1. New Zealand Red Meat: Getting product to market: A trade perspective New Zealand Cold Storage Association 84 th Annual Conference 7-9 August 2016 Sirma Karapeeva Trade and Economic Manager Meat Industry Association of New Zealand

2. A voluntary trade association representing New Zealand’s beef and sheepmeat processors and exporters. 28 member companies (over 99% of all exports) – mix of size and ownership structure: Four major processing & exporting companies Thirteen smaller companies Sixteen exporters supplied by processors. Members operate some 60 processing plants and employ 25,000 people nationwide.

3. Role of the MIA Advocates on behalf of its members. Is the interface between the meat industry and government. Facilitates policy formation on economic, trade policy, market access, industrial relations, compliance costs, environmental and animal welfare, technical and regulatory issues facing the industry. Facilitates whole of industry innovation projects (syndicates). Contracts with AHOs for provision of halal certification services and recruitment of slaughtermen. Is governed by a Council of 9 members’ CEOs plus an independent Chairman.

4. New Zealand Red Meat Industry Overview Red meat and wool exports of NZ$8.2 billion in year ended June 2016. NZ’s 2 nd largest goods exporter - 15% of NZ’s total merchandise exports. Export 92% of sheepmeat and 83% of beef production. Export to more than 120 countries. Fortunes driven by world prices. Business model based on: Market diversification Product diversification and maximising value Meeting highest standards Innovation.

5. Export Focused Market Diversity: In the 1960’s and … New Zealand sheepmeat and beef exports in 1961 (by volume) Sheepmeat Beef Source: Compiled by MIA from Statistics NZ data

6. Export Focused Market Diversity: … Today New Zealand sheepmeat and beef exports, ye June 2016 (by volume) SheepmeatBeef Source: Compiled by MIA from Statistics NZ data

7. Product Diversity: Co-Products The industry also produces and exports a wide range of co-products. Co-product export revenue NZ$1.4 billion or 19% of total beef and sheepmeat exports of $7.5 billion. Importance of maximising the value from each carcass. New Zealand exports of red meat and co-products (by value), ye March 2016 Source: Compiled by MIA from Statistics NZ data

8. Product Diversity: Changing product mix From this … Even in the mid 1980s, 75% of lamb was still exported in carcass form.

9. Product Diversity: Changing product mix … To this …

10. Product Diversity: Changing product mix … And this … Over 95% of sheepmeat is now exported as frozen or chilled cuts. Increase in exports of further processed products. Growth in use of retail ready packaging.

11. Product Diversity: Changing product mix Export lamb product mix, 1970/71 – 2014/15

12. Growing importance of Halal-certified meat New Zealand exports of halal-certified meat – 239,000 tonnes, ye 30 Sep 2015

13. Growing importance of Halal-certified meat

14. R&D, Innovation and Improving Processing Plant Productivity Improved productivity – 88% productivity gain (1980-2013). Improved regulatory compliance. Reduced contamination of meat – better food hygiene – improves shelf life of product. Improved carcass & pelt quality. Reduced manning and reduction in worker related injurie s.

15. Getting products to export markets: Trade and Market access Multiple domestic and overseas regulatory and customer requirements: Food safety, animal welfare, biosecurity safeguards Product traceability, truth in labelling Religious compliance Worker welfare Climate change and other environmental issues. Increased prevalence of behind-the-border barriers or non-tariff barriers (NTBs). Shifting trade winds from West to East - emerging markets challenges (unpredictability). Significant commercial consequences if trade is blocked.

16. NTBs can be more costly than tariffs Increased complexity. Increased costs of compliance. Increased unpredictability and confusion. Increased potential for requirements to be more trade restrictive than necessary. Increased delays, including at the border. Increased risk of trade blockages. Limitations of production flexibility and opportunities to maximise value. Significant commercial consequences.

17. Examples of NTBs facing the red meat sector Onerous premises audits and registrations. Onerous or unnecessary certification. Onerous import checks. Lack of transparency of requirements. Inconsistent technical requirements. Consularisation of documentation. Prescriptive and onerous labelling requirements.

