Friday, March 29, 2024

Dairy must stay focused after TPP disappoints

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Details of the Trans Pacific Partnership (TPP) agreement have been met with disappointment from many in the New Zealand dairy sector, and at face value the deliverables are underwhelming. Tightly regulated industries in Japan, Canada and the United States remain restrictive to any real growth potential for NZ dairy products in these countries. However, despite restrictions there is still potential for growth and Kiwi trade representatives hope that a foot in the door will lead to better opportunities for dairy down the track.
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The partnership itself is the most significant global trade deal ever made. The gross domestic product of the 12 Asia-Pacific countries involved accounts for 36% of the world total. 

The TPP members – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, the United States and Vietnam – are now confirmed destinations to $28 billion worth of NZ exports, of which $4.6b is currently in dairy products. 

The savings on dairy tariffs is slight in the scheme of things but once fully implemented there could be potential savings of $102m (3% of the total value) a year for NZ dairy exports to TPP countries. The exciting part of the deal though is the ability to trade in some of the world’s biggest economies and there will now be access to new markets with tariff quotas – for example, butter and cheese into the United States and milk powders into Mexico.

The success of the TPP talks also equates to NZ’s first free trade agreement with the US, Canada, Japan, Mexico and Peru. To these countries alone NZ exports $12b a year. 

The US is the world’s largest economy and Japan the third. While NZ hasn’t inked the best access to these markets for dairy, it does have a foot in the door. 

This country already has a deal with the second largest global economy, China. In comparison, NZ is the 47th biggest economy in the world so trade relationships such as TPP will secure the future of this country’s agriculture sector.

NZ Trade Minister Tim Groser acknowledged the shortfalls of dairy demands in the TPP agreement. But he stressed trade agreements never really conclude. The political climate in the US, Canada and Japan is adding resistance to dairy negotiations at present, which Groser said would change over time, eventually offering opportunities to re-evaluate trade deals.

In the meantime, the NZ dairy industry should take advantage of the small openings it has been given, keep a foothold in overseas markets and remain ready for opportunities as they arise. 

– Steph Holloway, Dairy Week editor

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