Major Product Outcomes
Sheepmeat
In the year to December 1993, sheepmeat exports totalled $1.34 billion, representing 13% of New Zealand’s agricultural exports and 7% of New Zealand’s total merchandise exports. The key export market for New Zealand sheepmeat is the EU, followed by a range of other markets including several in the Middle East and North Asia.
The voluntary export restraints to the EU, which currently limit New Zealand’s exports to 205,600 tonnes at an applied tariff of zero, will be replaced in 1995 by a tariff quota equal to 225,000 tonnes, with the tariff bound at zero. Under the agreement, there will be no restrictions on the volume of chilled sheepmeat New Zealand can send to the EU. In 1994, New Zealand’s chilled exports are limited to 13,500 tonnes.
Based on recent (1992/93) prices and the current product mix, the 19,400 tonnes of additional access is likely to lead to an increase in the value of New Zealand’s sheepmeat exports to the EU of around $80 million annually. The net benefit to New Zealand will, however, be less than this figure: in order to fill the new quota, product will initially be diverted from other, lower paying, markets. This caveat also applies to the market access gains for other key products discussed in this article.
A significant factor influencing sheepmeat returns in recent years has been the very large exports (over 1 million tonnes annually) of subsidised EU beef to many markets where foot and mouth disease is endemic, especially those in the Middle East and North Africa. This cheaper beef exerts downward pressure on New Zealand sheepmeat prices in these markets. Subsidised EU beef exports will be capped at around 800,000 tonnes by 2000. This compares with exports in 1993 of around 1.1 million tonnes. Reduced availability of subsidised beef, along with reduced subsidised white meat and grain exports and improved market access opportunities, should buoy sheepmeat prices. However, other developments, such as lower grain prices and greater competition from pork and poultry in the EU, could offset some of these benefits.
New Zealand Agricultural Exports - year ended December 1993
Beef
In the year to December 1993, beef and veal exports totalled $1.43 billion, representing 14% of New Zealand’s agricultural exports and 7.5% of New Zealand’s total merchandise exports. New Zealand’s key export markets for beef are the US, Canada, Japan and the ROK.
Although not embodied specifically in the Uruguay Round agreement, one very important outcome for the beef industry is the EU’s reaffirmation of the Kerin/Andriessen accord, whereby it will not export subsidised beef to important Asian and Pacific markets, namely Japan, the ROK, Taiwan, Singapore, Malaysia, and Papua New Guinea. The continued quarantining of this region from subsidised EU beef is essential if exporting countries free from foot and mouth disease, such as New Zealand, are to benefit from the continued opening up of these markets over the medium term.
In terms of market access, the main benefit for the beef sector is the tariffication of the US Meat Import Law (MIL), thereby ending the "voluntary" restraints imposed on New Zealand and Australian beef exports to the US. This removes a significant source of uncertainty from New Zealand’s most important beef market.
To replace the MIL, the US has established a tariff quota of 656,621 tonnes allocated by country-specific quotas (access in 1994 was limited to 552,838 tonnes). For exports above the tariff quota level, a tariff rate of 31%, reducing to 26% by 2000, will be the only barrier.
New Zealand’s permanent country-specific tariff quota is set at 213,400 tonnes, an increase of some 29,000 tonnes on its 1994 access level. The rate within the tariff quota will remain at 4.4 US c/kg. Assuming recent prices, this increased access is likely to boost New Zealand’s beef export earnings from the US market by around $125 million annually.
Canada has offered a global tariff quota of 76,409 tonnes at zero tariff. Of this, New Zealand has been granted a country-specific tariff quota of 27,600 tonnes. Exports in excess of the global quantity (which includes the New Zealand share of global access) would be subject to a 31% tariff, declining to 26% by 2000. New Zealand sent in excess of 30,000 tonnes at the existing tariff of 4.4 Canadian c/kg before a 25% surcharge was applied in 1993. Total Canadian beef imports, other than from the US, exceeded 120,000 tonnes in 1993.
Though not a direct Uruguay Round commitment, Japan has agreed to reduce its tariff on beef from 50% to 38.5% over the implementation period - provided cumulative imports in any year do not increase by more than 17%. If, at any time, it appears that imports will exceed 117% of the previous year’s level, the tariff will snap back to 50% for the remainder of the year. This provision could restrict market growth.
Continuing growth in access for beef to the ROK beyond the current arrangement to 1995 has also been agreed. This will see global access to the Korean market grow from a minimum of 99,000 tonnes in 1993 to a minimum of 225,000 tonnes by the year 2000. Beyond 2000 the Korean market will be fully liberalised, but subject to a 41.6% tariff, reducing to 40% in 2004.
