Focus on New Zealand: World trade view
According to data from the Meat Industry Association of New Zealand (MIA), meat exports in the 12 months to June 2012 were worth just over $6bn, a $200 million drop on the value recorded in 2011. The main contributor to this decline was a drop in both the volume and value of sheepmeat exports, which fell 7.5% and 9.4% respectively.
When it comes to sheepmeat, the European Union is far and away the biggest market for New Zealand exports, accounting for around a half of total export value. However, the region also saw the biggest volume losses last year, down 23,000 tonnes, or 16%, from the previous year. Lamb makes up the biggest proportion of sheepmeat exports to the EU market and there were declines in both chilled (-11.4%) and frozen (-17.3) volumes. A 4.7% increase in the EU import prices for lamb meant that the decline value of overall sheepmeat exports to the EU was less dramatic, down 13% to $1.4bn.
MIA analysts say that losses in the EU market were primarily the result of the economic uncertainty in the region, with many consumers switching away from lamb to cheaper alternative proteins. The increase in the price of both New Zealand and domestic EU lamb also had an impact on consumption.
The next biggest sheepmeat export losses were experienced in the North American market, which saw a 25.8% drop in volumes and 15.7% drop in value. These declines meant the region was overtaken by North Asia as New Zealand’s second biggest sheepmeat export market, although the US remains the second largest importer of New Zealand chilled lamb, importing NZ$135m of product last year.
South East Asia also saw declines in volume and value of sheepmeat exports, which was mainly a result of a big drop in exports to Malaysia. However, analysts point out that this drop came from an “exceptional year” for sheepmeat exports to Malaysia in 2011, meaning last year’s exports were more or less in line with 2010 figures.
In contrast to Europe and the US, North Asia saw strong growth in terms of both volume and value, which were both up 17% to 77,913 tonnes, worth $393m. Analysts say this growth is “almost entirely” due to China, which imported $247m worth of chilled sheepmeat last year and accounted for almost 80% of lamb shipments to the region. At the moment, a high proportion of these shipments are made up of lower value cuts like breast and flaps. However, economic growth means that there is increasing demand for higher value cuts in China and the country, which is New Zealand’s second biggest individual sheepmeat market by volume, overtook the US to become the fourth largest individual sheepmeat market by value last year.
The Middle East region also experienced modest growth in sheepmeat export volumes, up 2,146 tonnes to 32,283 tonnes, although value held steady at $186. The Middle Eastern market saw bigger increases in lamb volumes, which were up 24.5%.
In comparison to sheepmeat, New Zealand’s beef exports only saw a small decline last year. Figures from Beef and Lamb New Zealand (B+LNZ) reveal that beef volumes in the year to 30 September 2012 were down 2% on the previous year, to 332,011 tonnes shipped weight. North America remains New Zealand’s biggest beef export market and shipments to the US increased 4% last year, partly as a result of declining cattle production in the US. Beef shipments to Japan were also up 7% and shipments to China more than doubled, albeit form a very small base.
Shipments of beef to the EU, which only takes a small volume of New Zealand beef but is a relatively valuable market, decreased 12% to 11,500 tonnes, again reflecting the Euro zone recessionary trend. A notable decrease was also recorded in shipments to Indonesia, which reduced imports from 24,500 tonnes to 11,400, reflecting the country’s internal policy to reduce imports and aim for self sufficiency in beef production.
With established markets such as Europe and the US suffering in the midst of economic turmoil, the biggest growth for New Zealand meat exports has been experienced in emerging markets. Of these, Asia has seen the most significant growth, particularly China.
“The total value of the industry’s exports to China was NZ$827 million in 2012, and China has become a significant buyer of co-products such as tallow, casings as well as raw hides and skins, but the growth of sheepmeat exports to China has been particularly notable,” explains Tim Ritchie, chief executive officer of the MIA. “New Zealand exported 15,000 tonnes of sheepmeat to China in 2000. This had grown to nearly 78,000 tonnes in 2012, when China overtook the UK to become the industry’s largest market for sheepmeat by volume.”
South East Asia has also become an important region for beef exports over the last decade, particularly Malaysia and Indonesia, although Ritchie adds that “market access issues have had an impact on exports to both these markets.”
As with any international exporter, New Zealand faces a range of market access issues of varying severity, be they complete barriers to trade or hindrances that add significant cost or restrict volumes or flexibility. “Market access issues can include formal tariff barriers, quotas or unjustified technical and sanitary requirements that preclude trade,” Ritchie explains.
New Zealand is currently experiencing “very serious tarriff barriers” in significant beef export markets including Japan, Korea and the EU, says Ritchie. The import licencing regime in Indonesia has also had a “very detrimental” impact on a previously thriving beef trade, he adds. “Import restrictions introduced as part of a self-sufficiency policy have significantly impacted on New Zealand’s exports over the last two years, with exports last year declining to just over 10,000 tonnes, approximately a fifth of what they were in 2010 before the import quota restrictions were imposed.”
Trade agreements are key to reducing barriers and improving market access and Rob Davidson, executive director of B+LNZ Economic Service, says they are therefore a major focus on both industry and government.
“New Zealand has implemented trade agreements with Australia (1983), Singapore (2001), Thailand (2005), China (2008), the Association of South East Asian Nations (ASEAN) (2010), Malaysia (2010) and Hong Kong (January 2011. Negotiations were concluded in 2009 with the Gulf Co-operation Council (GCC), but these are still outstanding due to differences over the live sheep trade,” he explains, adding that negotiations are also currently underway with Korea, India and the customs union of Russia, Belarus and Kazakhstan.
New Zealand is also participating in the Trans-Pacific Strategic Economic Partnership (TPP) negotiations. The partnership, which currently includes Australia, Brunei Darussalam, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam, is working towards establishing a free trade agreement that will allow for improved trading conditions and greater economic integration across the Asia Pacific region.
Both B+LNZ and MIA were present at the most recent round of TPP negotiations, which took place in Auckland in December 2012. Focus for both organisations was ensuring that negotiators worked towards the elimination of agricultural tarriffs and other technical barriers. “The TPP agreement has the potential to create new opportunities for all red meat exporting countries through improved market access, reducing both tariff and non-tariff barriers, and trade facilitation in the Asia Pacific region,” said MIA chairman Bill Falconer last year.
Negotiations are also expected to commence this year for the Regional Comprehensive Economic Partnership (RCEP) Agreement, which has similar aims of trade liberalisation and economic integration, and a target completion date of 2015. “RCEP members include the ten ASEAN countries and the partners with which they have already signed Free Trade Agreements; New Zealand, Australia, China, India, Japan, and Korea,” explains Davidson.