$10m in tariffs could go

Talks to pave the way for United States entry into a Trans Pacific Partnership trade agreement could eventually remove $10.3 million of tariffs from New Zealand export beef.

Meat & Wool New Zealand chairman, Mike Petersen, said the negotiations were a major step toward US trade liberalisation within the Asia/Pacific region.

He said removing the tariff might be a relatively minor financial benefit, but would put New Zealand on an even footing with other trading nations, and provide a small increase in farmer earnings.

"This $10m is taxes to a foreign government that the Australians do not have to pay. The margins are fine for beef, particularly our market for manufacturing beef and while $10m does not sound much it all helps and is US2c/pound (quota tariff of US4.4c/kg) extra in farmers' pockets. It is making us less competitive than Australia."

The United States confirmed this week it would start negotiating entry to the partnership in a formal notification to Congress after President Barack Obama earlier signalled interest during the Apec meeting in Singapore.

The negotiations are expected to be complicated, with New Zealand joined at the TPP table by the US, Australia, Singapore, Brunei, Chile, and Peru, with Vietnam stepping in as an observer with a view toward full participation.

Petersen said the US move was a positive sign it was looking at the agreement countries for greater trade.

"That is symbolic after a period of relative inactivity. With the Obama administration the US has come out strongly and notified their intent to negotiate this agreement and it is a significant message from the US to get back on the trade liberalisation page."

New Zealand has a beef quota into the US of 213,000 tonnes, second only to Australia, but only supplied 171,000 tonnes in the year ending September. The US is New Zealand's largest beef market, worth $793m and 42 per cent of total beef exports by volume.

Meat supplied above the quota would incur a higher tariff of 26.4 per cent.

Meat & Wool predicts more beef cows will emerge from the dairy herd for the manufacturing beef market and the quota to be filled in the next two years.

Petersen said the dairy herd was expected to increase and the US was a key area for the product with potential for growth with improved access. Rural service and other businesses would benefit from further trade flows in the Asia/Pacific, he said.

"History has shown often the biggest benefit of a trade agreement is not the dollar amounts, but the huge change of mindset which occurs, and business naturally looks [to go] where these trade agreements are." Petersen said Meat & Wool had been working hard with farming and political leaders over many years to demonstrate New Zealand beef was not a threat.

He said it was crucial to gain the support of cattle producers otherwise the agreement would not go ahead as they were a powerful lobby group.

Meat & Wool will provide background information and analysis in the next few months for government negotiators when they deal with agriculture in trade negotiations.

Other statistics:

- New Zealand pays tariffs of US0.7c/kg to 2.8c on sheepmeat exports to the US, the second most valuable market for lamb behind the European Union. New Zealand exports about 19,000 tonnes of sheepmeat worth about $236 million a year.

- New Zealand exported 2151 tonnes of wool (clean) to the United States in the year ending September.

- © Fairfax NZ News