Australian Prime Minister Tony Abbott (C) talks to Chinese President Xi Jinping (R) before a meeting at the Great Hall of the People in Beijing, April 11, 2014. REUTERS/Parker Song/Pool
IN PHOTO: Australian Prime Minister Tony Abbott (C) talks to Chinese President Xi Jinping (R) before a meeting at the Great Hall of the People in Beijing, April 11, 2014. Reuters/Stringer

Chinese President Xi Jinping's current visit to New Zealand has become more reassuring to New Zealand's dairy industry as it feels its clout on the Chinese market is intact. Recently, Australia had claimed that its new FTA with China has a better deal for its dairy industry vis a vis New Zealand.

Australia had claimed that its China deal on dairy products was "New Zealand-plus," as restrictions that apply to NZ liquid milk, cheese and butter exports will not be made applicable to Australia, according to its Trade Minister Andrew Robb. The Australia-China FTA reportedly seeks to abolish tariff for Australian dairy industry in the next 4 to 10 years, and shower benefits for beef and sheep farmers by virtue of abolished tariffs in the range of 12 to 25 percent.

But New Zealand trade Minister Tim Groser played down fears of New Zealand being at a disadvantage. He said New Zealand inked the deal with China six years ago and it is resilient, reported 3 News. According to him, any better agreement with another trading partner can be an opportunity for making it a benchmark to incorporate new elements into New Zealand's own trade dealings with China to be in sync with the current requirements, although he did not say when that would happen.

Fonterra Gains

The efforts at relooking the relative gains for the dairy sectors are considered significant in the context of ongoing negotiations over the Trans-Pacific Partnership. In fact, the Australian deal with China will also benefit New Zealand dairy sector indirectly. This is because Fonterra owns 20 percent of the Australian milk pool, which is the largest outside New Zealand.

Thousands of dairy farmers in Victoria and Tasmania are suppliers to Fonterram, which is running 10 plants that process milk powder, cheese, butter, yoghurt and other nutritional products. Recently, Fonterra entered into a partnership with Chinese distributor Beingmate for buying the Darnum infant milk plant in Australia. Fonterra's general manager Robb Stevens asserted that China as a large market offers high demand for dairy products and there are enough opportunities for dairy exporters in a variety of products, reported Stuff.Co.Nz

New Zealand Deal

Waikato University Professor Jaqueline Rowarth pointed out that New Zealand's FTA with China has a clause that allows New Zealand to ratchet up its provisions. Meat Industry Association chief executive Tim Ritchie is also not seeing the Australian deal as threat to New Zealand exports because China's demand is higher than supply. Australia's claims notwithstanding, New Zealand is still ahead in the matter of red meat access, he said.

However, recent trade figures have shown a big drop in dairy and forestry exports from New Zealand and China lost its crown as New Zealand's top export market in September. New Zealand's exports to China in September slumped to $568 million, by 30 percent compared to the same month last year, as per the figures of Statistics NZ.