Primary sector gives its verdict on NZ-EU Free Trade Agreement

The primary export sector has given its verdict on the latest EU trade deal signed overnight. Photo / File

The New Zealand primary sector has given its verdict on the new European Union free trade agreement.

The meat industry was less than impressed, as was the dairy sector, but kiwifruit, onion and wine growers treated the deal signed overnight as a win.

New Zealand exported $3.9 billion worth of goods to the EU in 2021.

For comparison, the EU bloc of countries and Asean bloc accounted for 6.4 per cent and 10.1 per cent, respectively, of New Zealand's exports over the same period, Westpac said.

The bank's senior agri economist Nathan Penny said he expected the goods trade benefits of the deal to prove modest for "New Zealand Inc".

The Ministry of Foreign Affairs and Trade estimated tariff savings would exceed $100m per year when the trade deal comes into force, rising to $110m after seven years.

Penny said the trade concessions made were largely on the EU's side.

Catherine Beard, director of advocacy at BusinessNZ, said the agreement fell short for meat and dairy but horticulture, wine, honey and seafood exporters would be pleased.

Federated Farmers president and trade spokesperson Andrew Hoggard said the deal was "a slap in the face for New Zealand farmers".

"That the Europeans' protectionist mindset on livestock products remains entrenched is sadly not a surprise but the very small quotas agreed are considerably worse than we expected," Hoggard said.

Meat

The Meat Industry Association said it was a disappointing outcome and one that
would continue to put growers at a disadvantage in their third largest export market.

The deal allowed only a small quota of New Zealand beef into the European Union - 10,000 tonnes into a market that consumed 6.5 million tonnes of beef annually - far less than the red meat sector's expectations.

"We are extremely disappointed that this agreement does not deliver commercially meaningful access for our exporters, in particular for beef," Sirma Karapeeva, chief executive of the Meat Industry Association, said.

Sam McIvor, chief executive of Beef and Lamb NZ, said the outcome was "difficult to reconcile" given the longstanding relationship between the EU and New Zealand.

"It's difficult to understand why a more ambitious outcome wasn't possible."

Dairy

The Dairy Companies Association of New Zealand (DCANZ) said the deal left the EU market "98.5 per cent closed" to key New Zealand dairy products.

"The combination of very small quota volumes relative to the market size and trade-restrictive in-quota tariffs has this deal falling well short of being commercially meaningful for the dairy industry," DCANZ chairman Malcolm Bailey said.

The deal was seen as positive for kiwifruit but negative for dairy. Photo / File

New Zealand's biggest exporter, Fonterra, said it was a disappointing result and reflected the degree of protectionism which continued to afflict dairy trade globally, and particularly amongst the EU dairy industry.

"The agreement provides some small pockets of access for certain products over time, but overall commercial opportunities for products such as butter, cheese, milk powder and key proteins are constrained relative to the size of the EU market by a combination of small permanent quotas, in-quota tariff rates, and quota administration requirements," Fonterra said.

At the same time, the outcomes for the EU on geographical indications (GIs) meant Fonterra, alongside other New Zealand cheese producers, would no longer be able to use the term '"feta" after a transition period of nine years.

Fonterra, however, retained the ability to use the terms Parmesan and Gruyere.

Kiwifruit

Kiwifruit exporter Zespri welcomed the deal, which included removal of tariffs on New Zealand kiwifruit exports to the EU upon entry.

Zespri paid around $46.5m in tariffs on sales of more than $1 billion into the EU last season.

Chairman Bruce Cameron said the agreement would help Zespri meet the growing demand for its fruit in Europe.

"The FTA will set us up to expand our exports to Europe, providing more European consumers with the highest-quality Zespri Kiwifruit and helping deliver strong returns for our growers," he said.

Onions

The $189m onion export industry gave its seal of approval for the deal, which meant the complete elimination of tariffs - worth $6m annually - on onion exports to the European Union (EU) when it comes into effect.

The EU is the number one market for New Zealand onion exports.

"The elimination of tariffs - from 9.6 per cent to zero - puts the New Zealand onion industry on a level footing with competitors such as Chile and South Africa," Onions New Zealand chief executive James Kuperus said.

Onions were an important rotation crop for vegetable growers so the FTA would benefit growers from South Auckland to Canterbury, he said.

The FTA also addressed technical barriers to trade, he said.

In the year to March 2020, the New Zealand onion industry contributed $189m to GDP and employed 1762 people.

Wine

Philip Gregan, CEO of New Zealand Winegrowers, said the deal would help remove technical barriers to trade, and reduce burdens from certification and labelling requirements.

"It will also support future growth in the market, and encourage exporters to focus on the EU," said Gregan.

The EU is a significant export market for New Zealand wine, with over 20 million litres of wine exported, valued at over $150m over the past 12 months.

"The EU's complex rules can make market access difficult for winegrowers, so it is encouraging to see some easing of restrictions in this area. We look forward to publication of the full text of the agreement so that we can examine the agreement in more detail."

Tariffs on NZ wine would be lifted as soon as the agreement took effect.

The Government estimated this would save NZ wine exporters $5.5m annually.