EU-New Zealand trade deal puts European meat and dairy on the chopping board

01 Jul 2022 --- The EU and New Zealand have brokered a free trade anticipated to expand the capacity and ease for both parties to export their food products. However, in an already tough year ridden with sky-high prices for fertilizers, oil and gas, EU farmers fear the increased market pressure the trade deal will bring.

“We cannot see any gain that would be, by any means, reasonable in relation to the impact of the increased market pressure on the EU dairy markets,” Alexander Anton, secretary-general of Euromilk, tells FoodIngredientsFirst.

“The only positive outcome for consumers may be that New Zealand consumers will be protected against misleading cheese marketing when it comes to European cheeses with a protected geographical indication – but on that particular point, we do not yet have the details of the New Zealand-EU deal,” he outlines.

The deal will, most possibly, further increase the negative trade balance of the EU on agriculture, which reached €750 million (US$784 million) in 2021.

“The European Dairy Association (EDA) calls it an “extremely favorable deal” for New Zealand.”Proper management of TRQs is critical
Any additional ton of meat, butter or cheese that arrives at EU markets after the limit tariff quotes are reached will have to pay a tariff-rate quota (TRQ), which has not yet been disclosed.

“We know that for key sectors such as dairy, sheep and beef production this agreement is painful. Therefore, we call for a proper management and monitoring of TRQs on imports of agricultural products to avoid market failure,” says Pekka Pesonen, secretary-general at Copa-Cogeca.

“What we expect now from the European Commission is to assure that at least the management of the TRQ will be established in a way that doesn’t further play to the advantage of New Zealand’s dairy,” echoes a statement from the European Dairy Association (EDA).

Consumers win cheaper goods
The new trade deal will allow 91% of New Zealand’s current exports to the EU to arrive free of tariffs.

Consumers in the EU will see cheaper products in the aisles thanks to immediate tariff elimination for kiwis, wine, onions, apples, mānuka honey, as well as most fish, seafood and horticulture products.

Annual tariff savings will amount to NZ$37 million (US$23 million) just for kiwis alone; with total savings reaching NZ$110 million annually (US$68 million), according to the New Zealand government.

Meanwhile, EU exporters will be able to export pig meat, wine, sparkling wine, chocolate, sugar confectionery and biscuits, among other products, with no tariffs.

The agreement will also protect over 2,000 wines, spirits and some traditional products, adding to Feta cheese. Such as the already mentioned Asiago, Comté or Queso Manchego cheeses, Istarski pršut ham, Lübecker Marzipan or Elia Kalamatas olives.

Dairy, sheep and beef the “sacrificed lambs”
But the nascent trade pact has not been pleasing for industry parties from both sides of the world.

On one hand, the EDA calls the agreement an “extremely favorable deal” for the “small island country” – but concedes that EU dairy will “pay a high price”.“Annual tariff savings for New Zealand will amount to US$23 million just for kiwis alone.”

Copa-Cogeca warns that dairy, sheep and beef are the “sacrificed lambs” of the deal.

An additional 38,000 metric tons of New Zealand sheep meat, 10,000 metric tons of beef, 15,000 metric tons of butter and 25,000 metric tons of cheese will enter European markets duty-free.

In the case of beef, the concessions from the EU side have been particularly poignant, allowing for an eight-fold increase in the volume that will be shipped to New Zealand free of tariffs.

On the other side of the globe, Tucker considers the outcomes for the dairy sector of New Zealand as “very disappointing,” reflecting “the degree of protectionism which continues to afflict dairy trade globally and particularly amongst the EU dairy industry”.

Fonterra still believes that the deal could have been more ambitious.

“The agreement provides some small pockets of access for certain products over time. But overall, commercial opportunities for New Zealand products such as butter, cheese, milk powder and key proteins are constrained – relative to the size of the EU market – by a combination of small permanent quotas, in-quota tariff rates and quota administration requirements,” explains Tucker.

In the case of milk and dairy, the EDA highlights that the two trade partners are very different in terms of scale.

Notably, “85% of New Zealand’s milk (with 25.3 million metric tons per year and an average dairy herd size of 450 cows) are processed by one single dairy. Meanwhile, the European dairy sector (with 159 million metric tons per year and an average dairy herd size of 21 cows) is rather characterized by small size, regional dairies.

A limit to the amount of duty-free meat entering EU markets will still remain in place.Labeling considerations
Shining more light on concerns regarding geographical indications is Simon Tucker, director of global sustainability, stakeholder affairs and trade of New Zealand dairy company Fonterra. He says that, nonetheless, certain cheese brands from the isles nation will be able to use the terms parmesan and gruyere in labeling, which will not be protected by EU geographical indication clauses in the new deal.

However, New Zealand businesses will not be able to use the term “feta,” for example, after 2031.

According to the European Commission, Asiago, Comté or Queso Manchego are some cheeses that will maintain their geographical indication protection.

Climate action considerations
The deal also includes important climate action standards provisions.

“We acknowledge the commitments that both the EU and New Zealand have agreed upon with regards to incorporating the principles of the Paris agreement and sustainability in international trade,” adds Pesonen.

“[The deal] contains the most ambitious sustainability commitments in any trade agreement ever,” says Valdis Dombrovskis, EU executive VP and commissioner for trade.

New Zealand recently made a surprising revelation unveiling that the country is set to become the first nation in the world to tax farmers for their livestock methane emissions.

By Marc Cervera

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