18. Trade shocks due to NTBs NZ exports of beef and beef offals to Country A and Country B, 2000-2015

19. Can Free Trade Agreements help?

20. China/New Zealand Significant growth in exports since 2008. NZ’s largest market for sheepmeat and 2 nd largest market for beef. $1.5 billion in exports in ye June 2016. Good relationships at all levels – from political to commercial. Functioning Joint Management Committee under the FTA with an active work programme. BUT Technical market access issues remain: e.g. Meat protocols, plant listings. Progress is being made – but it takes time and the commercial consequences are significant.

21. Growth of exports to China

22. Taiwan/New Zealand A strategically important trade deal: Complements NZ’s existing FTAs with China and Hong Kong First mover advantage – our competitors do not currently have trade deals in place NZ’s 3 rd largest beef market taking $212 million of exports in ye June 2016. The tariff on beef was eliminated in 2015: Beef exports increased by 20% in 2015 following tariff elimination. The tariff on sheepmeat will be eliminated in 2017: Significant sheepmeat market (taking 9,000 tonnes in the ye June 2016).

23. Korea/New Zealand NZ’s 6 th largest beef market taking $116 million of exports in ye June 2016. NZ beef was trading over a 40% tariff rate ($52 million tariff duty paid). US, Australia and Canada enjoy a tariff advantage under their FTAs with Korea. Current tariff on NZ beef is 34.7% Compared to 32% for Australia and 26.6% for US beef. This is a ‘catch-up’ FTA to ensure NZ remains competitive in this key market. The tariff on beef will be eliminated over 15 years. Beef exports to Korea appear to be recovering.

24. Indonesia and AANZFTA In 2010, Indonesia was NZ’s largest market for offal ($23.1 mill) and 2 nd largest for beef after the US ($144.7 mill). Current tariff rates on beef and sheepmeat are between 0%-5%. Under AANZFTA all beef and sheepmeat will be duty free by 2020. BUT In 2011, Indonesia introduced import restrictions NZ beef trade shrunk by 80%. Indonesia is now our 7 th largest beef market ($61mill). In March 2015, NZ and US filed a WTO Dispute Settlement case against Indonesia.

25. Trans Pacific Partnership (TPP) Over NZ$2.8 billion of red meat exports to the TPP region in 2015. TPP will see the removal of tariff costs for all beef and sheepmeat products, with the exception of Japan. Japanese beef tariffs will be significantly reduced from as high as 50% to 9% over time. Once fully implemented, estimated annual tariff savings will be approx. $84 mill. TPP will also open the door to addressing some complex and costly NTBs. BUT will the TPP be ratified by all? NZ parliamentary process on-track to meet deadline. A number of other TPP parties are also on schedule. What will the US do?

26. EU/New Zealand FTA Strong and historic relationships. Long standing strategic objective for NZ as one of only 6 WTO members without a preferential trade deal with the EU. Most important market for high-value lamb products, taking approx. 67% of NZ’s chilled lamb exports. Important beef market – particularly for high value cuts. Market with the second-highest tariff burden for the sector, behind only Japan. In 2015 NZ red meat exports to EU totalled $2 billion: 40% of NZ’s total exports to EU (sheepmeat alone is 28% of total NZ exports). Supportive of the government’s effort to negotiate a FTA with the EU.

27. And what about Brexit? A period of uncertainty as UK and EU negotiate their trade relationship and the UK negotiates its WTO commitments. Under WTO, NZ’s overall sheepmeat and beef access cannot be eroded. UK and EU are both very important markets by value and volume. Both markets take a complex mix of products that helps to maximise the value. Maintaining NZ’s trade access is vital and a top priority for the sector. Once the UK is ready, we would be interested in an FTA with them.

28. Can Free Trade Agreements help? Trade deals are critical to remaining competitive in the global market place. Eliminating tariffs is a critical first step. For example: FTAEntry into forceCurrent meat trade% change since EIF China2008$1.5 billion+418% AANZFTA2012$551 million+3% TaiwanNov 2013$287 million+54% KoreaDec 2015$182 million-6%

29. Can Free Trade Agreements help? NTBs can and do restrict New Zealand’s trade opportunities regardless of the tariffs applied. NTBs can be more costly than tariffs. Some FTAs include robust mechanisms to address NTBs. The challenge is to fully utilise available mechanisms to New Zealand’s benefit. The government’s focus on NTBs through the Business Growth Agenda is timely and welcome.

30. Thank you