Exporters warned about conceit by trade envoy
New Zealand's special trade access to China risked making exporters complacent and over-reliant on that single market, a top trade negotiator has warned.
The country needed more diversified export market to spread risk, Mike Petersen told farmers at the Waikato Rural Business Network's recent July meeting.
"It's not about China. Frankly, it's about our over reliance on one market."
Petersen said the country's meat companies were sending whole carcasses to China because the returns were so good. "I can't blame the companies for doing that but at the end of the day is that where our long-term future wants to be? Do we really want to be exporting commodity cuts to China for them to add the value and capture the wealth? I don't think so. I think China is making us complacent."
He compared the China situation to the meat industry's old reliance on the European market for sheepmeat.
Petersen is New Zealand's special agricultural trade envoy, representing the interests of New Zealand dairy meat, wool, horticulture and wine producers.
His role is to advocate for New Zealand's agriculture trade interests from the perspective of a practising farmer.
New Zealand's trade agreement with China was an incredible opportunity that should be grabbed, but there were opportunities in other affluent markets that we risked missing, such as the West Coast of the United States.
That region was going through an organic phase where customers were paying a large premium for that type of produce.
"People are using organics as a proxy for food safety," he said.
Organic products were seen as safe and New Zealand's food safety standards were as good as an organic certification.
"And probably better in many cases and I would argue that we need to be telling the New Zealand story as to exactly what that is the case and I think we can be commanding the same premium that those organics are fetching in those very discerning markets."
Petersen said he hardly saw any New Zealand produce within this market.
"My message is don't forget those affluent markets . . . as well as the emerging markets in China and South East Asia."
Petersen's role also involved improving co-operation between different companies to help progress agriculture offshore.
New Zealand was relentless in its desire to break down trade barriers and reducing the cost of getting into markets because it was so trade-dependent.
New Zealand exported 90 per cent of what it produced, and produced enough food for about 100 million people.
However, New Zealand's 4.5 million population could not eat everything it produced. "Frankly, New Zealand is one of the few countries that really care about this stuff."
He described the drawn out Trans Pacific Partnership (TPP) negotiations as like "water on a stone".
"You have to keep pushing and pushing and eventually you'll get there, and that's exactly what we're doing."
Key to the TPP was breaking down tariff barriers, which were "obscene".
Tariffs were a protection countries put on imported products to make their producers more competitive.
A tonne of beef leaving New Zealand for South Korea was priced at about US$5500. The importer had to pay a tariff of 40 per cent before they could sell it into that market. "All it does is penalise the consumer for buying the beef and the producer who is exporting it."
"They're insidious taxes and they are a huge disincentive to exporting."
Tariffs cost New Zealand sheep farmers $18,000 per farm per year, kiwifruit growers $40,000 per orchard per year and $65,000 per year for the average dairy farmer with a 380 cow farm.
"That's why it matters and it's a big cost to doing business."
They were also a huge barrier to adding value to agricultural products. If that same Korean-bound tonne of beef was made into salami, it would face a 72 per cent tariff, he said.
He also assured that New Zealand was not trading away sovereignty rights in signing the TPP when questioned by the audience.
He was confident New Zealand was "on the right side of the ledger" when it came to those discussions.
"[Trade Minister] Tim Groser is right on top of these issues and he is not about to agree to a deal that will disadvantage New Zealand in those areas."
Petersen said currently there was little global pressure on New Zealand to farm sustainably.
Instead that pressure was coming from the country's domestic population.
"The reality is that the global pressure on us to be sustainable is almost zero."
There was also no rewards or payments from overseas markets for meeting those standards.
"It's just literally a cost of having market access."
But he warned the room there were things happening offshore to farmers in other countries that could eventually come to New Zealand.
One of these was in parts of the United States where all water used in irrigation for fresh produce had to be of drinking quality standard.
He urged New Zealand farmers had to show more ownership around their use of resources such as water.
That meant having hard, but necessary conversations with farmers.
Most farmers wanted to do the right thing environmentally but were being let down by a small minority.
"We have to take more ownership and get the bad eggs out of the industry," he said.
Farmers had to be more creative in using resources efficiently.
That meant investing more in new technology such as solar energy and they had to strive for best practise to stop over-regulation.
That meant investing in research to ensure farmers remained at the leading edge of best practise in the world.
Farmers also had to be better at telling their story and a pan-pastoral sector strategy was needed to tell the good stories about farming.
"This is crucial. We do this very poorly as an agricultural sector," Petersen said.