Free trade deals save millions

Free trade deals have saved multi millions of dollars, Beef + Lamb New Zealand says.

By its calculations, New Zealand’s Free Trade Agreements (FTAs) delivered tariff savings of more than $160 million on sheep meat and beef exports last year.

Beef and Lamb chief executive Scott Champion said those savings would grow as tariffs continued to come down and exports grew.

“The good news, I guess, is how big some of the savings are compared to if those free trade agreements weren’t in place.”

Dr Champion said red meat was one of the most protected products in the world and, especially for beef, the amount of tariffs being paid was still significant.

“It’s about $161 million saved, compared to not having FTAs in place, but the total tariff bill is still about $326 million.

“We have a lot of discussion – often publicly – around whether we should be doing free trade agreements, or shouldn’t we, and what this data really suggests is that… free trade agreements deliver significant savings to sectors, and particularly primary industries.”

Protection limits choice and adds costs for consumers, distorts markets and reduces income for producers.

It can also facilitate corruption as those seeking market access or to limit access for others seek to influence those with the power to confer favours.

The only real beneficiaries from trade restrictions are politicians, bureaucrats and the protected businesses who gain at everyone else’s cost.

13 Responses to Free trade deals save millions

  1. Will Dwan says:

    A’int that the truth. People telling us how we may or may not dispose of our own property. Who do they think they are?


  2. Dave Kennedy says:

    Free Trade agreements are open to abuse and very often the larger power in such agreements tend to do significantly better, as in the Australia/US FTA:

    At a Southland Chamber of Commerce meeting the Deputy Governor of the Reserve Bank, Geoff Bascand, was asked about the real benefits of our FTA with China. He responded that there was no evidence to show that our increase in trade was due to the FTA, it could be that they had a ready market for our protein anyway. In terms of their total trade, New Zealand is a minor player in China and it was easy to see how fragile our exports are during the contaminated milk scare. Australia has learned how quickly their coal exports were affected when China decided to move to cleaner sources of power production.

    It is interesting that the TTPA negotiations have been carried out in secret but 60 corporations have been included in those negotiations and have access to all the documentation. The corporate protections within this agreement have the potential to override the sovereignty of individual nations when any later legislation is passed to protect people or resources may impinge on profits.

    The Investor-state dispute settlement process is particularly concerning and Australia’s current battle around plain packaging for cigarettes is an indication of the costly battles that we may experience in the future:

    We need to remember that the legal resources of the larger corporations far exceed our country’s resources and (given the mismanagement of the MFaT restructuring, the mess we made of the documentation for the 2013 meat shipment and this Government’s willingness to hand out corporate welfare and bribes) I really worry about what we will be giving away in the TPPA.

    “Protection limits choice and adds costs for consumers, distorts markets and reduces income for producers.”

    This is a naive statement, Ele, all markets are distorted and the US (as the strongest supporter of FTAs) has some of the strongest protections, especially for its farming sector. Protection ensures that our patent rights are upheld, we have safe and cheap pharmaceuticals, we protect our resources from outside exploitation, human rights are upheld, monopolies don’t develop and our exporters can operate in ‘fair’ markets.


  3. Will Dwan says:

    There is more to life than dairy Dave. My operation made good gains from the FTA, both lamb and wool. And if you cared at all about fair markets you would not advocate subjecting us to taxes on gross emissions. No-one else pays them, nor ever will.

    I like to think of international trade as being like the America’s Cup. We all know the rules are stacked in America’s favour. They do it because they can, they aren’t even embarrassed about it. The trick is to get out there and compete anyway. And even if we lose on points, you will often find we win in other ways. Who made the boats?


  4. Dave Kennedy says:

    WD, I think you have a very simplistic view of FTAs and the TPPA. The latter is becoming so biased towards the interests of corporate monopolies that there is widespread concern from both within the US and elsewhere.

    Undoubtedly reductions in tariffs are useful for meat and fibre exports and certain industries can do well when there is a demand for commodities. However there is no reason why good marketing and negotiations can’t achieve similar results without being trapped into agreements that have wider and unpredictable consequences.

    It is not so much having rules “stacked in America’s favour” but the multi-national corporates that operate in a borderless fashion allowing them to escape taxation and manipulate the fine print in agreements. The use of child labour (for example) creates market advantages that businesses operating within the employment laws of their countries cannot compete with.

    El Salvador will have an expensive battle to stop OceanaGold from polluting their waterways. This company is also the largest gold mining company in NZ and recently bought the Waihi mine:

    Free markets can be like a brawl with limited rules where the biggest bullies can have unfair advantages and can do as they wish. In those environments promising start ups can be crushed before they can even start to establish themselves if they threaten the profits of established businesses and existing monopolies. Free markets can kill innovation and healthy competition if they have no constraints.


  5. Name Withheld says:

    China decided to move to cleaner sources of power production.
    They sure have Mr Kennedy.
    China has 26 nuclear power reactors in operation, 24 under construction, and more about to start construction.
    Nuclear fission using thorium is the future in China and hopefully elsewhere.
    Enough to give a green a dose of the vapours don’t ya think?


  6. Dave Kennedy says:

    Oh dear NW, anything as a diversion 😉

    What do you think about FTAs and the TPPA?


  7. Name Withheld says:

    Oh dear oh dear, Mr Kennedy.
    Obviously you have not kept up up on renewable energy in China.
    China’s Three Gorges Dam: An Environmental Catastrophe .
    And by the way, it was you who offered The “cleaner sources of power production” throw-away line.
    A green, as usual slipping in the dirty coal meme wherever possible.


