Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
"If we could go to total tariff elimination and therefore free up a lot more trade between these key economies of US, Japan, Mexico, Canada and the others within the TPP region, that would eliminate some of the volatility," he says
"My view is that is understood by the participants in TPP but they were not brave enough to show the leadership to transition their sectors into total trade elimination."
If you open barriers to trade you get less volatility.
"When prices go down or up quickly New Zealand's farmers are the first to benefit or otherwise from prices moving quickly," he says
"We feel it first of all. The Europeans feel it next -- they tend to be about six months behind us -- and the US tends to be another 6-12 months behind that again. If you look back over the last 7-10 years of increased volatility you see that.
"You see this lag between when New Zealand dairy farmers have global commodity prices impacting their payout and it flowing through to European and US farmers. With tariff barriers and markets semi closed – not open to free trade and open markets – it certainly accentuates volatility."
Federated Farmers President Dr William Rolleston says the deal, although not as comprehensive as we would have liked at the outset, appears to be beneficial for agriculture and New Zealand.
"While it would have been great to see dairy tariffs eliminated altogether and for a greater range of products, preferential access to new dairy quotas into these markets should be helpful.
"Overall dairy will still reap the benefits of tariff savings into other TPP markets and further progress on dairy access can be made in the future," Rolleston says.
The Government has to secure parliamentary approval for the deal.
Rolleston says while these trade deals are never perfect, opponents of the TPP should consider the serious consequences that would be faced by New Zealand if we were not part of such a trade agreement, should the Government be unable to secure Parliamentary agreement.
"In other words, while we still await much of the detail, it's clear that we are better off today than we were yesterday. The conclusion of the TPP negotiations is the start of a journey of trade liberalisation, a journey some countries find harder than New Zealand."
"Tariff savings of $259 million per year, including $72 million for meat exports and $102 million for dairy exports, will provide an ongoing boost to farmer's incomes and for the economy as a whole. It also improves competitiveness for our products in TPP markets."
$102m tariff savings
The NZ dairy industry will save about $102m in annual tariffs when TPP is fully implemented, Mfat says.
NZ currently exports $4.6b in total dairy products to TPP countries.
A key outcome of TPP negotiations is that $826m of NZ protein products into the US will be duty free when the agreement comes into force, with zero duty on New Zealand dairy exports within all WTO tariff quotas.
Tariffs will be zero on infant formula in 10 years and on milk powders and some cheeses after a "transition period" according to Mfat. NZ will have access to new tariff quotas for several key products in the US, Japan, Mexico and China.
In Japan $217m of NZ's exports of high-protein products will be duty free; after 15 years $349m will be duty free.
