By Susan Kilsby, an agricultural economist with ANZ New Zealand
At long last, our primary producers have something to celebrate.
After years of negotiations, the New Zealand-European Union Free Trade Agreement finally came into effect this month, on May 1.
It effectively opens the door to Europe for our producers, giving them improved access to our fourth largest trading partner and a market of 450 million consumers in 27 countries.
It will make New Zealand products more competitive in Europe and is expected to grow the value of our exports by as much as $1.8 billion per year by 2035.
An immediate annual boost of around $100 million comes from cuts to tariffs – charges paid at the border – on the vast majority (91%) of our exports.
How quickly the door will open does vary between industries. For some it has been flung wide open, but for other industries, such as dairy and meat, access will improve more slowly.
Our exports of kiwifruit, onions and apples will see tariffs virtually eliminated, immediately saving about $45m a year.
Fish and seafood exporters will benefit to the tune of almost $20m a year, while our wine industry will save $5.5m annually.
Over the next seven years these preferential tariffs will increasingly cover more of our imports, until almost all (97%) are included.
In addition to the tariff cuts the agreement streamlines the process of exporting our goods to the European Union, simplifies customs procedures and reduces regulatory hurdles.
New quotas for dairy and meat are likely to be worth over $600m per year to our exporters if fully utilised.
Although there was some disappointment in the dairy and red meat industries that the quotas were not higher, any improvement should be viewed as a win, given the EU’s longstanding protection of its producers, especially its farmers, from outside competition.
While our trade negotiators always aim high it was always going to be a challenge to negotiate access to 450 million European consumers when we only have 5 million consumers to offer in return!
The real opportunity for NZ exporters lies in ensuring we export high-quality products, focus on “brand New Zealand” and aim for the high-price end of the European market.
This will help make our primary producers more resilient against external shocks, such as fluctuations in commodity prices or geopolitical tensions.
Consumers are increasingly looking for goods that have been produced in a natural and sustainable way, which is what we do in NZ. We must play to our strengths and sell our uniqueness to the world.
Under the FTA, New Zealand mānuka honey gets an immediate reduction to tariffs, saving exporters about $5.4m a year.
The deal is sweetened further by the recognition that the word “mānuka” can only be used for the Leptospermum scoparium tree grown in Aotearoa, and derivative products such as honey and oil.
This means health-conscious EU consumers can trust they are getting genuine honey produced in Aotearoa. It’s a big win for the honey industry, and will help it achieve its goal of doubling honey exports, to be worth more than $1bn a year, by 2030.
The FTA also makes a commitment for both NZ and the EU to promote trade that makes a positive contribution to addressing emissions reductions and climate change.
This will further incentivise the development of tools and technologies to mitigate emissions and will help both NZ and European farmers to access new technology. It also highlights the need to be able to measure and reduce emissions throughout the supply chain, from farms right through to the consumer.
For the public-private joint venture AgriZeroNZ – which ANZ has invested in – this is great news and is likely to help drive further investment in this sector.
At a time when many of our producers are under pressure from high costs and low returns, this FTA serves to highlight the important role trade negotiations play.
