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Chief trade negotiator Vangelis Vitalis travels the world to get New Zealand farmers better deals, but he warns the golden weather for trade is over. He talked to a group of people in South Otago including Shawn McAvinue about how New Zealand needs to be able to prove it can farm sustainably to ensure the success of its trade recovery strategy.
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New Zealand must be able to prove it is farming sustainably to secure future trade agreements, the Government’s chief trade negotiator warns.
Ministry of Foreign Affairs and Trade deputy secretary for trade and economic affairs Vangelis Vitalis was the guest speaker at the Beef + Lamb Southern South Island Farmer Council annual meeting in Clinton last week.
The trade negotiation business had got “harder and harder” for New Zealand in the past six years, he said.
“The golden weather is over, but we have a strategy to manage this.”
The golden weather began when the World Trade Organisation was established in 1996 and agriculture became part of a rule-based trading system.
For the first time, a system allowed small countries to sue big countries in a court in Switzerland to make them comply to a trade agreement.
New Zealand “took on the big guys” and won all of its 11 cases, including a case against the United States on sheep meat and a case against the European Union (EU) on butter.
The expectation was the system would result in export markets for agriculture becoming more open and financial returns for New Zealand farmers improving.
“That was true until about six years ago.”
The change came after the US government refused to reappoint judges in Switzerland, and continues to do so.
New Zealand could make a case but there were no judges to hear it, he said.
At the same time, the trade agreement The Trans Pacific Partnership failed to gain bipartisan support.
When the agreement was getting signed, nearly 30,000 protested against the agreement in Auckland.
“This is an agreement which generates incomes employment and productivity, but New Zealanders were sceptical.”
New Zealanders’ support of trade agreements was critical for negotiating deals with trade partners, he said.
Now countries New Zealand trade with were breaking the rules, imposing “non-science based requirements” on imports, increasing tariffs and there was “no recourse”.
“There is no system to hold them accountable.”
International trade was being impacted by “war, plague, famine, food security, climate change and no international leadership”.
In response, the New Zealand Government launched a trade recovery strategy nearly a year ago.
Part of the strategy was about ensuring New Zealand exported sustainable goods.
A proposal to price agricultural emissions in New Zealand, He Waka Eke Noa, was a contentious issue earlier at the Beef + Lamb meeting.
“The option of not doing anything is simply not going to work — we are going to pauperise ourselves if we don’t do something.”
International consumers were seeking environmentally friendly food due to their outlook on climate change.
“I do see some of the big markets out there are going to become a serious problem for us, if we don’t have an answer for the consumer.”
International supermarket giants were demanding proof of the environmental and carbon footprint of food they stocked.
He urged New Zealand farmers to find ways to tells its positive story of producing premium, sustainable food, which would resonate internationally.
“If we don’t have that story we are not going to get trade agreements.”
Six years of negotiations on the New Zealand and European Union Free Trade Agreement concluded in June this year.
“They looked to keep us out.”
The EU imported about 50,000 tonnes of butter a year, and New Zealand negotiated to supply 37,000 tonnes of it.
“That’s worth real money. Of course we wanted more, of course we wanted free trade, but you are talking to countries that do not understand that concept.”
Before the agreement, New Zealand could export about 127,000 tonnes of sheepmeat to the EU and filled about 70% of its quota.
New Zealand negotiated to increase its sheepmeat quota by 38,000 tonnes.
The next biggest sheepmeat supplier to the EU was Australia, with 20,000 tonnes.
Before the agreement, New Zealand had a quota to export slightly more than 1000 tonnes of beef, with a tariff rate of 20%.
Under the agreement, New Zealand could export 10,000 tonnes to the EU, and the tariff rate dropped to 7.5%.
“Did we want more? Of course we did and we expect when we review these agreements to make a case for more.”
As New Zealand had no trade tariff walls, New Zealand could not offer free access in the negotiations to the EU, because they already had it.
“What does a European negotiator have to gain with a free trade deal with New Zealand? The thing with trade agreements is you’ve got to ask yourself what you got but what you gave.”
The EU negotiator wanted New Zealand to dismantle the kiwifruit industry’s single desk seller structure and to extend the patent-term for some pharmaceuticals, which would result in a “sharp” increase in the cost of medicines for New Zealanders.
New Zealand declined both requests, resulting in the narrative for the deal focusing on New Zealand providing “high quality, sustainable” food to countries serious about sustainability.
The 4000-page agreement “almost fell apart at the end because the Europeans genuinely felt they were not getting anything out of it”.
The benefit of the agreement for New Zealand would be an extra $1.8 billion of export revenue on full implementation.
New Zealand would continue to secure trade deals if it maintained its reputation of being a “reliable, safe, sustainable” trade partner, setting itself apart from other premium food-producing countries.
Being able to prove the sustainability of the food New Zealand exports would encourage international politicians to vote favourably on trade agreements.
Politicians in countries including Europe and the US “picked over” trade agreements and had rejected other countries’ proposals because they farmed in an unsustainable manner.
He had met with the British Parliament and about 80% of the questions he had been asked were about animal welfare and sustainability.
In the European Parliament about 85% of the questions he fielded were on sustainability, and the rest on animal welfare.
New Zealand could still export goods to a country without a trade agreement, but the products would not be competitive in many markets due to tariffs.
“We don’t have that luxury internationally.”
The New Zealand Government did not provide its farmers similar protections, such as a tariff wall, so international farmers did not pay a subsidy to export goods to New Zealand.
China, the EU, India and US were the “big protectors”, accounting for 75% of subsidies in the global agricultural sector.
Nearly all of the other 25% global subsidisers were accounted for by Australia, Canada, Japan, Norway, Switzerland and the UK.
The subsidies reduced the return for New Zealand farmers, such as dropping the export revenue price for beef by 12%.
Trade agreements would help “level the playing field” for New Zealand farmers in global markets.
He had recently returned from working in London, Tokyo and Malaysia on the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CP TPP).
The CP TPP is a trade agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, which evolved from the Trans Pacific Partnership (TPP).
The amount of goods New Zealand exported to the 10 other countries in the CP TPP was the same amount New Zealand exported to China.
New Zealand’s dependence on China for trade posed a “real risk”.
A reason for his recent visit to London was because the British wanted to join the CP TPP.
“If you add the British we will be exporting more to that group of countries than we are to China.”
The CP TPP was about diversifying New Zealand trade, managing risk and building resilience.
Trade agreements, such as the CP TPP, had legally enforceable provisions, allowing New Zealand to sue a country which did not meet its trade obligations.
Under the CP TPP, New Zealand had recently opened a case against Canada for allegedly under-filling a milk powder quota.
New Zealand was using trade agreements “to stand up for itself when it felt like it had been cheated”, the same way it once did using the World Trade Organisation.
Signing more trade agreements and upgrading existing ones would help the New Zealand economy build resilience.
If New Zealand did not shape its own environmental rules, then its trading partners would force them on them.
“They know if you can’t meet it then you stay out and give their farmers free reign.”
Beef + Lamb chairman and Southern South Island farmer director Andrew Morrison, introducing Mr Vitalis to speak at the meeting, said many farmers thought they were the hardest workers in the world and discounted anyone who could not do a physical task.
“I’m pretty sure you guys didn’t get Covid three times in the last two years, negotiating trade agreements offshore for us. Vangelis puts everything on the line to deliver for our sector.”