Friday, March 29, 2024

Key aims to break China deadlock

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The dairy industry is sticking to its argument that Chinese consumers would be the biggest winners from the early removal of tariffs protecting their own farmers from increased competition from New Zealand rivals.
GDT has been working on the event in order to offer alternate weeks between GDT events in an effort to provide the market with interim price discovery for core commodities.
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Prime Minister John Key would head to Beijing next month to try and break a deadlock that has emerged since China and NZ committed in November 2014 to upgrade their ground-breaking free trade agreement.

A top priority was the removal of safeguards which trigger a 10% penalty tariff which hit the bulk of NZ’s milk powder exports to China most years.

The safeguards were estimated to have so far cost NZ dairy farmers $100m in lost revenues and were not due to expire till 2023.

Dairy Companies Association executive director Kimberly Crewther said the increase in NZ exports in recent years had done no more than meet demand from Chinese consumers not being met by local producers. 

She said the argument still held even though NZ’s market share had been eroded in recent times by rivals.  

“So what that shows is that there is quite a broad domestic demand and the products are not only being demanded in the safeguard trigger volumes but well beyond that from a variety of sources.”

Crewther said abolishing the safeguard would allow tariff cuts negotiated in the free trade deal to resume.

“What that reduction in tariffs does is support the Chinese consumers and dairy manufacturers in being able to source the product that is not necessarily available from domestic sources.”

China was  quite familiar with the arguments which echo those used by ministers and officials over a number of years.  

Documents recording exchanges between officials from early 2014 seen by AgriHQ show the Chinese side arguing the safeguards had done little to deter explosive growth in NZ exports since the FTA came into force.

Officials from the Ministry of Foreign Affairs and Trade argued back that the growth in this country’s exports had plateaued since 2009 as China used the safeguards earlier and earlier each year.

Later documents showed both sides had intended for the scope of the FTA renegotiation to be agreed by October 2015.

Trade Minister Todd McClay told AgriHQ last week that officials were making progress behind the scenes and denied talks were deadlocked.

Despite this, industry insiders believed both sides were dug in over their respective positions and did not hold high hopes for a breakthrough from Key’s trip next month.

One high-level source said NZ hoped to dissuade China from its goal of self-sufficiency in dairy products and which had underpinned the use of the safeguards.

Key would also call on China to pressure Europe and others in the World Trade Organisation to cut back on their use of domestic support payments which were contributing to a global glut of dairy products hurting its own farmers as well as those in NZ. 

 

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