The New Zealand dairy industry has welcomed China’s December 1 unilateral reduction in some tariffs on imported dairy products though the immediate financial benefit will not be large.
Dairy Companies Association executive director Kimberly Crewther said the tariff reductions would have a moderate but useful impact on trade.
“We also hope this development is a sign that the elimination of all remaining dairy safeguards will be an outcome of the China-New Zealand free-trade agreement (FTA) upgrade process, now under way,” she said.
Safeguards is FTA-talk for quotas, a volume of a product allowed in tariff-free, after which further trade incurs a tariff.
For example, the existing China-NZ FTA signed in 2008 had a safeguard of 5585 tonnes (in 2017) for all types of cheese but NZ sold more than 50,000 tonnes of cheese to China annually, most of it mozzarella for pizzas.
When China reduced the tariff level of cheese from 12% to 8% on December 1, the reduction effectively applied to the 45,000 tonnes-plus of trade above the safeguard level.
But the tariff reduction also applied to all other countries exporting to China.
NZ’s special agriculture trade envoy Mike Petersen said the FTA gave NZ products a head start with a tariff-free period early each year but that advantage over other countries had now been narrowed.
China’s announcement also covered tariff reductions of 15% down to 2% on some pre-packaged infant foods and 20% down to zero on hydrolysed protein formula for people with special dietary needs.
In Europe, commentators hailed the Chinese move as a big win for dairy multinationals like Nestle, Danone and Glanbia.
Crewther said infant formula out of NZ was already on zero tariff under the FTA, without safeguard.
She also said the four cheese categories mentioned in the latest announcement did not include processed cheese, or mozzarella, which was the bulk of our trade.
“Reduced tariffs have two-way benefits for the importing and exporting countries involved.
“Chinese consumers will benefit through reduced consumer costs and increased consumer choice while exporters will benefit as a result of the removal of a dead weight cost from supply chains.
“The dairy market in China continues to grow as consumers bring an increasingly diverse range of dairy products into their diets.
“Imported products are playing an important and complementary role in supplying this consumption growth alongside China’s domestic dairy producers.
“The development in the market over the last decade has been significant and there is scope for much more still to come as the gap between current Chinese dairy consumption levels (36kg/capita/year) and the dietary consumption targets for dairy products (110kg/capita per year) is closed.”
The financial benefits from tariff reductions would not necessarily flow to NZ dairy companies but be shared along the supply chain.