NZ trade strategy must evolve as global markets become more protectionist

New Zealand must evolve its trade strategy to capture more value from existing markets if the country is to increase exports and grow the economy, amid rising protectionism and geopolitical tensions.

That’s according to the latest research from the Meat Industry Association of New Zealand (MIA) and Beef + Lamb New Zealand (B+LNZ), who today published the latest edition of the biennial Barriers to International Trade report.

The report shows that New Zealand’s framework of free trade agreements has reduced the level of red meat tariffs from $366 million in 2010 to $193 million in 2022 (a reduction of $173 million).

However, between 2021 and 2022 there was a 22 per cent uptick in red meat tariffs due to New Zealand exporting more products to markets with high tariff rates last year.

“For decades, our focus as a trading nation has been on securing FTAs with lucrative markets in Asia and farther afield, and this is something we have been highly successful at,” said Sirma Karapeeva, chief executive of MIA.

“But the world is changing, and the international landscape is now marked by greater protectionism, geopolitical tensions, and more economic volatility in the wake of the Covid pandemic.

“As a country, we need to ensure that our trade strategy is responsive to this changing environment, and a central part of this is ensuring that we get the maximum value out of the free trade agreements we already have in place.”

Ms Karapeeva said this work must also include a strong focus on non-tariff measures that also apply beyond the border that unnecessarily drag on the competitiveness of New Zealand’s red meat exports.

“Our internal research shows that New Zealand’s red meat sector faces an average 2.3 times more non-tariff measures than the world average, and that adds $1.5 billion a year in costs to red meat exports.

“Some of these non-tariff measures work in New Zealand’s favour because of the quality of our products and systems, such as food safety standards. But other technical barriers to trade impose $370 million in administrative costs that provide little consumer benefit - that’s almost twice the level of border tariffs faced by red meat processors every year.”

These unnecessary technical barriers to trade can include requirements for documents to be certified at the importing country’s consulate, or the imposition of overly strict standards, such as product shelf-life, that are out of step with scientific evidence, among many others.

Sam McIvor, chief executive of B+LNZ, said these tariff and non-tariff barriers are not theoretical costs to farmers, but real concerns that need to be prioritised as part of the New Zealand trade strategy.

“With on-farm inflation almost double that of general CPI, and average farm profits in the sheep and beef sector forecast to fall 30 per cent this year, these are not insignificant costs that can be ignored,” said Mr McIvor.

“Tackling tariff and non-tariff barriers requires government-to-government engagement, which is why we are calling for it to top the trade priority list. 

“As a country, we’ve invested significantly in establishing our framework of trade agreements and have seen great success particularly on tariff reductions. But now, as our economy starts facing increasing headwinds, it is time to leverage all aspects of these agreements to the fullest extent.

“The development of robust, science-based standards is a key strategy to tackling barriers to trade and non-tariff measures. We strongly encourage the Government to take a leadership position in this space and give our trade-facing agencies the resources they need to be successful.”

Mr McIvor said sustainability requirements are increasingly being placed on imports into key markets.  And while New Zealand’s farming practices are not the focus of these new regulations, New Zealand beef and sheepmeat risks being unduly impacted by these barriers to trade.

“Ensuring New Zealand’s farmers’ sustainability credentials are well understood by government officials in key markets, particularly the EU, is critical to prevent a flood of new non-tariff barriers hitting the New Zealand red meat sector.”

New Zealand’s red meat farmers and producers generated almost $12 billion in export earnings in 2022, and the sector is the country’s second biggest export goods producer. The industry also employs 92,000 people, equivalent to five per cent of total national employment.

The Barriers to International Trade 2023 report can be access here. 

ENDS