TPP   

The biggest news, or at least the news creating the highest expectations, is the conclusion of the TPP (Trans Pacific Partnership) agreement. For the farming sector, leaving aside disappointed dairying, TPP appears to offer substantial trading benefits.

According to CHB farmer and Government agricultural trade envoy Mike Peterson: “We have basically gained free trade access for the majority of our primary sector products – with the exception of dairy and some beef – to 11 new markets with a population of 800 million or 40% of the world’s trade.” And coincidentally, these markets account for 40% of NZ’s exports.

Sector groups representing beef & lamb, horticulture, seafood, forestry and wine unanimously praised the deal. Dairy drew the short straw in the negotiations, but even Fonterra put on a happy face, with chairman John Wilson describing the deal as “a small, but significant step forward for the dairy sector”.

Most of the agriculture sector gains would come via foreign tariff reductions, which the Government has valued at $259 million per year in savings. For example, the agreement eliminates tariffs on all wine, fruit and vegetables, and forest products exports to all markets, and significantly reduces beef tariffs – sectors that represent the heart of Hawke’s Bay’s primary sector.

Stephen Jacobi of the NZ International Business Forum asserts: “All this has been achieved without the likelihood of significant adjustment for NZ in areas like medicines, investment, intellectual property or the management of state-owned enterprises.” And chair Traci Houpapa of the Federation of Maori Authorities, whose 150 members hold $8 billion in assets and represent the majority of Maori exporters, strongly supporting the TPP says: “NZ has always been a part of the trade conversation globally … and it’s opportune for Maori exporters to participate in the next stage of the conversation.” She is fully satisfied that Treaty of Waitangi obligations are enshrined in the agreement.

Despite all this kudos, the ‘deal’ is not quite done. Legislative bodies in each of the twelve signatory nations must endorse the agreement, and that is not a sure bet in some cases.

In the US in particular, the battle will be fierce. Presidential contenders from Donald Trump on the right to Bernie Sanders in the left have denounced the agreement, while straddling Hillary Clinton has said she cannot support it unless she’s satisfied with the details (NZ Labour’s starting position, as well as Canada’s new Prime Minster Trudeau). President Obama, with strong opposition amongst key Senate Democrats (who don’t like the agreement), as well as Republican senators (who don’t like him), will have his hands full winning Senate approval.

Here in New Zealand, critics of the TPP legitimately complain that the Government has mounted a full-scale campaign to sell the agreement before releasing any of its details.

Once implemented, the TPP opens the door to significantly more agricultural exports. But what will we sell? Virtually all commentators in the farm sector agree that NZ’s future must be in value-added premium food products, not simply more low-value commodities.

GMO-free

So while the TPP plays out on the international stage, right here in Hawke’s Bay another – not unrelated – battle gathers steam, as local farmers and growers fight to give the region a competitive edge in overseas markets.

The Hastings District Council recently officially notified its District Plan, which includes a provision that would keep the district, home to much of HB’s foodbasket, GM-free for the next decade.

The local advocates of keeping Hawke’s Bay GM-free, led by Pure Hawke’s Bay, advance a trade-based economic argument for their proposition. In a nutshell, they argue, in the words of local pastoral farmers Bruno Chambers and Will MacFarlane:

“The region is not a low-cost producer, but is home to some of the world’s best and most expensive horticultural land. Our producers – pastoral farmers, wineries, fruit growers and niche producers – have production integrity and need to sell to high-value markets to command the best price possible. And those markets are very clear they have zero tolerance to GM food, whether in conventionally-produced or organic products.”

While trade treaties like TPP can open access, national policies – driven by consumer preferences – can just as easily shut doors. For example, in recent weeks, 17 European Union countries, including Germany, France and Netherlands, have announced policies prohibiting the release of GMOs – more than two-thirds of Europe’s arable land will be GM-free. Why? Because their domestic populations don’t want to eat GM food and their farmers want to be able to export to consumers who don’t want to eat GM-tainted foods.

Pure Hawke’s Bay enjoys the support of many heavy-hitters in the region’s primary sector; its polling has demonstrated overwhelming public support; the Environment Court has endorsed the right of local councils to regulate on the matter … and now one council in Hawke’s Bay has.

The HDC rules are pragmatic; for example, they exempt GM animal feed and GM veterinary vaccines. But there’s plenty of politics ahead, including the threat that National Government might seek to legislatively pre-empt regional initiatives like this. BayBuzz will examine the issues more extensively in coming editions.

Where’s the beef?

The farm trade press regularly reports developments that confirm the need for the agriculture sector to meet consumer dictates. Fonterra recently announced it was “desperate” for organic milk because it is worth five times more than conventional … at a time when low conventional milk prices might be the ‘new normal’. And it bomb-shelled its suppliers by announcing maximum use guidelines for per cow, per day use of PKE, an imported feed produced from palm oil. Why? To protect its global image as a supplier of milk that comes from predominantly grass-fed cows.

And speaking of grass-fed, who would have thought, one farm veteran recently touted New Zealand’s grass-fed beef as the “caviar of the future”! He noted:

“We need to make sure we hang on to that NZ Inc brand because we are not a low cost producer any more. There are a lot of countries that can produce the same product cheaper than us, but we have a reputation as delivering quality safe products.”

What’s at stake? Mark Lebovich, chief executive of major US beef importer, Pre-Beef, estimates the US market for quality beef was already worth NZ$100-120 billion. He says demand in the US for high quality, grassfed beef grew 50% in the last decade. This was currently a niche market at 3% of the US beef market, but would grow to 20%.

Says Lebovich: “This is a global phenomenon, but in the US everyone is looking for more healthy options and in beef there are not too many options.” He notes that grass-fed beef typically earned a 20-25% premium over grain-fed, based on consumers seeking quality and health attributes.

Where does this lead? Massey agribusiness professor Jacqueline Rowarth sums it up nicely:

“Magazine racks are filled with how to eat better so you can live longer, healthier lives … The general trend is about natural, organic, non-GMO. It’s the farm to table approach. NZ is quids-in on this because we have the ethical approach. We look after our workers on farm. We look after our animals. We look after the environment. And we can prove it all.”

Some of us might dispute Rowarth’s environmental claim, but her point remains. The premium space is ours to take, if we commit to it.

That’s a “no brainer” message as Chambers and MacFarlane see it. The trade door will be most open and most profitable to those with premium food products … products deemed by consumers to be demonstrably safe, natural, ethical.

New Zealand, including Hawke’s Bay farmers and growers, can choose that door, or we can default to the door that commentator Ceri Wells, on the next page, terms the Kiwi “Commodity Obsession” – striving to sell for less and less!

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