REGULATORY, TECHNICAL AND TRADE POLICY NEWS UPDATE

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1 REGULATORY, TECHNICAL AND TRADE POLICY NEWS UPDATE If you know of somebody who might be interested in receiving this newsletter, please contact BY FARMERS. FOR FARMERS 1

2 TECHNICAL POLICY For more information on technical policy please contact (04) NEW ZEALAND Update on Theileria Ikeda in New Zealand Springtime is a peak period for reporting of cases of Theileria in cattle, mostly attributable to the impacts on animals associated with the stress of calving. This season has seen a decrease in the number of cases reported compared with the same period last year but this is believed to be linked with low dairy returns which influence farmers willingness to purchase veterinary services. It is also likely that many poor-performing animals, those most likely to become visibly affected by Theileria, will have been culled. There continues to be fewer cases in the southern North Island than further north, with Waikato having the highest occurrence of reported cases. Whilst sporadic cases have been observed, there is no evidence to suggest that there is an undetected propagating epidemic in the South Island. Progress towards electronic Animal Status Declarations (easds) B+LNZ has been supportive of the development of easds as a means of increasing efficiency across the supply chain and providing benefits for market assurance, biosecurity and food safety. Funded by the Red Meat Profit Partnership and with oversight from the Ministry for Primary Industries, OSPRI is currently preparing to roll out a trial or proof of concept (PoC) of easds for some stock received at three different meat processing plants. The PoC aims to capture all of the information currently required on the paper ASD form and encompasses sheep and cattle transported from farm to processor. The PoC is expected to become operational in early February 2016 and be completed by June The meat companies involved are managing communications with the subset of suppliers who are participating in the PoC. OSPRI has also approached stakeholders, including B+LNZ, to participate in the development of a Business Case to support a decision on full implementation of easds for all movements of stock, including farm to farm, farm to saleyard etc., that are currently out of scope for the PoC. BY FARMERS. FOR FARMERS 2

3 TRADE POLICY For more information on trade policy please contact (04) NEW ZEALAND New Zealand Korea Free Trade Agreement Minister of Trade Tim Groser announced in early December that all steps were now completed for the New Zealand Korea Free Trade Agreement to enter into force before the year end. This means that New Zealand red meat exporters will benefit from two rounds of tariff cuts in quick succession the first on entry-into-force of the agreement on 20 December, and a second round of cuts on 1 January The Free Trade Agreement (FTA) with Korea is a significant step towards reducing the overall amount of tariffs paid on New Zealand red meat exports. Tariffs of almost $323 million were paid on New Zealand red meat exports in A significant proportion of those tariffs were paid in Korea ($64 million) where applied tariffs are 40% on beef. Korea is New Zealand s fourth-largest beef market by volume, taking nearly $123 million of beef exports last year. However, trade volumes have dropped in recent years, partly due to competitors such as the United States, and more recently Australia and Canada, having a tariff advantage through their FTAs with Korea. This FTA will help improve the competitive positioning of New Zealand beef products in the Korean market. Trans-Pacific Partnership Negotiations The long-running Trans-Pacific Partnership (TPP) negotiations were finally concluded in early October. The TPP outcomes are good for the New Zealand sheep and beef sector, removing the vast majority of tariff costs in TPP countries and addressing non-tariff barriers in these markets as well. New Zealand s current sheep and beef sector trade to the TPP countries totalled more than $2.4 billion in 2014, almost one third of the sector s total exports to the world. Sheep and beef exports to TPP countries were charged a total of $94 million in tariffs in 2014, with the significant majority of that cost incurred on exports to Japan ($77 million). The vast majority of these tariff costs, around $72 million, will be removed over time by the agreement, improving the competitive positioning of New Zealand red meat products in TPP markets. Tariffs in 10 out of the 11 countries will be eliminated to zero over time. The exception is in Japan where tariffs are substantially reduced from 38.5% to 9% over 15 years, with a TPP wide safeguard that is set at above current trade levels. A summary of TPP outcomes for the red meat sector by country can be found here: TPP outcomes by country BY BY FARMERS. FOR FOR FARMERS 3 3