Dairy
In the year ended December 1993, dairy product exports totalled $3.39 billion, representing 33% of New Zealand’s agricultural exports and 18% of New Zealand’s total merchandise exports.
Initial analysis suggests that the dairy industry will probably be the largest beneficiary of the export subsidy disciplines. In recent years third country markets have become increasingly distorted as the US and EU in particular have used their subsidy mechanisms to capture market share. Milk powder and cheese markets should respond relatively quickly to the reducing levels of subsidised production. This fact, plus the many enhanced market access opportunities, should mean greater stability in dairy prices received by farmers. Other factors such as general supply and demand trends will continue to inject price variability from year to year. However the overarching source of significant price volatility, namely continuing resort to unfair export subsidisation, will, over time, become much less of an influence.
Under the market access provisions, New Zealand has gained country-specific access for 76,667 tonnes of butter to the EU at a levy of 868.8 ECU/tonne. Current access is 51,830 tonnes of butter at a levy of 408.6 ECU/tonne. This means that there will no longer be a need for annual negotiations on access, which will now be placed on a long-term footing.
As a result of this increased access, New Zealand’s export returns for butter from the EU are likely to rise by around $50 million annually.
For cheese into the EU, New Zealand has maintained its existing country-specific tariff rate quota of 3,000 tonnes of cheese for processing at a reduced levy of 170.6 ECU/ tonne, and 6,500 tonnes of cheddar cheese for direct consumption at a levy of 170.6 ECU/tonne.
Above these country-specific cheese tariff quotas, the EU is also providing additional global access for cheese commencing at 18,000 tonnes in 1995, rising to 104,000 tonnes in 2000. New Zealand can expect to secure some of this additional access.
New Zealand could benefit from additional opportunities to market milk powders to the EU, as there is a new global access quota rising from 41,000 tonnes in 1995 to 69,000 tonnes by 2000.
The US has offered New Zealand additional country-specific access for cheddar cheese at a reduced tariff rate, rising to 5,100 tonnes by the year 2000. This should yield more than $65 million over the six year period.
Canada has offered New Zealand a country-specific quota of 1200 tonnes of butter, rising to 2000 tonnes by the year 2000 at a reducing tariff rate.
New Zealand has a country-specific tariff quota for 11,550 tonnes of prepared edible fats (a blended mix of butter and vegetable oil) into Japan, maintained from current levels. Access has also been secured for current levels of butter, cheese, and milkpowder exports. Japan will also preserve its 135,000 tonnes (liquid milk equivalent basis) of global access for a ‘basket’ of dairy tariff lines.
The ROK has significantly liberalised its dairy market, with reducing tariff-only protection from 1995.
Mexico has eliminated its quantitative restraints, including import licences, on all dairy products.
Wool
In 1993 New Zealand’s wool export receipts totalled $1.12 billion, representing 11% of New Zealand’s agricultural exports. Tariffs on wool at the raw and scoured stage are already low in most GATT member countries and consequently wool will receive little direct benefit from lower tariffs. However, demand for wool may increase indirectly through the progressive phasing out of the Multi Fibre Arrangement’s quota restrictions on textiles and apparel (MFA) over the period to 2005.
The gradual relaxation of quotas on textiles and apparel goods should flow through to lower consumer prices and boost world consumption of apparel and textile goods. An offsetting factor for wool, however, is that the MFA has tended to encourage exporting countries to concentrate on production of apparel using higher priced fibres such as wool to extract maximum value from their quotas. This trend might not continue if the removal of quotas leads to increased use of cheaper fibres such as nylon.
Horticulture
In 1993 fruit and vegetable exports totalled $1.22 billion, accounting for 12% of New Zealand’s agricultural exports.
Japan and the EU are to reduce their tariffs on kiwifruit and apples. Japan is to reduce its tariff on kiwifruit from 8% to 6.4% and its tariff on apples from 20% to 17% over the implementation period. The EU will reduce its kiwifruit tariff from 11% to 8.8%, and its tariffs on apples; during the New Zealand apple exporting season the apple tariffs will fall from 8% to 4% (January to March) and from 6% to 4.8% (April to July). Japan is to cut tariffs on New Zealand sweetcorn, squash and some berryfruit by 40%.
The US has offered to eliminate its 8.5% tariff on kiwifruit, though anti-dumping deposits on New Zealand kiwifruit remain, and will continue to limit exports.
Deer Products
In 1993 New Zealand venison exports reached 14,850 tonnes, worth $134 million, while velvet exports returned $50 million. Assuming 1993 prices, the average tariff reductions arising from the Uruguay Round negotiations could lift venison returns by around 25 cents/kg by the year 2000. Similarly velvet returns could be boosted by around $16/kg by 2000.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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