Thursday 14 April 2016 03:51 PM
Fonterra, Zespri supportive of TPP, see long-term gains from trade pact
By Sophie Boot
April 14 (BusinessDesk) - Fonterra Cooperative Group and Zespri International have voiced their support for the
Trans-Pacific Partnership at a select committee hearing, although neither could quantify the benefit of the treaty being
ratified.
Fonterra's director of global stakeholder affairs Philip Turner told the foreign affairs, defence and trade select
committee that the dairy cooperative was disappointed with the immediate outcome for its sector but sees longer-term
benefits.
"Although TPP falls well short of full liberalisation of dairy products, it will provide some limited new access for key
traded products," Turner said. "New Zealand exporters currently face prohibitively high tariff barriers on dairy
products. Dairy exporters in New Zealand will benefit more from being within the TPP than if New Zealand remained
outside it."
Turner said Japan, the US, Mexico and Canada were four of Fonterra's top ten markets, and had a collective trade of
US$2.56 billion in 2015. At the end of the transition period, New Zealand will have limited quotas to export butter and
milk powder to Japan, most cheese types and butter into the US, milk powder, cheese and butter into Mexico, and butter,
cheese and milk powder into Canada.
Fonterra hasn't done any deeper analysis of the potential financial benefit from tariff removal, saying there was
potential to draw inaccurate conclusions about the impact down the track and Turner dismissed the government's projected
gain from tariff reductions of up to $96 million at the end of the full term as "very hard to use as an indicator of
full benefits."
"Tariffs are paid by importers, not exporters, so it does not necessarily change into a benefit for New Zealand," Turner
said. "The tariff savings are simply a crude proxy for trade opportunities which would result from greater market
access. More market access will benefit our farmers, but trying to quantify that is very hard."
Zespri had a quantifiable number - $15 million, which was their calculation of tariff removal in Japan, the kiwifruit
marketer's most valuable market.
Zespri's chief operating officer Simon Limmer predicted a 33 percent growth in that market should the TPP be ratified,
although when asked how he could quantify the benefit to producers, he said the benefit would accrue more over time.
"It's not an immediate benefit back into growers' pockets, but the direct indirect benefit from that long-term
investment and a sustainable position in that long term market is going to be very valuable," Limmer said. "The $15
million is the exact quantum in terms of what the tariff represents, but it will flow through in the market in terms of
our ability to be more competitive. Now that flows through into additional volumes, additional run rates, our ability to
build volume in the market, which does have an indirect financial benefit for us through the supply chain."
Six of Zespri's top 20 markets are present in the deal - Japan, Malaysia, the United States, Singapore, Australia, and
Canada - which had about $500 million in collective sales in 2015. Zespri is expecting a 50 percent increase from those
markets to $750 million in sales by 2020.
(BusinessDesk)
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