Fingers crossed
Mike Petersen is one person who's closely monitoring the progress of the FTA with the EU.
Mike Petersen, the former NZ special agricultural trade envoy and director of a number of NZ agri-related companies, believes face-to-face contact is what shifts negotiations. He says that was evident last year when Trade and Export Minister Damien O'Connor and top MFAT Trade Negotiator, Vangelis Vitalis went to Europe and saw them lockdown an agreement in principle on the free trade agreement (FTA) with Britain.
Petersen says a major priority for NZ in 2022 is to lockdown the FTA with the EU.
"But it's going to be incredibly difficult with French elections in April and, of course, agriuculture being so sensitive over there," he told Rural News.
"We are going to struggle until the French elections are over and then who knows what sort of government France will have after that. We have been talking about this for a long time and we need to make sure we have got Europe alongside because the 27 nations of Europe are incredibly valuable to us with a lot of our products shut out of that market including dairy."
According to Petersen, while politicians are important to get FTAs across the line, these agreements also need business to business contact because often the pressure is not coming from the politicians, but it's coming from the people on the ground. He says the business and private sector can play a really important role in this.
"And at the moment that is almost impossible and we have been out of the market for two years now," he says.
Petersen says business people are frustrated at not being able to get overseas and says the goodwill that has been built up over the years is starting to disappear. He says this is often due to changes of personnel in both NZ and overseas.
"This is a real concern. It's like credit in the bank, it lasts for a fair while, but it erodes away gradually over time."
He points to China as a case in point. Petersen says prior to Covid, there was a lot of face-to-face contact with Chinese politicians and business people which this resulted in a lot of credit being built up. But he points out there has been no travel for two years and, in the case of China in particular, face-to-face contact is what matters.
'Ducking and Diving' Pays Off
Meanwhile, Petersen says that demand and prices for all NZ primary products are looking good and this is a positive for the country in the coming year.
He believes this is largely due to the exporters who deserve a huge amount of credit for the returns they have been able to get out of the market despite Covid. He says they have been 'ducking and diving' around the world trying to navigate an incredibly challenging world with Covid.
"They have done amazingly well getting premium prices, which have largely offset to this stage the cost pressures that are coming through," Petersen told Rural News.
But he says getting the product to market and obtaining the same good prices with Omicron around will be the biggest challenge for 2022 and dominate the thinking in the primary sector.
"I think this will be an ongoing problem in 2022 and some commentators are saying it will get worse."
Petersen says rising air and sea freight costs and unreliable shipping schedules have put paid to the export of many added value items - such as some chilled meat. He says there are exporters who are going back to shipping frozen products to avoid the risk of these failing to get to destinations on time. He adds that this is compounded by a shortage of labour in NZ, which means there isn't the staff to produce value-add products here.
"People are now starting to commoditise and do less value add here in NZ which is not what we want," Petersen adds.
"In fact, we want to go the other way but the reality is some of that added value will be created offshore. But even then there are problems because most markets in the world are constrained by a lack of labour - so this not just an NZ problems, it affects others around the globe as well."
Petersen says he detects an air of nervousness in the primary sector with exporters not knowing just where things are going to land in the coming year. He says even though there are predictions of good returns, people are worried about the future.
