US tariffs threaten NZ horticulture exports
"Unwelcome" is how the chief executive of the Horticulture Export Authority (HEA), Simon Hegarty, describes the 15% tariff that the US has imposed on primary exports to that country.
That's the good news for the sector revealed in the biennial report Barriers to Our Export Trade produced by the Horticultural Export Authority (HEA), which was published just before Christmas.
The HEA is responsible for promoting the effective export marketing of NZ's horticultural products - including advocacy for the freeing up of trade barriers. Chief executive Simon Hegarty says this is due to the 12 operative Free Trade Agreements that NZ has signed. In 2004, there were just two FTAs.
Hegarty told Rural News the overall picture is good news with the growth of NZ horticultural exports that are now worth $4.8 billion.
However, he says below the surface the news is not so good for some sectors, notably avocados, onions and asparagus, which have seen their export earnings fall. Prices for apples and kiwifruit have been good, which Hegarty says has effectively propped up the earnings for the wider sector.
The report notes that while in purely dollar terms the amount of money NZ is paying in tariffs has risen, this is due to the overall increase in exports.
The 240-page report is crammed full of statistics and is regarded as a bible for those in the industry. In his forward to the report, Charles Finney notes that in his time as a trade negotiator the report was an incredibly useful document which clearly highlighted where the problems were for NZ exporters and the cost of these.
Finney makes the observation that the UK and EU FTAs could not have come at a better time for NZ and will provide immediate benefits for our horticultural exporters.
Of particular note in the report is the fact that in the past year China has taken over from the combined UK and EU markets as the main outlet for NZ's horticultural exports. It now takes 20% of these. But Simon Hegarty warns there is no guarantee that this will continue in the future.
"I think that with the signing of the NZ/EU/FTA's we will see a refocus on the EU because 70% of our total tariff costs has been on trade with the EU," he explains.
"This has not been helped with the exceptionally high freight rates and disruption to shipping, which has made trading with Europe high risk and expensive. So, I would not be surprised to see a return to the numbr one position by the EU," he says.
The other issue with China is that it's a very difficult market to access because not all of our products can be sold there. He says NZ only has market access for approximately 12 products in China.
"Just because we have got an FTA with China doesn't mean that we can send all our horticultural products there," he told Rural News.
Hegarty says there is now a strong Asian focus for NZ horticultural products. This is because it is closer to NZ and there has been less hassle with shipping and supply chains compared to Europe. A new market is Vietnam, rising rapidly up the ladder since 2012 from our 21st to our 8th largest market. Hegarty says there has been a slow but continuous growth with sales to South Korea, while Japan and Taiwan remain high on the list.
Then there is Australia.
"While we have the CER agreement with Australia, it doesn't help and it's probably one of the most difficult markets to access for horticulture because there are phytosanitary restrictions on a number of products," he explains, "so trade with Australia has been quite stagnant."
Storm Clouds on the Horizon
A major issue flagged in the report is the concern of rising non-tariff measures (NTM's) - essentially technical and bureaucratic hurdles that are placed on products when they get to the border of a country we export to.
These can include things such as phytosanitary regulations, labeling, food additives, the lack of recognition of NZ systems and the time taken to approve the export of new products.
Such 'barriers' are not unique to horticulture and most primary exports have struggled to deal with these kind of obstructions over the years. Sometimes rules have been introduced without warning and created much angst for exporters.
"There is a vast array of NTM's that horticultural products face and these are sometimes below the radar so we are very concerned about this," Hegarty told Rural News.
Hegarty says the HEA is positive about the future but warns of some serious headwinds at the moment. He says many of these are in NZ, such as concerns about the supply of labour to grow, harvest and export crops, not to mention the variable climatic conditions.
"It's been a fairly hard slog for the last couple of years. We are hopeful and positive for next year, but we can see the storm clouds and feel the winds already."
