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Home / Business

NZ trade deal with Japan makes US dairy exporters jittery

By Andrea Fox
Herald business writer·NZ Herald·
1 Feb, 2019 02:56 AM3 mins to read

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New Zealand trade deals continue to make US dairy exporters nervous.

New Zealand trade deals continue to make US dairy exporters nervous.

New Zealand's first trade agreement with Japan continues to rattle our dairy export rival the US, with a new internal report forecasting "critical" losses in the billions of dollars to competitors if the US doesn't forge a trade treaty of its own with Japan.

The US Dairy Export Council last month sounded the alarm about the Comprehensive and Progressive Trade Agreement for Trans-Pacific Partnership (CPTPP) to which New Zealand and Japan are signatories.

The council has followed that up with the release of an economic impact study on the potential fallout on the US dairy export industry from the CPTPP, which came into effect on December 30, and a Japan-EU Economic Partnership Agreement (JEEPA) which has just taken effect.

The report by Tokyo-based Meros Consulting said US dairy competitors could seize US$1.3 billion (NZ$1.9b) in sales from the American industry in the next 10 years, climbing to US$5.4b (NZ$7.8b) once the two trade agreements are fully implemented over 21 years.

New Zealand and Australia are Japan's two largest dairy suppliers.

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Japan is the fourth largest dairy market for the US, with annual sales of about US$291 million, accounting for 5 per cent of total US dairy exports, almost half of it cheese.

The Meros report said all the major dairy countries exporting to Japan, except the US, are included in one of the two new trade agreements.

US President Trump withdrew from Trans-Pacific Partnership trade talks, the precursor to CPTPP, in 2017.

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The report says New Zealand and Australia have "limited capacity to increase their supply" to Japan, the second biggest importer of cheese in the world after the UK. As a result Japan had looked to the US and the EU for extra supply, it said.

"Japan's cheese imports are expected to show a 1.6-fold expansion over the next 10 years under CPTPP/JEEPA. If the US had the same market access as its competitors, US share could grow from 13 per cent in 2017 to 24 per cent in 2027, and US cheese export value to Japan could show a 3.3-fold expansion.

"However .... the CPTPP and JEEPA will put the US at significant disadvantage against other dairy suppliers and the US will lose critical market share if the US remains without a comparable agreement with Japan," said the report.

New Zealand is the eighth biggest milk producer in the world. Japan is its fifth largest dairy export market with an annual value of about $450m.

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Responding to the report, the US Dairy Export Council and the US National Milk Producers Federation said: "These agreements give our competition a significant economic advantage that will be enable them to increase their market share in Japan...."

The report underscored the need for the Trump administration and US congress to secure a strong trade treaty with Japan, they said.

Last month the council said dairy competitors including New Zealand were "aggressively" pursuing new trade deals in key US export markets.

The CPTPP was signed by 11 Asia-Pacific countries, which collectively were the destination for 30 per cent of New Zealand export goods (NZ$16.7b) last year.

Six, including New Zealand, Australia, Canada and Japan have ratified it, allowing it to come into force on December 30.

The Government says the agreement has the potential to deliver about NZ$222m of tariff savings a year once fully in force.

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Tariffs will be eliminated on all New Zealand's exports to CPTPP economies with the exception of beef to Japan and a number of dairy products into Japan, Canada and Mexico, where access is improved through partial tariff reductions and duty-free quotas.

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