Risks in 2017 for primary sector exports
Many commentators are predicting a tough year for our primary sector exports, and even a decline in returns. This is an easy prediction to make, considering the global repercussions of Brexit and President Trump's policies.
New Zealand conducts 60% of its trade with countries it has free trade agreements with, the exceptions being the US, the UK and the EU. The Government is focused on negotiating deals with these countries, and will likely be successful in time. But the real question is, what sort of deal can be negotiated?
Tariff reduction is only part of the mix. Other barriers to export, such as residue levels and pest free requirements, as well as the continuation of preferential access to the U.K. and EU, will test the Government's negotiating prowess; for our continued prosperity, it will be vital for the Government to be successful, and get high-quality agreements.
The other trend, completely outside of the Government's control, is the gradual decrease in commodity prices. Where we do not specialise and produce premium products, our primary sector exports are at the mercy of the commodity cycles; this includes milk powder, wool and many of our meat products. With these non-speciality products, the commentators are predicting weaker prices and, considering that the majority of our export returns come from commodity products, this is not good for New Zealand.
In horticulture, we have been able to specialise through innovative new varieties; this has given us the ability to secure premium pricing in offshore markets. This position will only be enhanced by further high-quality free trade agreements.
A tightening of free trade and an increase in trade barriers will affect both commodity and premium products. We need the Government to do all it can to keep our existing trade deals operating as agreed, and also negotiate successfully to keep our access to the US, the UK, and Europe open.
- Mike Chapman, CEO