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Tariff reductions for New Zealand's dairy exports to Egypt will help Fonterra be more competitive there against European exporters, the co-op says.
New Zealand sends $140 million worth of dairy products to Egypt, accounting for more than 85 per cent of our total exports to the Middle Eastern country each year.
The dairy products include butter and butter products (which account for more than 50 per cent of the dairy trade), whole milk powder and cheese.
Trade Minister Phil Goff announced on Monday that Egyptian tariffs on New Zealand milk powder and sheep meat had been eliminated, while butter and cheese tariffs had gone from 5 per cent to 2 per cent.
A spokesman for Goff said butter and cheese used to be tariff free up to a certain point but then a 5 per cent tariff kicked in. Now a 2 per cent tariff applied to all butter and cheese exports.
The cuts came after Goff told the Egyptians in December that reductions in tariffs faced by European exporters would place New Zealand exporters at a disadvantage.
Immediate tariff savings of $3 million a year for the dairy industry are expected to result from the New Zealand cuts.
But this country will still remain at a disadvantage to European exporters who do not pay tariffs on butter. A Fonterra spokesman was unsure yesterday why the Europeans had preferential treatment but said the co-op wanted all its products to eventually be on an equal tariff footing, giving it a better chance of boosting export volumes.
The Government hoped the scrapping of tariffs on sheep meat would also encourage greater trade. Exports of sheep meat more than doubled last year to be worth about $2.6 million.
New Zealand is seeking to improve the overall bilateral relationship with Egypt, with Prime Minister Helen Clark due to open a new embassy in Cairo in April.
