FTAs Bear Fruit for NZ Horticulture in Global Markets

04 Dec 2014

A report released today by the horticulture industry shows tariffs imposed by other countries on our products cost New Zealand’s 5000 commercial growers an average of $36,000 each, which is a decrease of $8,000 on the 2012 figures.

The study says fruit and vegetable exporters paid an estimated NZ$181 million in tariffs to importing countries, a reduction of 25% on the 2012 figure of $241 million. At the same time export earnings increased by 4%. The number of growers for export has reduced since 2012.

The New Zealand Horticulture Export Authority and Horticulture New Zealand commission the report ‘New Zealand Horticulture – Barriers to Our Export Trade’ every two years, with funding support from the Ministry of Foreign Affairs and Trade.

The report is prepared by Wellington-based company Market Access Solutionz and is used extensively by both industry and government agencies for monitoring and negotiating international trade access and helping exporters to develop new markets.

About 60% of New Zealand’s total horticultural production of fruit and vegetables is exported, valued at just over $2.4 billion.

“It is very pleasing to see the eight free trade agreements now in effect are bearing fruit as overall trade value increases while the tariff cost drops,” Horticulture Export Authority chief executive Simon Hegarty says.

“With New Zealand’s free trade agreements being predominantly in the Asian region where high tariffs are common, this progress on tariff reduction enhances the great opportunities for developing trade in Asian countries,” HortNZ chief executive Peter Silcock says.

“That’s why we need to continue our efforts on developing and signing free trade agreements.”

As in the previous 2010 & 2012 editions, there is a notable trend for many importing countries to exploit the use of non-tariff trade barriers (NTBs), in the form of sanitary and phytosanitary (SPS) issues, and other technical compliance barriers.

“This NTB threat remains a concern to our horticulture export sectors. Unfortunately, reality tells us a reasoned case backed by sound science rarely prevails when up against politically motivated decision making,” Simon says.

“It is important that exporters and Government jointly recognise this risk to their business and appropriately resource it to deal with the importing country requirements.”

This report does not calculate the SPS costs of not being able to access a particular market. HortNZ and HEA are confident these costs are greater than the costs of tariffs calculated in this report.

“Technical barrier costs faced by our exporters include compliance with quota restrictions, grade standards, fumigation requirements, additional product testing, plus labelling and packaging rules. Food security and self sufficiency are emotive topics and vulnerable to political interference,” Simon says.

Our Biggest Markets

  • The European Union market is our largest, worth NZ$547m, next is Australia at $474m, Japan $405m and the USA $151m.
  • China ($147m) remains in fifth place while the Republic of Korea is 7th. The total value of trade with Korea has dropped almost 40% since 2012 as the very high tariffs applied by to a variety of products continue to impede growers and exporter investment in developing that market.
  • The Republic of Korea applies an average tariff rate of almost 39%, meaning New Zealand paid $25m in tariffs in this one market.
  • The value of exports to China continues to rise – up 40% to $147m and when Hong Kong is included, $205m. Kiwifruit exports account for 83% of the direct trade to China trade and 37% of the trade to Hong Kong.
  • The average tariff on all horticultural exports to all major markets is estimated to be 4.8% of exports by FOB (free on board) value, a significant decrease on the 6.78% reported in 2012.

Some Product Examples

Buttercup Squash: 41 export growers paid an average of $95,000 each in tariffs - 27% in the Republic of Korea – a total cost of $3.9m to the industry.

Kiwifruit: 2556 growers paid an average of $29,000 each - the highest tariff is 45% in the Republic of Korea, which equates to almost $20.0m. The tariff in the EU is 8.8%, a cost of $24.4m.

Onions: In 2014, 90 growers paid an average of $50,450 each in tariffs, on exports mostly to the EU (tariff rate 9.6% - Chile pays no tariff on onions into the EU). The Republic of Korea imposes a tariff of 50% on New Zealand onions, and a volume quota of 18,805 tonnes on all imports which is not country specific. Not surprisingly, there has been no trade in NZ onions to Korea since 2010.