EU-US agreement on trade barriers is encouraging for NZ exporters

NZ  exporters   who have been tracking  the threat  of  global  trade  wars  triggered by President Donald Trump will have been  relieved  by the apparent  success of  EU-President  Jean-Claude  Juncker on his visit to the White House.

He won  agreement  from Trump to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

In  a  sense  this appears  to be a  victory for  Trump,  whose threats  to  raise tariffs  on  key  EU  exports, particularly cars,   sent tremors through European  industrial  heartlands including  the big  car manufacturing centres of Wolfsburg, Stuttgart and Munich.  Those threats forced the   EU  to  the negotiating  table.

For  NZ  traders  the signal is  positive:  not only does the threat diminish the threat of  trade  wars damaging  export markets but an important element  in the  Juncker concession to Trump  is the   EU’s agreement   to  work  towards zero non-tariff  barriers. That should  embrace  quotas.

For  NZ,  which  is in the process of  negotiating   a free trade  agreement  with  the  EU,  the  issue  of   quotas   has always  looked like  a  sticking  point.

The  EU’s willingness to  negotiate with the  US  to reduce that particular barrier to  trade gives fresh ammunition to the  NZ  negotiators.

In  recent  weeks the outlook  for  NZ’s  dairy  export trade   has  grown  gloomier,  and prices  have  correspondingly   weakened.  Concerns were deepened by the prospect that  Trump’s  trade  wars  would  damage  global  trade flows.

Analysts    argue  that  higher tariffs will hurt economic growth and potentially stymie demand for products like whole milk powder, NZ’s key dairy export product.  Trade data released yesterday showed milk powder exports in June fell 25% and the quantity dropped 32%, compared with June last year, due to declines across a range of key markets, including large falls to Algeria and China.

Recent Global Dairy Trade auctions have also shown weakening demand out of China.

There  has  been  little sign of  progress   with  the negotiation for the upgrade  of  the  NZ  Free Trade Agreement with  China, which  NZ  dairy exporters   hoped  would  produce broader  and easier  accesss  to the  Chinese market.


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