  8. Dave Kennedy says:

    NW, I have no intention of defending China, they have an appalling human rights record, they have committed possible genocide in Tibet and their levels of pollution caused by their rapid economic growth are horrendous. The Three Gorges Dam is an example of how a Communist government can ignore the plight of millions for the sake of the nation as a whole (however their ability to make decisions like that have enabled them to grow their economy much faster than India).

    The pollution caused by their largely coal fired power stations have had a huge impact on the health of the population and they have been forced to look at cleaner options. As you say they have a number of nuclear power stations too.

    My reference to their shift away from coal was just an example of how demand in a market can change quite quickly when you rely on a single nation for trade. This Government initially tried to replicate Australia’s economy by focusing on coal and lignite mining and it ended disastrously with the demise of Solid Energy and the moth balling of the $30 million dollar lignite briquetting plant near Mataura.

    A FTA may help reduce tariffs but it certainly won’t necessarily ensure a market.

    You are very determined to create a diversion away from a discussion about the value and risks around FTAs and the TPPA in particular. Why should only Governments and 60 corporates be fully informed parties to the TPPA? How many NZ corporates are involved? If there are none the whole thing looks to be a bad deal for our NZ exporters if they clash with the favoured 60.


  9. Name Withheld says:

    You are very determined to create a diversion away from a discussion about the value and risks around FTAs and the TPPA in particular.
    Once again in your arrogant way you assume too much about anothers motivation.
    I am not “very determined”, or even slightly determined. But obviously if it strokes you ego to say so, go ahead.


  10. Will says:

    I’m not sure you fully appreciate New Zealand’s vulnerability Dave. We are not part of NAFTA or the EU or any other powerful trading block. We have CER and the FTA and reasonable access to Britain. We made good gains from the GATT but that initiative has stalled. Probably we will just have to do the best we can with what we can get.

    You call me naive; I think I am the one who is being realistic about our situation.


  11. Dave Kennedy says:

    Will the CER with Australia has hardly served us well, Australia accept from us what they found useful, blocked our apples, their supermarkets gave their own produce and products priority and New Zealanders working there can’t access many services even though they pay taxes. We have one of the most open economies in the world and have made too many compromises.

    At the same time individual businesses and exporters have just gone out and done their own thing and found markets and business partners all around the world without having the support of an FTA.

    We may not be part of a trading block, but that may not necessarily be disadvantage, farmers in Europe have set quotas that artificially controls their markets and they consequently have a huge issue of an over-supply of dairy at the moment:

    When it comes down to it, FTA or no FTA if we have a commodity or product that meets a market we will do well. Surely our Government would be much better to support the infrastructure here that helps our exporters and ensures our national brand is strong. Our clean green image was very marketable but it is now largely a fabricated image.


  12. Will Dwan says:

    Where do you think our ‘clean, green’ image came from Dave? Tourism New Zealand’s market research included simply asking departing visitors what they liked about New Zealand. “Oh, it’s so clean and green” they said. Animals grazing green pastures. Farming created much of that image, but you Greens turned it into a stick to beat us with. But none of this matters if you don’t have ACCESS to the markets. Without access we are stuffed.

    EU farmers have (or had) quotas, but they also have subsidies. However I am not suggesting we succumb to Europe. You are completely wrong about CER, it has been fantastic for us. Australia was one of the few countries less efficient than us when we signed it:) We opened our economy because we were gaining nothing from the restrictions. Who would return to Muldoonism?

    My point is that rejecting a free trade deal because it is not perfect won’t do. It will be far from perfect, but I doubt we will be in a position to walk away. The world is changing fast, with influence moving away from traditional powers (US, EU) and into Eurasia. (Silk Road project) Who can say how this will play out? We will need to keep our options open.


  13. Dave Kennedy says:

    Will, I have read fairly widely on FTA’s and found the Deputy Governor of the Reserve Bank’s comments interesting. Often wahat is attributed to an FTA may very well have happened anyway and for every example of where there was a benefit there is often a story of the opposite happening for an exporter or local business.

    What appears to happen with FTAs is that it opens our local businesses and manufacturers into open competition with countries with much bigger economies of scale, or a much cheaper Labour force. To be competitive local manufacturers have to reduce their own labour costs (drive down wages) or outsource manufacturing. The result is lower wages and reduced employment here and cheaper outside goods swamping our domestic market.

    The issue then becomes one of balance. Competition is good for consumers and so is a greater choice, it also forces local businesses to become more innovative and efficient. However it can also tip our current account into greater deficit as more and more goods are imported. Because of shifting to a lower wage economy (to be competitive) there is less discretionary spending available for locally produced goods so that smaller manufacturers and retailers struggle.

    The Greens are not against trade agreements and are currently working on what an alternative could look like, but a FTA that is negotiated entirely in secret and designed to suit a few powerful corporates it is where we should be going. Labour has negotiated FTA’s in the past and is not against the TPPA but it’s recently announced bottom lines we would agree with, yet they are unlikely to be supported in the final agreement.

    A healthy market is where there is competition and allowance for new businesses to try out ideas and products on a level playing field. The TPPA especially looks as though it will mainly support the big players at the expense of real competition and the ability of individual countries to have sovereignty over their resources and the health and safety of their people.


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