Tariffs cost NZ $1.5bn a year, ANZ says

Monday 4th April 2011 1 Comment

Free trade agreements being negotiated now could mean a big reduction in the $1.5 billion annual bill for tariffs this country pays on its $18.5 billion worth of exports, ANZ says.

The dairy industry alone paid $1.07 billion worth of tariffs in 2010, equal to 10.7% of export earnings, the beef industry paid $183 million or 9.8%, and kiwifruit paid $105 million or 10.8%.

Broken down to the level of the individual farmer or grower that translated into foregone revenue of about $15,900 for an average meat and fibre farmer, an article in the ANZ Weekly Focus report said.

With a net profit around $85,000 forecast for the 2010/11 season - the highest since the early 2000s - that amounted to around a 19% hit on the back pocket.

For the average dairy farmer looking to a net profit of $300,000, the foregone revenue of $100,950 amounted to a 34% hit on profitability.

Kiwifruit growers were among the hardest hit with foregone revenue of nearly $50,000 per grower when compared to a cash operating surplus of $74,000 in the 2010 season, making a "whopping" 67% hit.

Tariff rates in Asian markets, including 45% in Korea, 20% in Taiwan and 13.3% in China, reinforced the need to focus free trade agreement efforts in the Asia-Pacific region, the article said.

Major negotiations New Zealand was taking part in included the Trans Pacific Partnership, aiming to establish free trade between nine countries, among them the US, Australia and Singapore. A long term goal was for the partnership to cover all the countries in the Asia-Pacific Economic Cooperation organisation.

"This will provide an important route through which New Zealand can rapidly expand market access to the Asia-Pacific region."

Other negotiations were also under way with India, South Korea, and Russia.

Countries with which this country had free trade agreements covered almost 2 billion people and 15% of global gross domestic product. They accounted for almost half of this country's merchandise trade and had been growing at a much faster rate than had global growth.

The agreements being negotiated covered a further 1.8 billion people and 32% of global GDP. They now accounted for about 20% of New Zealand's trade.

Academic literature showed that growth in a country's GDP tended to be closely aligned to growth in exports, the article said.

Fifty years ago this country had strong commodity prices and a lot of preferential trade access, but conditions in both areas had deteriorated massively, the article said.

"Right now commodity prices are strengthening. Restoring the same degree of trade access could deliver a winning quinella."

NZPA

Comments from our readers

On 5 April 2011 at 10:17 am Ownerbydam said:

The Trans Pacific Partnership is a farce. We'll gain access to these markets with reduced tarrifs but at what cost? Pharmac will be disbanded at the bequest of international pharmaceutical corporations so they can sell their highly priced drugs of doubtful cost/reward benefit at an estimated net cost to the crown of approximately $1.5Bn.