New Zealand primary sector nervous over prospect of world trade wars

Special trade envoy Mike Petersen. Photo / Glenn Taylor, News Business

New Zealand's primary sector is viewing the rising tide of global trade protectionism with trepidation, but escalating trade tensions between the United States and China have yet to spill over into this country's main exports.

Primary sector and trade representatives welcomed last week's launch of trade talks with the EU as positive step.

At the time, European Union trade commissioner Cecilia Malmström voiced concerns about trade issues that have plagued markets in recent weeks after the US Donald Trump administration imposed steel and aluminium tariffs and the US and China stepped up their war of words.

Beef and Lamb New Zealand international trade manager Esther Guy-Meakin said the spectre of trade protectionism was a worry but it did not yet present a threat to the meat trade - New Zealand's second biggest export after dairy.

"Obviously it is pretty concerning," Guy-Meakin said. "We are worried about the rhetoric internationally and the change in sentiment towards a more anti-free trade stance."

"The red meat sector is a significant export sector and the prosperity of that relies on certainty and stability around access on international markets," she said.

"So we are worried about it, but in saying that there does appear to have been some positive reactions to that rhetoric," she said.

When Trump torpedoed the Trans-Pacific Partnership (TPP) trade agreement, Guy-Martin said countries such like Japan and New Zealand stepped up to the plate to get the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) up and running.

Guy-Meakin said New Zealand exports were not under threat.

"Obviously, the events that are happening in the States are a risk to us and a risk to global trade as well, so it is something that we are watching very carefully," she said.

America is by far New Zealand's biggest customer for beef, last year taking in just under 140,000 tonnes.

New Zealand trade envoy Mike Petersen said it appeared there had been no immediate spillover effect from trade tensions between the United States, China, the EU and Canada.

"We are deeply uncomfortable about it, but as of now we have been fortunate that has been no spillover in the products that are of interest to New Zealand," he said.

"There has been no damage to date for New Zealand but I think there is a real risk of it spreading," he said.

"It's not all doom and gloom, but the risk that the creeping uncertainty could impact on confidence and behaviours. There is a lot of nervousness around it," Petersen said.

Dairy Companies Association of NZ executive director Kimberly Crewther said the rising tide of protectionism had potential to impact on New Zealand dairy producers because it would ultimately have a negative impact on world economic growth.

"There will be no winners here," she said.

Meanwhile, trade friction continued to dominate the world's dairy news, and it is seen as another risk for the sector.

Last week China said its government was considering raising its import tariffs on US products, which included 21 dairy product lines.

The US has now raised the ante with a further unspecified US$200 billion (NZ$290 billion) of tariffs on Chinese goods, and the threat of a further US$200b if China responds again in kind.

Rabobank dairy analyst Emma Higgins said non-dairy tariffs also had the potential to significantly impact dairy markets.

In addition to dairy tariffs, US alfalfa is subject to an additional 25 per cent import tariff.

The US is China's largest alfalfa supplier with US-origin alfalfa accounting for more than 90 per cent of China's import volumes last year.

"This is primarily consumed by the large scale dairy farms in China, meaning this could hurt the domestic large scale dairy farms in a meaningful way," Higgins said.