4 TRADE POLICY For more information on trade policy please contact (04) The text and schedules of the TPP Agreement were released in early November. Each TPP country now needs to go through their domestic legislative procedures. When a country has completed its domestic treatymaking processes, it will notify other TPP countries that it has done all that is required for the Agreement to enter into force. The TPP will enter into force 60 days after all original signatories have notified completion of their domestic legal procedures. If this has not occurred within two years of signature, the Agreement will enter into force 60 days after the expiry of that two year period if at least six original signatories accounting for 85 percent of the combined gross domestic product (GDP) of the original signatories have ratified the agreement. That last part of the clause is important. The United States and Japan between them represent almost 80 percent of the GDP of the twelve original TPP signatories. So the TPP cannot come into force if either of these countries fail to ratify the agreement domestically because there would be no way for the remaining TPP countries to fulfil the 85 percent of GDP requirement (even if the United States and all TPP countries but Japan ratify, the eleven would stand at 83 percent of GDP). So it will be particularly important to watch the domestic legislative procedures in Japan and the United States. Beef + Lamb New Zealand, through its office in Washington, will be focused on supporting US agricultural interests (particularly the red meat sector organisations) in their efforts to gain ratification from the US Congress. New Zealand European Union Free Trade Agreement The European Union (EU) announced in mid-october that it would seek to negotiate separate FTAs with both New Zealand and Australia as part of its trade strategy for the next four years. Several weeks later at the time of Prime Minister Key s visit to Europe, the EU and New Zealand announced that they would start the process for Free Trade negotiations. The European Union (EU) is a very significant export market for New Zealand red meat products, worth nearly NZ$1.9 billion for the year ended December The EU is New Zealand s largest market for sheepmeat exports and second-largest for wool exports. New Zealand still faces a range of tariffs (on beef and other co-products) and non-tariff barriers in this market. There are several steps that the EU needs to complete before FTA negotiations can commence. These include defining the scope and overall approach to the negotiations, completing an impact assessment and negotiating directives. These steps are expected to take around months to conclude, with negotiations expected to start in early BY FARMERS. FOR FARMERS 4

5 TRADE POLICY For more information on trade policy please contact (04) Regional Comprehensive Economic Agreement (RCEP) negotiations New Zealand is involved in negotiations for a Regional Comprehensive Economic Partnership (RCEP) agreement with 16 countries, involving the 10 members of ASEAN Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam plus the six countries with which ASEAN has free trade agreements Australia, China, India, Japan, Korea, and New Zealand. The RCEP aims to establish further economic cooperation between ASEAN and its regional trading partners, with a focus on trade in goods, services and investment. The RCEP countries are of importance to New Zealand as they have a total population of more than 3 billion, a total GDP of around $US21 trillion, and they account for about 27% of New Zealand s global trade, and 60% of our goods exports (2013 figures). Beef + Lamb New Zealand and the Meat Industry Association advised trade negotiators of the lines of interest for the red meat sector in advance of the RCEP negotiations to take place in mid-late December. Pacific Agreement on Closer Economic Relations (PACER) negotiations New Zealand and Australia are involved with negotiations for a regional trade and economic agreement, called the Pacific Agreement on Closer Economic Relations (PACER) Plus. These negotiations have been underway for a number of years. At a recent Pacific Islands Forum Trade Ministers meeting, Ministers instructed trade negotiators to conclude a high quality trade and investment deal by June Countries involved in PACER negotiations include Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. The primary objective of this agreement is to promote the economic development of Forum Island Countries through greater regional trade and economic integration. Given the importance of tariff revenue to many of these Forum Island countries, the PACER Plus agreement is unlikely to reduce all tariffs to zero, so it will be important to prioritize outcomes. Beef + Lamb New Zealand would welcome any feedback on exporter priorities for these negotiations. WTO trade facilitation agreement New Zealand formally accepted the World Trade Organisation s (WTO) Trade Facilitation Agreement (TFA) at the end of September. The TFA contains provisions to accelerate the movement, release and clearance of goods by streamlining customs and border processes. It also contains measures for cooperation between customs and other authorities on trade facilitation and compliance issues. This agreement is expected to be beneficial to New Zealand businesses and exporters as it will reduce the time and cost associated with clearing goods in the importing country, which is particularly important for perishable goods (defined as goods that rapidly decay due to their natural characteristics, in particular in the absence of appropriate storage conditions). The TFA will enter into force once two thirds of WTO Members (107 of the current 161 Members) have accepted it. BY FARMERS. FOR FARMERS 5

