Government and exporters battling to avert the latest in a series of non-tariff barriers that can harm trade just as actual tariffs can

The Government is nervously counting down the days until stringent deforestation rules come into effect for some exports to the European Union (EU). 

It has pressed for an exemption from these rules, along with other countries including Australia, and is anxiously watching the clock as time ticks away towards the first big deadline, in December.

The deforestation rules are just one of many non-tariff barriers (NTBs) which are causing exporters more headaches than traditional tariff barriers.

Trade Minister Todd McClay says he resents any possibility that NTBs can arise in the wake of a trade deal and undo some of its benefits.

“I’ve been very, very clear with the EU Vice Commissioner responsible for trade that it would not be appropriate for us to have a free trade agreement with the EU and our exporters then find it is difficult (to actually take advantage of that pact),” McClay says.

“We have asked if it’s OK for New Zealand to be exempt from those rules, because New Zealand law reaches the same conclusion as EU regulations do.”

The EU rules on deforestation were passed in June last year and come into effect in stages, with large businesses to be affected from December and small businesses from June next year.

They were developed in the wake of highly publicised controversies in countries like Brazil and Indonesia, where old-growth forests were cleared to make way for farms and crops.  

The rules state that various products including beef and wood sold in the EU should not be derived from land that was deforested after the end of 2020.  

When these regulations were first proposed, it appeared that NZ would not suffer, since most NZ farmland was deforested in the 19th century.  

And in more recent years, there has been net afforestation, not deforestation, especially on lower quality sheep and beef land.

But demonstrating these facts was always going to be time consuming and expensive for beef farmers and wood exporters, who are nervously bracing themselves for mountains of paperwork just to prove the obvious.   

Deforestation rules are just one of many NTBs that risk overwhelming the benefits of Free Trade Agreements (FTAs).   

According to the Ministry of Foreign Affairs and Trade (MFAT), there were 192 NTBs as at last September and they affected $9.8 billion of trade. They cover things like plant and animal health, public procurement, quantitative restrictions such as quotas, subsidies in foreign countries, or stringent rules on labelling.

“Just for the red meat sector alone, we faced $1.5 billion dollars of NTB costs, which is a considerable number,” the chief executive of the Meat Industry Association (MIA), Sirma Karapeeva, told a recent conference. 

According to veteran trade expert, Stephen Jacobi, “just as the tariffs go down, NTBs spring up."

“NTBs can be hard to identify, it is hard to know sometimes why they are being implemented and by whom, and they can be hard to address.”

Jacobi says some NTBs are legitimate, such as biosecurity rules, but others serve to restrict trade, which is a problem. 

“Last year MFAT reported they had got rid of 14 significant NTBs, worth about $1.4 billion. We congratulate them for what they have done, but this is just the tip of the iceberg.”

Jacobi’s comments are backed up by a report done two years ago by Sense Partners for MFAT, which found NTB costs amount to 12% of the total value of world trade. 

The New Zealand Government says it tries hard to set rules during FTA talks that give potential NTBs less room to move in future. But most FTAs with trading partners are already concluded, and the big new prize, India, is hard going even without getting to rules that thwart future NTBs in advance. 

'This is absolutely a priority for us'

Meanwhile, staff at MIA and Beef + Lamb NZ (B+LNZ) are busy fighting their own battles against the most pressing NTB, the EU deforestation rules.

B+LNZ says it is working jointly with other meat exporters such as Australia, Canada, the U.S and Uruguay to try to overcome this problem.

“This is absolutely a priority for us,” says the senior manager for international trade at B+LNZ, Francis Duignan, who says complying with the rules would require exporters to produce a lot of detailed information. 

“It is not an easy thing to adhere to……basically, you have to provide geo-location data for every place where cattle have been produced and demonstrate that those locations haven’t been areas of deforestation or subject to forest degradation from December 2020 onwards….it feels like a lot of wasted time.”

At present, B+LNZ is juggling a lot of balls, trying to avert the worst impact of the rules through joint lobbying efforts, but also preparing ways to cope with the situation if that lobbying fails. Some aspects of its strategy are being kept private at this stage. 

Duignan says one tactic is to try to alter New Zealand’s risk profile in the eyes of the Europeans. 

“The EU Commission is doing a benchmarking process, and every single country is considered standard risk (of deforestation). So, we’re considered standard risk. The likes of Indonesia, Malaysia and Brazil are also considered standard risk, even though we have very different forestry profiles from them. 

“So, one of the things that we have to secure is a low-risk categorization, (another approach) is a bilateral solution in which we could get either an exemption to the rules or lessened requirements, but that’s probably a longer-term conversation.

“Then, the last thing is, to be quite honest, these rules are not World Trade Organisation compliant, they are not FTA compliant. So what dispute mechanisms are out there that we need to consider?  There are quite a lot of things on the table at the moment.”

The problem with NTBs persists even as the Government has pledged to double exports within 10 years, a policy the Labour Party agrees with.