New Zealand’s enthusiastic approach to trade deals has brought the country’s horticultural exporters some significant advantages in the Asia-Pacific region. International trade law expert Murray Denyer of New Zealand law firm Cooney Lees Morgan spoke to Fruitnet.com about recent developments from trade negotiations across the globe.
One of the key trade deals New Zealand is currently in negotiations for is the Trans-Pacific Partnership Agreement (TPP). The latest round of negotiations was held in Auckland in December; could you give me a roundup of the current state of negotiations, what NZ’s objectives are, and what the outcomes for the horticulture sector are likely to look like?
MD: TPP is probably New Zealand’s top priority free trade agreement negotiation at the moment. As you probably know, the TPP has evolved from the original “P4” agreement between NZ, Chile, Brunei and Singapore. The US, Peru, Vietnam and Malaysia have all now joined negotiations for an expanded TPP. Even more importantly, the stated longer-term goal of the key players including the US is to pave the way for a broad-based regional FTA. In this context, Japan, Korea, and Canada have all expressed interest in joining, and China could also be interested in the longer term. So for New Zealand, not only is the TPP an opportunity to put FTA arrangements in place with the US, it is also an opportunity in the longer term to get deals in place with the likes of Japan and Korea which have been elusive to date.
Progress at the December round in Auckland is probably best summarised by the New Zealand Ministry of Foreign Affairs and Trade who say on their website:
“Auckland has been something of a transitional round as negotiators in most areas have been assembling proposals and attempting to complete draft text that captures the positions of all the countries at the table. These drafts will be the raw material for the shift into a more intense negotiating phase that gets underway in 2011.
“While there are still diverse positions on many issues across the agenda, good progress has been made in Auckland in developing and refining texts and improving understanding of the underlying policy issues.”
It remains to be seen whether negotiations can be sufficiently complete by November this year in order for President Obama to make any announcements about a deal being reached at the APEC which the US is hosting. The first round of talks for 2011 has just taken place in Santiago during the week of 14 February.
Key outcomes for New Zealand from the TPP (based on existing members, forgetting about Japan, Korea and others for the moment) would be improved market access to the US for agricultural products. The US is NZ’s number one export market for agriculture. It is also the fourth largest market for horticultural products (NZ$126m in year to 30 June 2010). Tariffs on horticultural products in the US are generally low, however (total cost in 2010 estimated by Horticulture NZ to be only NZ$1.3m). One exception is asparagus, which faces a 21 per cent tariff. Tariffs on meat and dairy products are far higher, and this is likely to be the focus for NZ negotiators on market access issues with the US.
One of the most significant trade deals to come into effect for New Zealand in the last two years has been the ASEAN-Australia-NZ free trade agreement. What have the major impacts of that been for the country’s fresh produce business since it came into force in January 2010?
MD: There are indeed significant gains that will be delivered to NZ horticulture from the ASEAN-Australia-NZ FTA (AANZFTA). ASEAN is New Zealand’s third largest export market, and has grown 120 per cent in value over the last decade. Tariffs on 99 per cent of New Zealand’s exports will be eliminated in the four key ASEAN markets of Indonesia, Philippines, Malaysia and Vietnam by 2020, and 74 per cent eliminated by 2015. (Exports to Australia and Singapore are already tariff free under the existing bilateral free trade agreements NZ has with those countries.)
Key outcomes for horticulture are reductions in kiwifruit tariffs (which currently range from 5-30 per cent) to zero by 2016 (and most will be zero by 2012). Apple and pear tariffs (currently 5-25 per cent) will similarly reduce to zero by 2016 (most by 2011). There are also significant gains for onions and other fresh produce. These markets are significant growth markets for New Zealand fruit and vegetable exports, and the tariff reductions will deliver significant value back to New Zealand growers over the coming years.
The FTA with Malaysia also took effect from August last year – what has that meant for fresh produce so far?
MD: Malaysia is NZ’s 9th largest export market for fresh produce (NZ$47m in 2010). It is also fast growing, with categories like kiwifruit enjoying triple-digit annual growth rates at the moment. The NZ-Malaysia FTA delivers additional and faster tariff reductions to those secured under the AANZFTA, with 99.5 per cent of all exports becoming duty free within the first seven years (versus 12 years under AANZFTA). In particular, Malaysia’s 15 per cent tariff on kiwifruit – the largest fresh produce export – is bound at zero upon entry into force. The 5 per cent tariff on apples was also eliminated at that time.
Are there any other significant trade deals currently under negotiation, or are there any tariffs due to be reduced on fresh produce lines soon? (Under the China FTA, for instance.)
MD: Yes is the short answer! New Zealand trade negotiators have made significant progress on a number of FTAs in recent years - some of which have been concluded, and others which are under negotiation. Here is a very brief summary:
NZ/China FTA: Sixth-largest NZ produce export market and rapidly growing - likely to be in the top three in the near future. FTA entered into force in October 2008. Tariffs on 96 per cent of NZ exports to be eliminated – a third on day one, and two thirds within the first 5 years (i.e. by 2013). Kiwifruit tariff reducing on straight line basis to zero by 2016 – this has delivered enormous benefits to NZ kiwifruit growers, and will do more in the future as this market - already the third largest for kiwifruit after the EU and Japan – continues to grow very strongly. Tariffs on other produce lines, which were at 10-30 per cent prior to 2008, are progressively reducing and will be at zero by 2013.
NZ-Gulf Cooperation Council (Bahrain, Oman, Kuwait, Saudi Arabia, UAE, Qatar) FTA: Negotiations concluded and expect to sign this year. Tariff levels around 5 per cent level to be eliminated.
NZ-Korea FTA: Currently under negotiation but talks have stalled over the difficult issues in market access for agricultural products (dairy and meat in particular). Enormous gains to be had for horticulture if this deal can be concluded. Kiwifruit tariff currently 45 per cent (the highest faced anywhere in the world), and NZ pays duties of NZ$29m on kiwifruit which works out on average as a NZ$10,000 per year cost for each and every NZ grower! Tariffs on other produce range from 15 per cent up to 50 per cent, and some also have tariff rate quotas with triple digit out of quota tariffs.
NZ-India FTA: Negotiations commenced last year. Likely to be a long process, but again, significant tariff gains are likely to be secured if a deal can be done. Average agricultural products tariff is 9.3 per cent. India is also a strong growth market for NZ produce, albeit of a fairly low base at present (NZ$12m in 2010).
NZ-Russia-Belarus-Kazakhstan FTA: Negotiations to commence early this year. Relatively small market at present (NZ$5.7m in 2010) for NZ produce, but again growing quickly and with very large future potential.
No comments yet