6 TRADE POLICY For more information on trade policy please contact (04) UNITED STATES Mandatory Country of Origin Labelling (CoOL) Update In early December, the World Trade Organisation (WTO) announced that Canada and Mexico could impose an amount of US$1 billion in retaliatory tariffs on U.S. goods in their dispute over mandatory country of origin labelling (CoOL). This ruling is the final step in a long running trade dispute over the mandatory U.S. country of origin labelling requiring the disclosure of born, raised, and slaughtered information on US meat labels. That law was challenged by Canada and Mexico at the WTO, who ultimately ruled that the U.S. requirements accorded unfavourable treatment to Canadian and Mexican livestock because, amongst other things, it required segregation of live animals (impacting on their live cattle and hog trade with the US). The only hope of avoiding tariff retaliation from Canada and Mexico is for the US to repeal its CoOL legislation. This is currently being attempted as a policy rider in the US$1.1 trillion Omnibus spending Bill currently being debated in the US Congress. B+LNZ has consistently opposed mandatory country of origin labelling for meat products in any market, noting that if consumers wish to know this information that it be provided on a voluntary basis. New Zealand has been a third party to this WTO dispute since it began in INTERNATIONAL International Beef Alliance (formerly the Five Nations Beef Alliance) New Zealand, represented by Beef + Lamb New Zealand, has been a member of the Five Nations Beef Alliance (FNBA) since 1993, alongside beef producer groups from Australia, Canada, Mexico and the United States. At the FNBA s most recent meeting in October, Brazil and Paraguay were welcomed as new members into the group. This necessitated a name change to the International Beef Alliance (IBA). The IBA now represents approximately 50% of global beef production and 64% of global beef exports. The Alliance advocates for trade liberalisation for the beef sector, including a focus on the reduction of tariff and non-tariff barriers to trade. The Alliance also remains committed to working together by sharing market information, engaging on animal health and sustainability issues and continuing to support its young leaders development program. New Zealand will host the annual International Beef Alliance conference in October World Trade Organisation Ministerial Conference in Nairobi Trade Ministers are meeting mid-december in Nairobi for the World Trade Organisation (WTO s) tenth Ministerial Conference where they are expected to discuss and hopefully agree on a possible set of deliverables from the areas of agriculture, development and least developed country issues and rules as well as look at the future for WTO s work particularly the Doha Round and so called new issues. However despite extensive preparations and negotiations leading into this meeting, there still remain significant disagreements amongst WTO members both over the content of the likely outcomes as well as how to address the WTO s future negotiating work. This leaves Ministers with some very difficult decisions to make both at this meeting and in the months and years ahead particularly as the structure of trade governance is changing so rapidly. BY FARMERS. FOR FARMERS 6

7 ENVIRONMENT For more information on environmental policy please contact (04) or NEW ZEALAND Environment Reporting Act The first of the New Zealand s Environmental Reporting Series: Environment Aotearoa was released in November, as a consequence of the Environment Reporting Act. It contains information on five environmental domains: air, atmosphere and climate, fresh water, land and marine. Biodiversity is also included as a cross-domain theme. Reports will be released on a three-yearly reporting cycle with one domain reported on every six months. Once every three years, a synthesis report covering all five domains will be produced. The synthesis report will focus on the overall picture of our environment including interactions between domains. Reports will present information on the state of the environment and how it is changing over time, the natural or human pressures that influence this state, and the ecological, economic, social, and cultural consequences of changes in the state of the environment. The reports do not include possible responses to the issues raised, to ensure separation between environmental reporting and policy decisions. Instead, environmental reporting provides the basis for discussions at both the national and local levels about how to best respond to the environmental issues New Zealand faces. Draft Environmental Reporting regulations have been released for public comment, with submissions closing on 23 December. Environment conference On 2-3 December just over 50 farmers from around the country gathered in Wellington for the second environment conference within a year. The aim of the conferences is to gather farmers together to share information, be challenged in their approach and support environmental leadership across the sector. Most importantly it s about investing in and supporting farmers to take knowledge, skills and enthusiasm back to their own farms and regions to support good environment outcomes for sheep and beef farmers. Conference sessions were based around themes such as the value and use of farm environment plans, working with others and how others view the sector, using Overseer more effectively for the sheep and beef sector, understanding phosphorus, and meeting and working with central and regional government. These session themes will be used to develop stories over the coming year that we can get out to a wider group of farmers as we continue to build support around good environmental management and outcomes for the sheep and beef sector. BY FARMERS. FOR FARMERS 7

8 ENVIRONMENT For more information on environmental policy please contact (04) or INTERNATIONAL United Nations Climate Change Conference (COP 21) COP21 wound up in Paris with an historic agreement committing the world to tackling climate change. The agreement targeted keeping increases in global temperatures to less than two degrees above preindustrial levels, and set a more ambitious goal of restricting increases to no more than 1.5 degrees, after strong lobbying by island states who will be the first to be affected by sea level rises. Developed countries are targeted to set economy wide absolute emissions targets. Clear signals are being sent that climate change ambitions globally must be raised if the temperature goals are to be met. This includes New Zealand, where total contribution in real terms is 0.15% of world emissions, and unlike most other developed nations the emissions profile is dominated by agricultural emissions (methane and nitrous oxide) arising from agricultural products that are largely exported. The agreement recognises the fundamental priority of safeguarding food security, and vulnerabilities to climate change, along with the importance of sinks (forestry), the importance of ensuring the integrity of ecosystems and the role of sustainable lifestyles and consumption and production. New Zealand s Intended Nationally Determined Contribution (INDC) is 30% below 2005 emissions levels by 2030, which corresponds to an11% reduction below 1990 emissions. The sheep and beef sector s emissions have been declining steadily and are now some 19% below 1990 absolute emissions. This has been achieved through increasing the intensity of production per animal so that for sheep almost the same amount of meat is being produced from half the number of animals. Beef cattle have also improved their intensity, producing more meat per animal than in While good progress has been made by the sector, the focus is on improving the rate of emissions reduction, with significant funding being allocated to research into tools to mitigate methane and other greenhouse gases produced as a by-production of animal digestion. BY FARMERS. FOR FARMERS 8