Friday, December 8, 2023

Red tape takes its pound of flesh in FTAs

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Meat industry flags creeping protectionism in costly non-tariff measures.
BLNZ chief executive Sam McIvor says the ‘non-tariff’ price of doing business comes with costs that cannot be ignored.
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The meat industry is calling for the use of existing trade agreements to challenge red tape in overseas markets as new research says non-tariff measures are costing exporters $1.5 billion a year.

The cost of non-tariff measures is significantly higher than the nearly $200 million in tariffs paid by the sector, according to research by economic consultancy Sense Partners, commissioned by the Meat Industry Association (MIA)  and Beef + Lamb NZ (BLNZ),  and included in the two bodies’ latest biennial Barriers to International Trade report. 

When converted to a tariff rate equivalent, it is equal to the sector paying an 18.7% tariff on all its exports – more than double the global average. 

It is the first time the cost of non-tariff measures have been calculated for the meat industry, although others have totted up the cost for the agricultural sector as a whole in the past.

Non-tariff measures range from restrictive shelf-life limits for chilled meat and cumbersome plant licensing protocols that can drag out access to export markets for years, to a reluctance by foreign food safety regulators to accept perfectly safe innovations such as hot boning technology.

MIA chief executive Sirma Karapeeva said tariffs paid by exporters had reduced from $366m in 2010 to $193m last year as more tariff-busting free trade agreements came into force.

However, as successful as these deals have been in lowering the burden of tariffs, they have struggled to rein in red tape in those same markets even though those agreements often contain protocols for doing so.

Governments are becoming increasingly protectionist, and non-tariff measures are increasingly their weapon of choice for shutting out competitors.

“As a country we need to ensure that our trade strategy is responsive to this changing environment and a central part of this is ensuring that we get the maximum value out of the free trade agreements we already have in place,” Karapeeva said.

BLNZ chief executive Sam McIvor said the proliferation of non-tariff measures should be seen in the same light as the recent surge in on-farm inflation, with real costs to farmers.

“With on-farm inflation almost double that of general CPI, and average farm profits in the sheep and beef sector forecast to fall 30% this year, these are not insignificant costs that can be ignored.”

McIvor said increasing scrutiny of the environmental record of its trading partners by the European Union has the potential to create a whole new class of non-tariff measures for NZ exporters to contend with.

These include supply chain documentation requirements to be introduced later this year that will compel exporters to prove they have not contributed to global deforestation.

NZ isn’t being targeted by the EU but may be caught in the crossfire with others with lower environmental standards, such as South American beef producers.

“Ensuring NZ farmers’ sustainability credentials are well understood by government officials in key markets, particularly the EU, is critical to prevent a flood of new non-tariff barriers hitting the NZ red meat sector,” McIvor said.

In an apparent nod to NZ’s recent legal challenge against Canada over its failure to uphold pledges it made to open up its dairy market to imports in the Comprehensive and Progressive Trans Pacific Partnership trade agreement, McIvor called on the government to “leverage all aspects” of its trade agreements “to the fullest extent”.

“Tackling tariff and non-tariff barriers requires government-to-government engagement, which is why we are calling for it to top the trade priority list,” he said.

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