Exporters welcome Russian trade talks

Exporters have welcomed news of free trade talks with Russia, but there are warnings that a deal does not always lead to easy access for goods.

Trade Minister Tim Groser said New Zealand and Russia had agreed to start laying the groundwork for formal commencement of free trade agreement negotiations.

Manufacturers and Exporters Association chief executive John Walley said the proposed FTA held much promise for the manufacturing sector, provided "more than our milk powder" was covered by the deal.

Some New Zealand manufactured goods were not able to enter China duty free, even after an FTA was signed with that country in 2008, Walley said.

"I'm currently embroiled with all kinds of discussions trying to get high-class power amplifiers into China ... we still don't have free access for New Zealand goods into China, and how many years is it since we signed off the free trade agreement?"

Walley said there was scope in the Russian market for high-end, New Zealand-made manufactured goods.

Andrew Ferrier, chief executive of Fonterra, said the world's biggest dairy exporter was thrilled the Trade Minister had managed to open up the new opportunity with Russia.

Fonterra exported mostly butter and cheese to Russia, faced tariffs ranging between 5 and 15 per cent and last year sold about $120 million worth of product, Ferrier said.

"Per capita consumption is below Western Europe and we think they've got some really good growth potential and they will be importing quite a bit of their needs for the foreseeable future.

"In the real world what we would rather have is [World Trade Organisation] reform but in the absence of WTO reform then you might as well ensure that we stay competitive by getting on and signing free trade agreements."

Meat & Wool chairman Mike Petersen said Russian demand for red meat was expected to continue to rise and a large amount of the rise would have to be met by imports.

"This development is important because it's not just about eliminating tariffs, but also addressing non-tariff barriers that restrict trade."

The biggest benefit of free trade agreements often was not the fall in tariffs but that companies looked more willingly towards the market, he said.

"It's a change in mindset.

"There's more incentive for people to look at it and say actually this is a market where I can go and invest with surety."

Brazil, Russia, India and China - know as the BRIC group of nations - were growing in population and affluence, Petersen said.

"In the BRIC nations there are huge opportunities there for us to export product at a time when, globally, production is falling."

Kiwifruit exporter Zespri said Russia was an emerging market with potential for growth.

Director of corporate and grower services Carol Ward said sales to China had increased by about 86 per cent to more than 6.5 million trays since a free trade agreement was signed with that country in 2008.

Zespri's volumes to Southeast Asia rose about 45 per cent to 1.6 million trays in 2009/10, with the Asean, New Zealand and Australia free trade agreement signed early last year.

Ward said: "While these markets were already showing considerable growth potential for Zespri prior to the signing of FTAs, the FTAs provide confidence for investment into business development in the markets."

Bruce Goldsworthy, of the Employers and Manufacturers Association, said there was huge potential in Russia for New Zealand manufacturers.

"A country of that size has got to offer opportunities, and it will probably be for niche-type things ... you're not going to take the market by storm, because we wouldn't have the production capacity for it." There was also potential for New Zealand food and beverage manufacturers in Russia, Goldsworthy said, given the sprawling country with a population of 142 million imported about 40 per cent of its food.

"I guess that's really where we'll get the dollars."

Export New Zealand executive director Catherine Beard said Kiwi manufacturers had a reputation for carving out niches, and would find opportunities in Russia.

"We eagerly await further talks in the coming months and offer our full support to developing this valuable trading partner."


TRADE FIGURES

*EXPORTS TO RUSSIA 2009

Butter$104.74m
Sheep meat$21.87m
Cheese$14.35m
Frozen fish$11.57m
Coins$6.21m
Apples$6.09m

*AVERAGE TARIFFS

Dairy products9 per cent
Fruit, vegetables, plants9.04 per cent
Fish, fish products8.17 per cent
Wood, pulp, paper, furniture8.65 per cent
Beverages, tobacco9.88 per cent
Textiles, clothing6.9 per cent
Electric machinery5.45 per cent
Non-electric machinery2.66 per cent
Transport equipment6.67 per cent

Source: Ministry of Foreign Affairs and Trade