Trade access landscape increasingly crowded

At the same time as the TPP is struggling to get across the finish line before the next American President takes over early next year, there are several signs of access to the USA freeing up for some of New Zealand’s competitors.

 

The announcement of greatest significance concerns access for Brazilian beef after 17 years of negotiations which will be permitted to begin in September. Admittedly Brazilian plants must still gain accreditation before they can export to the USA and, when they do, their entitlement will be included in the ‘other country’ quota of 64,800 tonnes at the same preferential tariff of 4.4 cents per kilo as New Zealand for its 213,402 tonne quota. However, there is a possibility Brazil’s eagerness to export, combined with its weak currency, will encourage it to sell at the 26.4% general tariff rate.

 

Commentary out of New Zealand and Australia has downplayed the threat to exports from this part of the world for various reasons, including importer caution, beef type and feeding regimes, and time anticipated before Brazilian exporters have ticked the boxes. MLA emphasises the continued desirability of Australian beef on the basis of sustainability, provenance, food safety, traceability, assurance systems and meat quality.  New Zealand commentary suggests little immediate impact, although this may change when export volumes start to crank up in six months.

 

But MLA also draws attention to the probability Brazil will target manufacturing beef and has the capacity to export substantial volumes outside the quota limitations. This will present direct competition for lean New Zealand beef, both bull and manufacturing cow. One trader estimates Brazilian exporters could export 200,000 tonnes annually, equivalent to the NZ quota, as soon as they satisfy the USDA protocols for E Coli and STEC. Since being granted direct access to China 18 plants have gained accreditation and are shipping at the rate of 17,000 tonnes a month. It should be noted Brazil will not be aiming at the premium end of the market and will therefore undercut New Zealand beef when and where it can in order to achieve sales.

 

The competition won’t stop there either, regardless of the next President’s attitude to free trade and the TPP. The UK is also about to begin negotiating for beef and lamb access to the USA.

 

Markets to which New Zealand can export without facing South American competition are limited to Canada, Taiwan, Korea, and Japan, but we suffer a competitive disadvantage relative to our trans-Tasman neighbours in the latter two markets: Australia’s FTA with Japan gives it a 12.5% duty advantage, while we also lag in reduced duty levels into Korea. This has already adversely affected our beef exports to these countries.

 

At the Red Meat Conference last month, delegates were given a positive message about New Zealand’s market access negotiations. A closer study of the competitive environment shows a rather different story, suggesting there is a lot of work to do to offset the determined efforts of other countries with more muscle than we have.

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