Kiwi exporters fear sweetheart access for US farm products in new China deal

New Zealand meat and dairy exporters are hunting for detail on the new US-China trade deal, fearing it may give US food producers easier access to the Chinese market than the free trade agreement that New Zealand has invested more than a decade in negotiating and upgrading.

The US and China last night signed a so-called 'phase one' trade deal which commits China to buying some US$40 billion ($60.3b) of agricultural products as part of an agreement that has eased trade tensions between the current and emerging global superpowers and given political points to US president Donald Trump in the lead-up to the 2020 presidential election.

China has also gained from the deal, with the US Treasury this week removing its description of the country as a "currency manipulator."

The Dairy Companies Association of New Zealand and Meat Industry Association both reacted cautiously to the announcements, the details of which are contained in a 94-page document that governments and food producers the world over are still getting to grips with.

"It will be of significant concern to us if New Zealand dairy exporters were to face tariff disadvantages versus US exporters as a result of this agreement, especially as it was not possible to secure the early elimination of dairy safeguards on New Zealand exports in the recent New Zealand-China free trade agreement upgrade negotiations," said DCANZ executive director Kimberly Crewther in comments to BusinessDesk.

"Not all of the agreement's provisions relating to dairy trade have been made public, so the implications for New Zealand dairy exports remain unclear.

"We are aware that China has committed to increased purchasing of US agricultural products by US$40b annually over the next two years, and we understand the products purchased within this commitment are likely to be duty-free.

"We will be reviewing the agreement's dairy-related provisions in the public text to get a sense of any advantage they might give US exporters on issues such as audits and inspections for dairy products and infant formula and product registration requirements"

It emerged this week that New Zealand is the largest single seller of food products to China globally, with dairy products comprising the majority of that trade. However, New Zealand dairy products will continue to incur tariffs when exported to China under 'safeguard' arrangements that do not expire until 2022 and 2024.

Newly appointed MIA chief executive Sirma Karapeeva echoed the DCANZ concern about special treatment for US exporters.

"At first glance it looks like China has gone from not allowing meat from any animals treated with HGPs (hormonal growth promotants) to allowing meat from any animals as long as the residue limits for the HGPs are below a certain limit (for the US at least), but we need to do a bit more work on it to clarify," she said.

The chair of the New Zealand International Business Forum, Stephen Jacobi, told Radio New Zealand that the deal was "problematic" to the extent that it was unclear whether it was compliant with international trade agreement norms, governed by the World Trade Organisation, and because the Chinese commitment to take a particular amount of agricultural product from the US was likely to provide direct competition for New Zealand product.

New Zealand has already been disadvantaged once by the Trump administration's 'America First' approach to trade. In a partial trade deal signed with Japan late last year, the US effectively won the same rights of entry to the Japanese beef market as New Zealand gained through years of negotiation for the Comprehensive and Progressive Trans-Pacific Partnership Agreement, undercutting the value of improved access to that lucrative market for Kiwi producers.