Trade ministers were scheduled to wrap up talks in Hawaii this Saturday but that looked unlikely at noon today as dairy market access appeared to have become the major stumbling block to six years of negotiations being brought to a close.
Dairy Companies Association chairman Malcolm Bailey said there was still a possibility of a deal being announced over the weekend but it was looking increasingly unlikely.
“The dairy offers all round are woeful at this point.
“This could change. It was always going to be towards the end that dairy gets addressed.
“But it is now so late in the process that it is hard to see how there will be enough time.”
The delicate balancing act to free up the three big, protected dairy markets of the United States, Japan and Canada was in danger of being tipped up completely on Friday after the US withdrew an earlier offer to Australia to allow small increases in tariff-free or low-tariff access for butter, cheese and whole milk powder.
The offer, seen by Australia and NZ as a mere starting point for further concessions for improved access to the US market, was pulled after US attempts to prise open access to the Canadian market for its own dairy exports failed.
The Government’s agricultural trade envoy Mike Petersen said the dairy industry would not see the improvements in access to the American market it was looking for until other large countries in the talks made similar concessions.
“The US is playing this game that it is not going to give anything away unless it can get access into other markets such as Canada and Japan – so it is this domino effect we are looking for really.”
In the meantime, Nikkei reported Japanese TPP Minister Akira Amari describing his meeting with Trade Minister Tim Groser on Thursday as “extremely difficult” as the two butted heads over access to the Japanese market where NZ is largely shut out by tariffs as high as 300% for some dairy exports.
The news agency reported an offer from Japan of a low-tariff quota for butter, skimmed milk powder and dairy products that could be produced from 70,000t of raw milk to be shared among the US, Australia and NZ.
A maximum of 30,000t would be allocated to NZ.
“I just do not see the other 11 countries saying bye-bye NZ ‘you are not in this’ because of dairy.”
Mike Petersen
Trade envoy
On a brighter note, the talks did appear to have yielded possibly significant reductions in tariffs on beef and sheep meat exports in key TPP markets where NZ does not already have free trade agreements.
Beef + Lamb NZ trade policy manager Tracy Patterson said an offer by Japan to eventually cut tariffs on imported beef from 38.5% to 9% made to the US in an earlier round of negotiation had been extended to NZ.
She said progress had also been made on the phasing out of the 213,000t quota for NZ beef exports to the US and which Australia got agreement to have phased out by 2022 in its own free trade deal with the Americans a decade ago. NZ pays a 26.4% tariff on exports above that quota limit which looks set to be triggered this year for the first time in a number of years because of the high dairy cull cow and strong demand from the US for imported beef.
Progress was also being made towards cutting high tariffs for beef and sheep meat in secondary TPP markets such as Peru, Mexico and Canada, Patterson said.
“We are not privy to all the details of what is in there . . . but my understanding is that the outcomes are a lot more advanced for sheep and beef access.”
But these gains would disappear if NZ did not sign the TPP and that was looking increasingly less likely unless more was offered on dairy.
Bailey said backing a low-quality deal with the small gains being offered in the TPP would send a signal to future negotiating partners that NZ would accept similar deals from them.
The Government was in the final stages of talks to begin negotiations for a free trade agreement with the European Union where dairy market access would again be a major issue and the industry would be reluctant to snooker itself before NZ even reached the negotiating table.
“We are adamant that no TPP conclusion is better than the awful deal for dairy that is on offer at this point,” Bailey said.
With time running out to get a deal in front of the US Congress this year, before presidential elections next year, the pressure was mounting on NZ to sign up to what was on the table in Hawaii.
However, Petersen believed there was a window of another two or three weeks to get a better deal on dairy before the other 11 TPP countries finally brought the curtain down on the negotiations.
He said to exclude NZ from the TPP now would be a "failure" to live up to its goal of a full and comprehensive liberalisation of trade and investment between the countries involved.
“I just do not see the other 11 countries saying bye-bye NZ ‘you are not in this’ because of dairy.”
The 12 countries in the TPP are the US, Japan, Canada, Mexico, Singapore, Vietnam, Malaysia, Peru, Chile, Brunei, Australia and NZ.
