by Macaulay Jones, Federated Farmers Senior Policy Advisor
The failure of the New Zealand Government to secure meaningful market access for the nation’s two dominant exports, dairy and red meat, via a free trade agreement (FTA) with the European Union (EU) demonstrates the folly of justifying poor domestic policies with the hope of elusive premiums from foreign markets.
The EU is a wealthy developed market, home to millions of discerning customers. If many politicians and commentators are to be believed, EU consumers are eager to grant additional market access and pay an overwhelming premium for New Zealand produce if only Kiwi farmers would stop arguing over the practicality and appropriateness of the barrage of regulations being rolled out by the Government. Yet despite the primary industry largely trying to work in good faith to make new regulations workable, such as by delivering on a promise to produce a report on how to best practically price agricultural emissions, a meaningful trade deal with the EU, home to millions of potential-premium-paying customers, was not signed.
Despite numerous farming organisations cooperatively working with Government departments on how to implement impractical sweeping reforms to critical sensitive issues such as agricultural emissions pricing, freshwater and biodiversity New Zealand dairy and red meat farming will not be benefiting from a trade deal with the EU that delivers ambitious and comprehensive market access for their exports. Not only was a meaningful trade deal between the EU and New Zealand not signed, but a trade deal that fails to deliver meaningful outcomes for farmers was signed.
There is a long and checkered history of FTAs being signed with the promise of future upgrades on key products that never eventuate and the poor market access outcomes that were announced in early July will likely be what New Zealand farmers are locked into when attempting to export to the EU for decades to come.
Before the EU-New Zealand FTA was signed, New Zealand Prime Minister Jacinda Ardern stated that she will come home from the EU without a deal if there isn’t a good one on the table. This is what many New Zealand farmers and farming groups think should have occurred. There were no high hopes by Kiwi farmers for the EU FTA. Expectations within the New Zealand farming sector regarding FTA negotiations were already low when in 2020 an EU market access offer was leaked and the then New Zealand Trade and Export Growth Minister David Parker stated that he was “disappointed by both the leak itself and the proposals within.” and quipping “We were hoping for a poultry offer…and we got a paltry offer.”[i] The EU’s insistence on including clawback provisions of numerous geographic indications (GIs) that are now commonly used generic terms, such as feta, also drew outrage from New Zealand farmers and severely lowered expectations on any outcome. Despite the already low expectations held by New Zealand farmers and farming groups, the deal itself even manages to fall short of these low expectations.
When the FTA was announced Federated Farmers of New Zealand’s National President Andrew Hoggard stated “That the Europeans’ protectionist mindset on livestock products remains entrenched is sadly not a surprise but the very small quotas agreed are considerably worse than we expected”.[ii] Hoggard also said that “…The verdict on our big two – meat and dairy – is ‘deeply disappointing’. This is a Free Trade Agreement in name only.”.[iii]
Other key agricultural organisations were just as disappointed as Federated Farmers, with the Dairy Companies Association of New Zealand (DCANZ) and the Meat Industry Association (MIA), not sharing the current New Zealand Minister of Trade and Export Growth Damien O’Connor’s assessment that “overall, this was an outstanding result for us.”[iv] The CEO of MIA Sirma Karapeeva stated that “we are extremely disappointed that this agreement does not deliver commercially meaningful access for our exporters, in particular for beef”[v]. Karapeeva also stated that “This is a missed opportunity for farmers, exporters and New Zealanders. It will mean our sector will not be able to capture the maximum value for our products, depriving the New Zealand economy of much-needed export revenue at a time when the country is relying on the primary sector to deliver when it matters most.”[vi]
DCANZ Chairman Malcolm Bailey was also unimpressed saying “the combination of very small quota volumes relative to the market size and trade-restrictive in-quota tariffs has this deal falling well short of being commercially meaningful for the dairy industry”.[vii] DCANZ was also quick to point out that it is not necessarily accurate to claim that no industry is worse off, with New Zealand farmers losing out on many value-adding GIs in the FTA. “The agreement also includes the loss of New Zealand cheese makers’ rights to feta and gruyere. It will also prevent any new business development opportunities for parmesan. This is a significant blow to the many New Zealand feta, gruyere and parmesan cheeses which were last night celebrated for their quality at the annual champions of cheese dinner.”[viii] The poor EU FTA outcomes delivered for New Zealand farmers are in stark contrast with the trade premiums that were used at times to justify controversial domestic policies such as agricultural emissions pricing.
In 2020 during a public webinar hosted by the New Zealand Agricultural Greenhouse Gas Research Centre, Agriculture Minister Damien O’Connor spoke about the need for agricultural emissions pricing to enhance our chances of good free trade agreements saying “In negotiating a trade agreement with the EU, and with the UK, both of those places are very proud of their efforts around climate change and emissions reduction”.[ix] O’Connor also said “If we can say we’ve included agriculture [in the Emissions Trading Scheme], that gives us momentum when it comes to negotiating that market agreement and so don’t underestimate the positives of this.“[x] The 2017 Government deciding to price agricultural emissions was a controversial decision and the policy has proven to be very scientifically, politically economically, socially and ethically complex. In an attempt to cut through this complexity the promise of additional trade market access and the threat of potential losses to existing trade market access were used by politicians, such as Minister O’Connor. The New Zealand farmers and stakeholders that played down the shortcomings in many domestic policies because of the promise of market access, will likely now be wondering what happen to the momentum of 2020 and what happened to the underestimated positives of pricing agricultural emissions.?
Despite a recent barrage of domestic policy reform in New Zealand, such as agricultural emissions pricing, the freshwater policy package and a revised biodiversity national policy statement, the Government signed a deeply disappointing EU FTA for New Zealand farmers. The disappointing EU FTA result shows that farmers should not enable politicians and commentators to silence debate on a wide range of domestic policy reforms by evoking the allure of market premiums or by evoking the threat of market shutouts. Rais the possibility of undermining critically important trading relationships can be an effective means of ending debate in a food exporting nation, such as New Zealand.
New Zealand farmers have an incredible story to tell, a story of sustainable pasture-based, efficient and innovative livestock farming systems that enhance global food security. This story can be both told better and enhanced with shrewd policy changes, but poor policy should not be justified by claiming to enhance this story with little evidence. New Zealand farmers are the envy of the world, farming without subsidies for decades and delivering exceptional economic, social and environmental outcomes for the nation. Farmers can always further improve on all fronts and the primary industry should continue to dynamically embrace change and innovate. However, these changes must be demanded, explained and justified on their own merit, and not because of the promises or threats from international markets that often go on unfulfilled. New Zealand farmers and farming groups should continue to support complex and costly policies if they believe such policies are warranted on their own merit. As an example, farmers should continue to support an agricultural emissions pricing mechanism if they believe it to be an appropriate means of incentivising the use of cost-effective emissions mitigation tools that lower global emissions. The paltry results of the EU FTA demonstrate that supporting complex policy proposals, such as emissions pricing, because of the political promise of trade premiums and market access may not be in the best interest of New Zealand farmers.