Dairy Industry Will Benefit From India FTA

NEW ZEALAND - Waikato farmers will benefit from a potential free trade agreement with India but it will not have a direct impact on the dairy payout, according to a Waikato academic.
calendar icon 28 June 2011
clock icon 3 minute read

Prime Minister John Key is in India with a 25-strong business delegation at the moment to participate in bilateral talks with Indian officials.

The ultimate goal for the trip is a Free Trade Agreement, with the Government setting March 2012 as its objective for completing negotiations.

Yesterday, Waikato University Associate Professor Stuart Locke said the potential free trade agreement with India could provide several opportunities for local businesses and graduates.

But he warned the agreement would not impact on this year's or the 2012 dairy payout.

''The most obvious thing we ask about in free trade agreements is what does it mean for dairy farmers in Waikato?

''For individual farmers I don't think this is going to impact the payout immediately.'' Fonterra, the dairy giant has increased its payout range before retentions by 10c to $8-$8.10 per kg of milksolids for the 2010-11 season, while the opening forecast payout range for next season is $7.15-$7.25/kg.

Mr Locke said any potential free trade agreement with India would be beneficial to New Zealand's agriculture industry because the country would not have to rely so heavily on the United States.

And he said Waikato farmers would eventually reap the benefits.

''India is said to be the largest producer and consumer of milk in the world. It has huge numbers of dairy cows but a very disorganised and fragmented dairy industry.

''You have got a lot of farmers with three or four cows producing milk on a couple of acres in a village.

''With India's growing middle class we are getting a lot more consumers demanding value-added dairy products.

''There are more working mothers and higher family incomes and that is all good for New Zealand.

''We couldn't supply them even if we gave them everything we make. I think that it is a good thing that we can improve the living standards of other countries while improving our own profits.''

Mr Locke said New Zealand had to be careful when negotiating an agreement with India.

''Just last week China has imposed some restrictions on the importing of dairy products from New Zealand, which was allowed in the free trade agreement that we have with them.

''With that background, if we are going to enter into a Free Trade Agreement with India then we need to consider our dairy exporters really get a good go at it as there is a danger that agricultural exporters may get caught up in five-year trade restrictions.''

Fonterra's trade strategy manager James McVitty said India had 17 per cent of the world's population and 20 per cent of the world's children.

''However, dairy consumption is low by western standards and there is significant potential for growth.

''The per capita availability of raw milk in India in 2009 was 91 kilograms, compared to 147 kilograms in Brazil, or 280 kilograms in the USA.

''India's economy as a whole is growing faster than its dairy sector.

''Real GDP growth is forecast at seven to eight per cent per annum through to 2013, while the Indian Ministry of Agriculture's target dairy productivity growth rate for its five-year plan from 2007 to 2012 is five per cent per annum."

The NZ-India Free Trade Agreement negotiations began in April 2010 and there have been five rounds of talks.

In official talks in May, between Minister Sharma and New Zealand Trade Minister Tim Groser, it was agreed that dairy was a key sector to ramp up the trade and investment relationship between the countries and increase existing bilateral trade of NZ$1 billion to NZ$3bn a year by 2014.

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