Bakers prefer butter, helping prices soar
Consumers around the world are willing to pay more for products containing dairy and this is driving demand for butter and cream, says Fonterra.
The FTA will provide a major boost for New Zealand's red meat exports there, say chairmen of Beef + Lamb New Zealand (B+LNZ) and the Meat Industry Association (MIA).
"This deal is great news for sheep and beef farmers and meat exporters," says B+L chairman James Parsons (pictured).
Korea is New Zealand's fourth-largest beef export market by volume, taking nearly $110 million of beef exports last year. However, the trade volume has dropped significantly in recent years, at least in part due to the tariff advantage enjoyed by US beef exporters under that country's 2012 FTA with Korea.
New Zealand beef currently faces a 40% tariff when it enters the Korean market, but the FTA will remove that tariff over a 15 year period. The Korean tariff on US beef is currently at 32% and is also being phased out over 15 years.
Last year the Korean tariffs charged on New Zealand's beef exports added up to about $43.5 million. That is effectively about $1.34/kg of additional cost on carcass weight on beef products that were shipped to Korea.
In the first year of implementation the tariff cost is forecast to come down to about $1.25/kg of carcass weight.
"We were at risk of losing our competitiveness in the Korean market, due to the US FTA and other deals that Korea has signed with beef exporters in recent months, but this deal will make sure that we don't fall further behind our competitors," said MIA chairman Bill Falconer.
"Ensuring meaningful access to Korea has been one of the industry's highest trade priorities."
B+LNZ and MIA work together to improve access for sheep and beef products to overseas markets, including by providing in-depth analysis in support of the Government's FTA negotiation efforts.
Zespri also welcomes the significant outcome that has been achieved for the kiwifruit industry. Over the past year, Zespri growers have paid about $20 million in tariffs into this important market.
"It is hugely satisfying that the industry can focus on building sales in the South Korean market, which will benefit both New Zealand and South Korean growers, as well as South Korean consumers," says Zespri chief executive, Lain Jager.
"With volumes of our new SunGold variety increasing to over 50 million trays by 2018, this gives us a strong platform to build sales in this market."
New Zealand Horticulture Export Authority CEO Simon Hegarty says: "This much anticipated trade deal is a significant achievement that will provide tangible benefits to the majority of NZ horticulture export sectors and Korean consumers demanding our high quality, healthy food products."
Korea is NZ horticulture sector's 7th largest export market in value terms with exports in 2014 of $64 million Fob. However, these exports attracted an estimated $25 million in tariffs at an average 39% of the value and this has contributed to the decline in trade to this market in the past two years.
The 45% tariff on kiwifruit alone amounted to a cost of $20m or an average $7,820/grower,
while the cost to the 40 buttercup squash growers was $2.9m or an average of $73,000 per grower.
Korea is one of a few particularly high tariff markets -- reflecting its strongly protectionist approach to imports.
New Zealand exporters currently face tariffs in Korea ranging from 18% for prepared potatoes (French fries) up to 45% for kiwifruit, tomato juice and apple juice. Under this agreement these tariffs are either reduced to zero once the agreement enters into force, or on a 5-10 year phase-out period. Some specific examples include;
• cherries drop from 24% tariff to zero tariff at the entry into force (EIF) date,3
• kiwifruit phased down from 45% to zero over 5 years,
• buttercup squash will be phased down from 27% to zero over 5 years,
• avocado 30% tariff will be phased out to zero in year 10.
The Dairy Companies Association of New Zealand (DCANZ) says agreement will result in elimination of tariffs on the vast majority of dairy tariff lines over reasonable periods. For cheese, there will be a transitional quota of 7000 tonnes growing at 3% per year until elimination. For butter, there will be an 800 tonne quota increasing at 3% per year until elimination.
The agreement also includes a permanent quota on milk powder which begins at 1500 tonnes and then increases at 3% per annum until year 10. All of these results compare very well with the results of the previous FTAs that Korea has concluded with the EU, US and Australia. (for more on dairy see Dairy News on this website).
