Challenging but not a dead horse

Is it Groundhog Day or just that good things take a long time? Penny Clark-Hall investigates the latest on New Zealand’s trade in the Middle East and India.

The needle appears to have barely moved since Country-Wide’s last update on New Zealand’s trade with Iran and India in October, 2020. Processors and the Meat Industry Association attribute trade sanctions, politics, tariffs and logistics as the main culprits of why little has changed over two years. However they refute the query of whether they are flogging a dead horse.

Nearly half of NZ $9.2 billion menu of red meat exports are halal-certified now (2020) and 90% of the animals processed are done so in the halal manner. It is becoming the processing norm as non-traditional Muslim countries become more culturally diversified.

The Meat Industry Association’s senior strategy, trade policy and advocacy manager Esther Guy-Meakin says halal processing is a cornerstone of the industry’s strategy because it gives the industry flexibility and opportunity.

“We export to 110 different countries globally and some of our biggest (halal) markets are actually non-traditional Muslim markets.”

She says Canada, for example, is quite a large consumer (of halal) as is China, France and the US.

“So, in terms of our strategy, it offers us the opportunity to reach more markets and diversify.”

There is clear consensus from all that halal processing is a huge advantage to NZ trade. Alliance’s Head of Sales, Shane Kingston, says the perception and level of confidence consumers have in halal as a more ethical way of processing, regardless of their religion is keeping our options open. It is also accommodating consumers’ desire for peace of mind. Serving the needs of a diverse range of consumers through the halal regulatory framework has proved critical during the Covid-19 pandemic. Meat processing and exporting companies were able to redirect exports from traditional markets under pressure and weather the worst of the global disruption.

Ironically, trade with India is partly stifled by NZ halal processing as its Hindu population (79.8%) can’t eat halal. However, the exporting company Quality New Zealand, of which Alliance owns 10.8%, is focusing on its Muslim population (14.2%) which represents nearly 200 million people and a trade of $2.5 million (2019) in red meat.

While trade stopped in 2020 (likely due to Covid-19) it is expected to be a significant market to NZ in 10 years’ time, Kingston says.

“We’ve seen significant growth in the kind of elite and affluent population over the past few years.”

Kingston says there is a real opportunity to provide higher quality and imported product.

Alliance is starting to build meaningful distribution across both hotels and restaurants, in partnership with Quality New Zealand, which is allowing them to meet the needs of premium consumers.

High tariffs

Since beef is off the menu in India, it is NZ sheep meat (mostly frozen lamb) that has been a relatively valuable trade, albeit a small one. India’s potential though is in its size and growth. It is the fifth largest and fastest growing economy in the world ($2.6 trillion growing at a rate of 6%). The population is growing faster than China’s with projections of continued increases to its socio-economic wealth, with a rapidly expanding middle class. However, without a Free Trade Agreement (FTA), the high tariffs (38%), prescriptive animal health requirements, differing rules for each of its 32 provinces and immature infrastructure (mainly chilled transport) makes exporting lamb to India challenging. The tariffs are protectionist measures to support local farmers.

Covid-19 hasn’t helped either, but it is a long game for Alliance. They are banking on India, with investment into infrastructure, the supply chain, partnerships and their product portfolio, which will set them up to better meet India’s needs over time.

“We’re in for the long run. This will be something that will be a slower burn for a number of reasons. But fundamentally, we believe that India is very attractive long-term,” Kingston says.

The next China

It seems it’s not only India that could be the “next China” in terms of a significant trading partner. Taylor Preston’s chief executive, Simon Gatenby says he believes Iran has the potential to surpass India, matching China very quickly in terms of volume, price and demand.

While their population is smaller than India’s (82.9 million) and their economy slighter, ($454 billion growing at 3.7%) their GDP per capita is higher ($5,628 compared to India’s $1,980) and the Muslim community is also dominant.

“Iran is the only country I’ve visited where sheep meat is the preferred protein.”

Gatenby says the demand is there, they have the spending power to buy at good levels and the infrastructure is in place.

“In my opinion they have a 10-to-20-year head start over India.”

Guy-Meakin agrees Iran makes a good trading partner as a natural consumer of NZ products in their local cuisine.

In the past they have been crucial to NZ’s It is where we ‘cut our teeth’ in halal processing and it was Iran who took up our surplus (25%) in the 1980s as the sector grappled with an influx of livestock due to subsidies. However, it was dormant for some 25 years until 2017, when MPI successfully negotiated access for NZ meat exports to recommence. Exporters were cautiously optimistic about the future of this market with the first small shipments successfully being sent in the middle of that year (2017: 91 tonnes worth $728,000 of chilled lamb). The following year that more than doubled to $2.2 million of frozen lamb (90%) and chilled lamb (10%).

So, what happened? United States sanctions have again closed down trade with banks refusing to facilitate any business with Iran. In 2020, the US announced additional sanctions on 17 major Iranian banks. This means Iran’s entire financial sector is now under US sanctions making it near impossible to do business with the nation.

While it might feel like Groundhog Day in the process of obtaining market access and surety, Esther reiterates Shane’s view that good things do take time and in trade you have to take a long view of things.

Whether it be Free Trade Agreements, Infrastructure or politics you have to chip away at it but she adds that it’s also important to encourage different conversations about how else we might be able to unlock the potential of these markets.

INDUSTRY CONCERN FOR HALAL BUTCHER SHORTAGE

The meat industry is concerned about a significant shortage of halal butchers.

Meat processors require 250 halal slaughterers. The sector employs about 207 halal butchers — about 109 of those workers are either New Zealand residents or on open work visas, and a further 98 workers are migrant halal slaughterers.

MIA has sought to encourage more New Zealanders to become halal slaughters and has a programme of work to retain and source both NZ-based and migrant halal slaughterers – but is constrained by the relatively small Muslim population in NZ.

Recent visa extensions for the 109 halal butchers on work visas buys the industry about 24 months before these people would need to leave NZ. That means there is uncertainty about NZ’s ability to recruit a new intake to fill what is essentially 50% of our halal butcher workforce.

With the peak processing season just around the corner MIA says it is critical they and the Government come up with a solution. They are working on one which recognises that part of the “qualifications” halal butchers need to have is a religious affiliation, which of course cannot be trained for.