China is New Zealand’s key dairy export market. In 2017 exports of milk powder, butter, and cheese were worth $4.1 billion.
The tariffs are applied once exports reach a certain «safeguard» level, with the trigger point for milk powder, the biggest export, at the beginning of the season.
When the free trade agreement was signed in 2008, no-one envisaged Chinese consumer demand for Kiwi dairy products would be so strong.
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Fonterra is a giant in the China dairy sector.
Trade Minister David Parker told RNZ New Zealand was prepared to relent on the tariffs or else it might have to give up on other things in the negotiations. These included issues related to services and e-commerce.
The Dairy Companies Association of New Zealand said Australia, which had just recently negotiated an FTA, had a higher quality one. Although the safeguards end in 2024, New Zealand exporters will be at a disadvantage compared to Australian competitors until then.
China is not the only country that applies tariffs and non-tariff barriers to dairy imports.
The New Zealand Institute for Economic Research has estimated New Zealand is penalised to the tune of $1.3b a year by tariffs worldwide.
«There is no reason why tariff protection in Japan, the European Union, Korea, Mexico, or India should continue for any longer than in China. We note that the EU is a competitive exporter of dairy products; Mexico has already fully liberalised its dairy market to American exports; Japan is using annual emergency tenders to fill domestic shortages; and India is forecast to have a growing dairy deficit,» DCANZ chairman Malcolm Bailey said.
The Ministry of Foreign Affairs and Trade said it was in the sixth and final round of negotiations and it was too soon to talk specifics.
Dairy safeguards were just one issue that have been discussed in the negotiations, but there were many others.
A spokesman said by 2024 New Zealand would have the best access to China for dairy products of any country. Bailey acknowledged the assessment but said five years would be a long time for New Zealand dairy exporters to be at a tariff-rate-driven commercial disadvantage.
Another key area being negotiated is forestry. Logs and wood were the second most valuable commodity exported to China, reaching a record high of $2.5b last year.
New Zealand forestry interests want more production and work for processors locally. China takes more than two-thirds of New Zealand’s log exports, but it lags behind the United States, Australia and Japan for importing processed timber from New Zealand, such as sawn timber, panels and paper.
The MFAT spokesman said negotiators were seeking a better deal for processed wood and paper exports, one of the few product groups excluded from tariff elimination under the 2008 FTA.
Access for red meat is not a concern. The 2008 FTA achieved complete tariff elimination for New Zealand meat exports to China.
Meat Industry Association chief executive Tim Ritchie said the trade in sheepmeat amounted to $1.1b, with China taking 44 per cent of exports by volume, and 29 per cent by value.
Beef exports were valued at $710m for the year to the end of September and co-products such as leather and offal were worth $390m.
Since last year New Zealand had been granted the right to send higher value chilled meat.