Any free-trade agreement with Europe was expected to come with the added bonus of a separate deal with Turkey.
Petersen, recently in Europe and Turkey, talking up NZ’s case for a free trade deal, said the mood had darkened considerably from his last trip in late 2014 when the Russian import ban was just beginning to bite.
“The farmers are screaming. The processors are screaming. And they are all saying that prices have to lift.”
Petersen said the dismal state of returns was not helping NZ’s chances of getting an agreement that would make meaningful inroads into high tariffs protecting the continent’s farmers from import competition.
“The price of milk is a major issue and it makes it really hard to have conversations about some form of relationship with NZ.”
But resistance from farmers and milk processing companies needed to be weighed up against support from the continent’s politicians who in the European Parliament last month voted overwhelmingly in favour of beginning negotiations with NZ.
Petersen said Europe had difficulty justifying NZ being one of just six of the World Trade Organisation’s 160 member countries either without a free-trade agreement with the EU or one under negotiation.
For that reason it was likely negotiations would be confirmed later this year but the outcome of those negotiations when it came to getting a good deal for NZ farmers was less certain.
NZ negotiators would target tariffs on cheese and butter, which the dairy industry here said acted to restrict trade with the EU.
High tariffs on high-quality beef exports were also likely to be near the top of their hit list.
For its part the EU would almost certainly push NZ to sign up to rules governing the use of names for food and drink linked to European places.
So-called geographical indications included parmesan reggiano for cheese and parma for ham.
Petersen said the European dairy industry’s eagerness to capitalise on any new market openings from a massive trade deal being negotiated with the United States showed it was not completely closed off to the idea of free trade.
The Europeans seemed willing to open up their own consumer markets to the US dairy industry, which they did not see as an overwhelming threat, if it meant better access for their high-quality cheeses in the American market.
Petersen said European farmers and processors saw less potential for exporting to NZ and at the same time seemed to have an outsized view of the threat from NZ in their home market.
“I kept on reminding them that the US as a producer of dairy products is five times bigger than NZ.”
Petersen understood any free trade deal with the EU would automatically trigger negotiations for a deal with Turkey because of its customs union with Europe.
But for a Turkey deal to include agricultural access would depend on an upgrade of the latter’s customs union with the EU which at the moment included only industrial products.
“My expectation is that if there is a renegotiated customs union with Europe then I think it will include agricultural goods.”
Petersen believed agriculture’s inclusion was a good chance as Europe was desperate to keep the Turks onside in return for their help keeping Syrian refugees from reaching the continent.
NZ dairy and meat exporters could be among the big winners from a deal with Turkey.
High meat and dairy prices in Turkey were not helped by tariffs as high as 220% which meant little competition from cheaper imports.
“We are talking about very high tariffs in what is a pretty big consumer market.”
Turkey’s under-developed agricultural sector also represented an opportunity for exporters of technology and farming systems here, Petersen said.
