Trade makes new friends of old enemies

15/11/2010

We were the first country in the world to get a free trade agreement with China and are now the first to begin free trade talks with Russia Belarus and Kazakhstan.

Negotiations on a free trade agreement between New Zealand and Russia, Belarus and Kazakhstan will start early next year, Prime Minister John Key announced at the APEC Summit in Japan today.

“Free trade deals offer real benefits for jobs and economic growth in New Zealand and I am very pleased to be able to announce the start of negotiations on this FTA,” says Mr Key.

. . . “Russia is also one of the world’s emerging powerhouses, with Brazil, India and China.  It is the 12th largest economy in the world and the world’s fifth-largest food importer, with food imports reaching US$30 billion in 2008.

“An FTA with Russia would give us an improved position in that market.  New Zealand’s exports to Russia grew 267 per cent from NZ$51 million to NZ$187.1 million between 2000 and 2009. There is further strong growth potential, not only in food and beverage exports but also in agritech, specialised manufacturing and clothing.”

It’s good news for New Zealand in general and the primary sector in particular.

The Meat Industry Association and Beef + Lamb NZ  say improved market access in Russia will provide exciting opportunities.

B+LNZ Chairman, Mike Petersen said while Russia is currently a relatively small market for the New Zealand red meat industry, it’s a country with a substantial population of red meat consumers. They have increasing incomes and the potential to support significant market growth.

Over the last five years, the New Zealand red meat industry’s exports to Russia have been around $30 million annually, mainly consisting of sheepmeat and beef offals.

Exports peaked at $56 million in 2008 before the impact of the global financial crisis softened Russian demand for imported meat last year.

MIA Chairman, Bill Falconer said that while Russian imports of red meat have been volatile, the expectation is that Russian demand for red meat will continue to increase and that a significant proportion of this increased demand will have to be met by imports.

An arrangement with Russia would be significant if it provided genuine improved access into the market.

Securing an FTA with Russia is important because it’s not just about eliminating tariffs, it’s also about addressing non-tariff barriers that restrict trade, he said.

The Chairman of the Dairy Companies Association of New Zealand, Malcolm Bailey, said the FTA talks with Russia and its Customs Union partners, Belarus and Kazakhstan, as great news for the New Zealand dairy industry.

“New Zealand is really picking up pace in the FTA game” said Bailey.  “Adding Russia, Belarus and Kazakhstan to our growing list of FTA partners should mean new market opportunities for New Zealand dairy exporters.  Russia is already a significant butter market for New Zealand and reducing trade restrictions will only lead to further growth and diversification in the future,” he said.

Bailey said it was also a smart strategy to place New Zealand as one of the first countries to negotiate an FTA with Russia.  “Russia is a vast country with an economy that promises to continue to grow in the coming years.  Projections are for very significant growth in dairy consumption met by imports in the medium term.  Integrating our export industries with expanding Russian wealth and consumption is a good place for New Zealand to be.”

Russia is the world’s largest market for imports of butter and cheese.  New Zealand exports last year were around 33,200 tonnes, mostly butter and cheese, worth approximately $120 million.  New Zealand has the largest share of butter imported into Russia, last year supplying 28,600 tonnes which was over 50% of Russia’s internationally imported butter.

It’s not very long ago that China and Russia were cold war enemies. It’s much better not just for the economy but for security to be friends.

That doesn’t mean we shouldn’t be careful about dealing with people who have different cultures and different values from us. But trade is a very good way to develop positive relationships from which both sides can benefit.


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