Dairy Companies Association chair, Malcom Bailey

The New Zealand dairy industry early this morning slammed the new free trade deal with the European Union, saying it fell well short of being commercially meaningful for the industry.

The criticism is particularly relevant today as new tensions enter the relationship between New Zealand and its overwhelming dominant dairy market, China.

The Dairy Companies Association of New Zealand has contested claims about the FTA made by the Prime Minister and Trade Minister Damien O’Connor.

In a joint statement early this morning, Ardern and O’Connor said export revenue to the EU would eventually grow by up to $1.8 billion annually on full implementation and that the FTA delivered more to New Zealand GDP than the agreement with Britain.

There would be immediate tariff elimination for all kiwifruit, wine, onions, apples, mānuka honey and manufactured goods, as well as almost all fish and seafood and other horticulture products.

And there would be New quota opportunities worth over $600m in annual export revenue for dairy and red meat sector once fully implemented, with an eight-fold increase in beef access to the EU market.

 “There are some big wins in here,” said O’Connor.

“The EU is the largest export market for New Zealand kiwifruit growers, and the complete removal of tariffs delivers more than $37 million in annual savings on kiwifruit alone from day one. 

“For fish and seafood exports, annual tariff savings will reach $20 million a year.

“We’ve fought hard for our dairy and beef exporters, and the deal could deliver up to $600 million in additional export revenue if access is used and once the agreement is fully in effect. 

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“We’ve secured an eight-fold increase in the volume of beef we can export into the EU. 

“We have also secured improved access for our butter and cheese producers, some of which will now be able to be traded with the EU for the first time in many years. 

“With total savings on tariffs worth $110 million annually, $100 million upfront, the deal will make our exports immediately more competitive in the EU market and provides a platform for growth.”

But Dairy Companies Association of New Zealand chair Malcolm Bailey said their analysis of the value of the outcomes differed significantly to that calculated by the Government. 

“While it can be theoretically claimed that the value of this access grows to $600 million over seven years, the commercial reality is far less given the remaining trade-restrictive in-quota tariffs and quota administration.,” he said.

“ In-quota tariffs of around NZ$630 for butter and NZ$435 for milk powder will constrain competitive opportunities.

 “This is a considerable missed opportunity for the New Zealand economy as a whole when considering that dairy accounts for 28% of NZ exports and has been a pillar of resilience for the economy through Covid.”    

Bailey said the association strongly encouraged the New Zealand Government to continue negotiating rather than close on an outcome that failed to broaden meaningful trade opportunities.

“Opportunities to reset and upgrade access with trading partners come once a generation. Failure to capitalise on this opportunity, as occurred with the NZ-UK FTA, leaves us poorly placed in this much bigger market for a long, long time”.

“By not doing more to liberalise dairy trade, the deal reached is also a lost opportunity for sustainable food systems ” 

The agreement also includes the loss of New Zealand cheesemakers’ rights to feta and gruyere. It will also prevent any new business development opportunities for parmesan. This is a significant blow to the many New Zealand feta, gruyere and parmesan cheeses which were last night celebrated for their quality at the annual champions of cheese dinner.

Bailey Z acknowledged that the deal included market access improvements for other smaller NZ export sectors beyond dairy and meat. “But in terms of really addressing the large, more than 2:1, goods trade imbalance between the EU and NZ, the opportunity to really close this gap has been missed.”