the goods covered in the deal.

Under the deal tariffs on butter, liquid milk and cheese will be phased out over 10 years (2017), while milk powders will face a 12 year phase out up to 2019.

Mr van der Heyden said he had just seen the numbers and had yet to analyse the impact, but"the facts are that tariffs are going down to zero in 10 to 12 years that has got to be positive".

Fonterra faced on average 10 to 15 percent on exports to China with milk powder at the top end of the range.

"We would love them to go down in a shorter time period but at the end of the day we have to be realistic. I think it is actually a very good deal."

A five-year phase out would have been ideal, but farmers had to be realistic about China's sensitivity over milk powder exports.

"That is the product with the longest time frame and you would expect that.

The fact that we have got to a stage where there will be zero tariffs for a time period... you got to give it a tick."

Mr van der Heyden said it was too early to say what the deal would mean for its joint ventures in China, but he felt the deal overall was good for New Zealand.

China is Fonterra's fourth largest market growing to $300 million from virtually nothing over a five to 10 year period.

Exports had peaked in 2004 but had been flat ever since.

Mr van der Heyden said the recent plateau in sales was more effected by commodity prices than events in China.

He was unable to comment about parts of the deal which allow China to slow down the tariff phase out if it does harm to their farmers or their markets are flooded with New Zealand milk.

* Ian Llewellyn is in Beijing with the assistance of the Asia New Zealand Foundation.


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