Both the Dairy Companies Association and the Meat Industry Association are examining the 94-page agreement to see what impact it will have.
The phase-one deal between US President Donald Trump and Chinese Vice-Premier Liu He means an extra US$32 billion of US agricultural products will be bought by China by December 31 next year.
Dairy Companies Association executive director Kimberly Crewther said its implications for New Zealand’s $5b dairy export market are unclear because not all its provisions relating to dairy have been made public.
The association will review the deal to get a sense of any advantage it might give US exporters for dairy products and infant formula and product registration requirements, she said.
“While NZ already has a free-trade agreement and a very positive dairy trade relationship with China a large portion of NZ dairy exports will continue to incur tariffs in the Chinese market until dairy safeguards expire in 2022 and 2024.
“It will be of significant concern to us if NZ dairy exporters were to face tariff disadvantages verses US exporters as a result of this agreement, especially as it was not possible to secure the early elimination of dairy safeguards on NZ exports in the recent NZ-China free-trade agreement upgrade negotiations.”
But it was reassuring to see some commitments around World Trade Organisation transparency and notifications.
Meat Industry Association chief executive Tim Ritchie said it is taking a wait-and-see approach. NZ exports $3.9b worth of red meat to China.
“There will be implications at some stage. I guess it’s just a case of when and with all of these things, the devil is in the detail.”
One of the most significant developments is that China will lift its ban on importing red meat products that have been treated with growth hormones if it comes under set residue limits.
“Up until now nothing that’s been treated with a hormonal growth promotant has been allowed to go into China. That’s had the most significant impact on US beef exports to China,” he said.
That could give outdoor farmed NZ grass-fed red meat a market advantage because it does not use hormones.
“It has to be of benefit to us in terms of our positioning,” he said.
But that benefit will become apparent only once demand caused by African swine fever eases and customers are given a choice.
If more US beef goes into China there will be less beef in the US domestic market or in other markets. That also could offer new opportunities for red meat exporters.
NZ International Business Forum executive director Stephen Jacobi said the agreement means a substantial amount of US agricultural products will be bought by China.
“It’s not quite clear how that’s going to work but it does encompass a lot of products NZ sells, including meat, dairy and seafood.”
The former executive director of the NZ China Council said it could mean NZ will no longer be the largest foreign supplier of agricultural products to China.
“It would change if China made that undertaking real.”
About 60% of NZ’s agricultural to China are dairy while 40% are red meat, horticultural products and seafood.
The deal could possibly displace NZ products in that market.
The agreement also has lots of undertakings around the rules US exporters will have to follow to send their products to China.
NZ has to make sure its exporters are not advantaged in any way by those rules, he said.
“That is something Fonterra and the meat industry will need to look at very carefully to see if they have made undertakings that will affect our business in any way.”
While both countries claim the agreement does not breach WTO rules it will be hard to see how that works in practice, Jacobi said.
“We could see disputes arising from this and that could have implications again for NZ.”
That might have already happened with reports European Trade Commissioner Phil Hogan says the European Union will consider challenging the deal.
NZ’s good reputation in China could allow it to compete with any new US product quite readily and many US products are in different categories to NZ’s.
Jacobi said it should not deter exporters from doing business in China because it is such a vast market and NZ products are highly regarded.
“But the Government needs to look at the detail of this agreement to work out if NZ is disadvantaged in any way.
“We need to be taking it up with the Chinese and the Americans very promptly.”