Guest post: Free trade a fine fit for NZ

by | Jul 19, 2017 | Trade Working Blog

Guest post from Lain Jager, Chief Executive of Zespri

New Zealand isn’t a big global player or an economic colossus but we’ve always been an exporting nation and a producer of healthy, tasty food. Although we’re a long way from our major Northern Hemisphere markets, this has increasing appeal to global consumers who want to know the provenance of their food; to know what they’re eating comes from healthy soils and clean water, underpinned by robust quality systems.

To illustrate what trade means for our country, Te Puke is a town of around 8000 people in Bay of Plenty and the unofficial capital of kiwifruit production in New Zealand. Last season saw $610 million directly returned to this community through fruit and service payments from the local kiwifruit industry, with the flow-on effects supporting other industries around the region.

The New Zealand kiwifruit industry has benefited immeasurably from free trade deals with the likes of China, Taiwan and South Korea, though in ways that may not be immediately apparent.

Obviously, the removal of import tariffs has had an immediate and tangible impact for growers; China is set to become our biggest export market, nine years after the historic 2008 bilateral agreement, while Taiwan’s 20 percent tariff on New Zealand kiwifruit was phased out this year.

When New Zealand signed a free trade agreement with South Korea in 2015, kiwifruit growers were paying $22 million a year on a 45 percent tariff just to have access to our eighth-largest country market. It’s important to note that this tariff was built into our Korean pricing, forcing up the price of Zespri Kiwifruit for Korean consumers. By 2019, that tariff will have been completely removed, allowing us to reduce our prices and compete more fairly with other kiwifruit exporters. Our Southern Hemisphere kiwifruit competitor Chile had no tariff barrier to Korea so dismantling this tariff puts us on an equal footing in the market; we passed the price savings on directly to Korean consumers and we’ve been able to invest more in the Korea market which is set to grow sales by 10 percent each year over the next five years. Korean sales grew 41 percent from 2014 to 2016 as the tariff reduction came in, creating an additional $10.5 million in value.

Similar free trade agreements with India, Japan, Britain and Europe would be equally beneficial. Last year, for instance, our growers paid $25 million in tariffs to Japan which equates to around $1,900 for every hectare of kiwifruit grown in New Zealand.

New Zealand kiwifruit attracts a 30 percent tariff in India while the tariff on Chilean kiwifruit is now down to 15 percent, putting us at a real disadvantage in this huge and promising market. That’s not good for New Zealand growers or Indian consumers. Tariffs on New Zealand kiwifruit do not protect Indian kiwifruit growers because New Zealand kiwifruit is counter seasonal with Indian kiwifruit so we do not compete with local production, except for perhaps to a limited extent on the shoulders of the growing seasons. What the tariff actually does is slow up Zespri’s entry into the exciting Indian market and therefore slows up the development of the kiwifruit category in India as a whole – and that’s not good for Indian kiwifruit growers.

Nearly 40 percent of Zespri Kiwifruit is sold in the EU so the prospect of an FTA removing the 8.8 percent tariff would mean lower prices for European consumers and better profitability for NZ kiwifruit growers. Most importantly it would allow us to compete fairly for market share against the tariff-free Chilean competition.

When trade doors are opened wide, not just money and material goods crosses borders. People, investment and ideas soon follow and relationships grow. For Zespri that means licensing our world-leading kiwifruit varieties to local growers in the Northern Hemisphere with the fruit marketed under the Zespri brand in the Northern Hemisphere season. That’s great for our offshore growing partners who benefit from growing the world’s best cultivars and the Zespri marketing system. It’s also very good for our New Zealand growers who benefit from the strong brand recognition that comes from supplying the market year-round, supported by marketing.

Importantly this is not just about New Zealand exporting its goods to consumers in other countries. It’s about sharing intellectual property and know-how supported by deep, mutually-beneficial long-term relationships with kiwifruit producers throughout the Northern Hemisphere.

Zespri sold $2.2 billion of premium Zespri Kiwifruit to 59 countries around the world last season and a newly-released report from the University of Waikato shows the industry is on track to create 29,000 new jobs around the country by 2030. The reality is that we are a small trading nation with an economy dependent on exporting to make our way in the world.

Lain Jager, Chief Executive of Zespri

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