Tough trade
OPINION: Known for serious trade negotiations with global politicians, top NZ trade official Vangelis Vitalis also knows how to crack jokes.
The horticulture industry's 2012 Trade Barriers Report study says horticultural produce exporters paid an estimated $241 million in tariffs to importing countries, an increase of 2.5% on the 2010 figure of $235 million. At the same time export earnings increased by 6%. The number of growers has also reduced since 2010.
The New Zealand Horticulture Export Authority and Horticulture New Zealand commission the report New Zealand Horticulture – Barriers to Our Export Trade every two years, with funding support from the Ministry of Foreign Affairs and Trade.
The report, prepared by Wellington-based company Market Access Solutionz, is used extensively by both industry and government agencies for monitoring and negotiating international trade access and helping exporters to develop new markets.
About 60% of New Zealand's total horticultural production of fruit and vegetables is exported, valued at just over $2.2 billion.
"The catch for horticulture is that we are now reaping the benefit of great opportunities for trading in Asian countries, but there is a downside with that, because their tariffs can be considerably higher," HortNZ chief executive Peter Silcock says.
"That's why we need to continue our efforts on developing and signing free trade agreements."
As in the previous 2010 edition, there is an obvious trend for other countries to exploit the use of non-tariff trade barriers, known as 'SPS' – sanitary and phytosanitary barriers.
"We know difficult international trading conditions have put pressure on some countries to resort to these technical entry barriers for imported products," Horticulture Export Authority chief executive Simon Hegarty says.
"This is a huge concern to our horticulture export sectors. Unfortunately, reality tells us sound science does not always prevail where SPS barriers are concerned.
"It is important that exporters and Government jointly recognise this risk to their business and appropriately resource it to deal with the importing country requirements."
This report does not calculate the SPS costs of not being able to access a particular market. HortNZ and HEA are confident these costs are greater than the costs of tariffs calculated in this report.
"Technical barrier costs faced by our exporters include compliance with quota restrictions, grade standards, fumigation requirements, additional product testing, plus labelling and packaging rules. Food security and self sufficiency are emotive topics and vulnerable to political interference," Simon says.
Our biggest markets:
• Japan takes over as the number one market by value, followed by the European Union, Australia and the United States of America.
• Japan is worth $517m, the European Union $487m, Australia $481m and the USA $110m.
• China ($105m) has replaced Taiwan in fifth place while the Republic of Korea drops one place to 7th. Despite the total value of trade with Korea increasing, the very high tariffs applied by to a variety of products continue to impede growers and exporter investment in developing that market.
• The Republic of Korea applies an average tariff rate of almost 41%, meaning New Zealand paid $42.6m in tariffs in this one market.
• The value of exports to China has topped $100m and when Hong Kong is included, $160m. Kiwifruit exports account for 90% of the direct trade to China trade and 46% of the trade to Hong Kong.
• The average tariff on all horticultural exports to all major markets is estimated to be 6.78% of exports by FOB (free on board) value, a slight decrease on the 6.83% reported in 2010.
Some product examples:
Buttercup squash: 48 growers paid an average of $121,000 each in tariffs - 27% in the Republic of Korea – a total cost of $4.3m to the industry.
Kiwifruit: 2662 growers paid an average of $38,800 each - the highest tariff is 45% in the Republic of Korea, which equates to $35.0m. The tariff in the EU is 8.8%, a cost of $25.4m.
Onions: In 2012 105 growers paid an average of $40,400 each in tariffs, on exports mostly to the EU (9.6% - Chile pays no tariff on onions into the EU). The Republic of Korea imposes a tariff of 50% on New Zealand onions, and a volume quota of 18,805 tonnes on all imports which is not country specific.
