23 August 2020
New Zealand relies on stable and predictable market access to support the livelihoods of thousands of Kiwis so it’s critical in these uncertain times that we reject protectionism, uphold our ambitions to liberalise trade and strive for high quality free trade agreements with the EU and UK.
We have learned from previous global recessions that an economic recovery requires trade to expand again – robust trade rules and international co-operation on trade policy will be vital.
Now is not the time to look inwards and increase subsidies, price interventions and other measures that will inevitably exacerbate the longer term effects of the COVID-19 pandemic and hamper the global economic recovery.
At the heart of New Zealand’s economic fortunes is the red meat industry. It’s the country’s second largest goods exporter to the tune of $9.4 billion, accounts for almost five per cent of the country’s employment and contributes $4.6 billion in household income - around $3,300 per household.
Our industry has proven its agility and resilience during the COVID-19 crisis, acting quickly to put measures in place to prevent the spread of the disease in our processing plants and keeping thousands of people safely employed.
Our sector’s deep and diverse export market relationships and New Zealand’s high quality FTAs, have bolstered our resilience and cemented our critical role in our country’s economic recovery.
New Zealand is now in trade negotiations with the EU and the UK with the expectation that these trade agreements will not only level the playing field but grow commercial opportunities, strengthen our relationships and send a clear signal on the importance of the multilateral rules-based trade system and maintaining open markets.
Both negotiations create opportunities to strengthen our long-standing relationship with partners that hold shared values across a wide range of areas including trade, climate change, environment and animal welfare.
The UK is New Zealand’s third largest lamb market, worth around $500 million and backed by more than 140 years of responsible and mutually beneficial trade.
Seasonal complementarity means we can support UK production in their low season so consumers have access to “best in season” lamb year-round. This maintains price levels that benefit both sides and allows the UK to maximise returns on each carcass by exporting cuts/products UK consumers least prefer and replacing them with imports.
This strategy relies on global trade and access to a wide range of markets for both of our countries so that exporters and importers can match products/cuts to the consumers that value them most.
Currently, the UK exports some 30% of its sheepmeat production, predominantly to the EU in carcass form, and imports broadly the same volume of finished cuts from countries like New Zealand and Australia.
New Zealand’s current country specific access to both the EU27 and UK falls under historical WTO commitments, and allows individual companies to target and adjust their marketing efforts in response to individual country market conditions and commercial opportunities.
But these terms of access are in jeopardy. As part of Brexit negotiations, the UK and the EU have agreed to split their WTO country specific quotas, including New Zealand’s sheep and beef quotas, as the UK establishes its own WTO schedule.
This erodes the quality and quantity of our WTO quotas, is a major step back from the trade liberalisation positions claimed by both the EU and UK, and undermines their WTO commitments and their legally binding obligations.
Our sector cannot and will not accept this move. It takes away our market access rights and ability to respond to commercial opportunities.
New Zealand’s current beef market access to the EU is already severely constrained by a small quota of 1300 tonnes and an in-quota rate of 20%, accounting for 0.078% of total EU consumption, equating to each person being able to eat one 300g steak every 10 years.
EU beef exports are expected to increase by 15% while production is expected to remain flat. A shortfall looms. But splitting the New Zealand beef quota between the EU and UK would make it virtually impossible for our companies to form commercially meaningful relationships and build a stable trade in beef to the EU to help address the shortfall.
There is a strong argument for those imports to come from New Zealand, with the highest food safety, animal welfare and environmentally sensitive production, in line with the EU’s ambitions on climate change and sustainability.
Further, the recently leaked EU market access offer to New Zealand signals that rather than building on current WTO access, the EU is looking to further constrain New Zealand’s access to its markets.
This agricultural protectionist approach contradicts the EU Commission’s talk of the importance of trade liberalisation and open predictable market access, particularly in a post COVID-19 world.
We will continue to advocate for high quality, comprehensive access to the EU market that does not put New Zealand at a disadvantage to the EU’s other FTA partners and acknowledges that we are responsible global traders that export high quality products with the attributes demanded by the EU consumer.
It’s important the UK resists following the EU-style protectionist approach. Through New Zealand’s network of high-quality FTAs, our sector has become more agile and resilient to global market changes. The UK can achieve the same if it acts courageously and decisively and holds firmly to its open market principles.