Nov 10, 2016 - implications for the New Zealand sheep and beef industry. ... The Republican controlled House of Represen
US election result surprises
10 November 2016
The trade policy team provides a preliminary assessment of the US election and its potential implications for the New Zealand sheep and beef industry. Immediate potential impact
New Zealand has good access into the USA already for beef and sheepmeat, and the US is New Zealand’s largest red meat market. We expect that access to continue.
Despite immediate concerns, so far the US stock markets have held up and there hasn’t been a major change in the US currency. This is something we will be watching closely.
The US is our largest market for beef and an important destination for sheepmeat and any depreciation in the US dollar would affect our competitiveness in the market, as well as the value of our returns from the market. Longer term, any slow-down in the US economy would impact negatively on demand for our exports there.
Impact on TPP and trade policy
Over the short to medium term we are concerned about the potential impact on the scope for further trade liberalisation, including ratification of the Trans Pacific Partnership (TPP) Agreement.
Donald Trump spoke strongly against TPP during his election campaign, but didn’t say specifically what his concerns were.
It is very difficult to see passage of TPP in the next couple of months, as previously hoped, during the so called “lame duck” period before the President is inaugurated. The Republican controlled House of Representatives and Senate are unlikely to go against Trump’s wishes, as they will have to work with Trump once he comes into office. The TPP agreement cannot enter into force without the US.
Time will tell whether Donald Trump’s stance on trade will soften. President Obama also campaigned strongly against trade in the lead up to his first presidency term. Obama stalled ratification of three US trade agreements with Korea, Panama and Colombia for a number of years, but ultimately allowed their passage and was a major supporter of TPP.
Trump left the door slightly open during his election campaign as he said he could support “good trade deals” for the US.
More broadly we are concerned about the increasingly negative rhetoric around the globe this year about trade and what this means for progress on trade liberalisation. The US has traditionally played an important leadership role and we hope it will ultimately be able to maintain this.
All this reinforces the importance of continuing to invest in our relationships with producer counterparts, particularly through the Tri-lamb and International Beef Alliance, both of which are in a strong position.
Impact of a delay in the passage of TPP for sheep and beef farmers
If there is a significant delay in the ratification of TPP, this will impact on beef and sheep exports, not so much into the US (as the US tariffs are already relatively quite low) but most importantly on our beef exports to countries like Japan. New Zealand
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will still miss out on some expected tariff savings into the US, but it will not affect our competitiveness in the market.
An FTA between Japan and Australia entered into force on 15 January 2015. Australia now enjoys an eight percent advantage over NZ in the market for chilled beef and eleven percent for frozen beef. TPP would have put us on an equal playing field.
The Japanese MFN rate on beef is 38.5 percent, while Australia currently faces a tariff of 30.5 percent on chilled beef and 27.5 percent on frozen beef. (Japan’s tariff rate for chilled sheepmeat is zero.)
This has already had an impact on our exports which will likely magnify as time goes on as the tariff on Australian beef imports goes down. Since 1 January 2015, Australia’s beef exports to Japan have increased by 13 percent (from NZ$1.8 billion to over NZ$2 billion), while New Zealand and the US’s beef exports have reduced by 10 and 11 percent respectively (from NZ$163 million to NZ$145 million and NZ$1.6 billion to NZ$1.4 billion respectively).
Once fully implemented, it is estimated TPP would deliver $72 million a year in tariff savings on New Zealand’s red meat exports to TPP members.
Background information The value of NZ sheep and beef exports to the United States - Year ending December 2015 Commodity
Value (NZ$)
Volume (tonnes)
Beef Sheepmeat Associated co-products Total
$1,589,990,265
223,599
$288,829,740
23,970
$97,630,306
16,105
$1,976,450,311
263,678
Estimates of total tariffs faced on New Zealand sheep and beef exports to TPP members Country
Total value of trade 2015 (NZ$)
United States
Tariff cost incurred (NZ$)
$1,988,047,732
$15,062,486
Japan
$275,933,295
$64,523,577
Canada
$264,382,983
$0
Australia
$157,227,903
$0
Malaysia
$103,104,488
$0
Singapore
$85,430,253
$0
Mexico
$41,720,395
$3,336,456
Vietnam
$13,313,233
$528,873
Peru
$1,738,291
$7,494
Chile
$2,795,918
$167,446
$0
$0
$2,933,694,491
$83,626,332
Brunei Total
TPP outcomes by country can be found by clicking here.
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