Potatoes NZ Anti-Dumping Tariff Application
On 3rd July 2020 Potatoes NZ submitted an application to Ministry of Business, Innovation & Employment for anti-dumping duties on frozen potato products originating in Belgium and the Netherlands.
The application is based on the real threat of material injury to the New Zealand potato industry.
The threat is a result of huge surplus inventories of frozen potato products and processing potatoes in Belgium and the Netherlands.
This situation has arisen through the impacts of the Covid-19 global pandemic causing supply chain disruption in hospitality industries worldwide.
The surpluses combined with the support the European industries are receiving from their governments, will drive export prices down further, increasing dumping margins and the threat to the New Zealand industry.
According to PNZ analysis, dumping margins are currently anywhere between 95% to 151%. We expect these margins to increase. This will lead to price undercutting for the NZ industry of between 18% and 38%. The damage this will cause will destroy the NZ industry.
Given that Potatoes NZ has shown in the application to MBIE, that dumping exists and huge surplus inventories of frozen potato products exist; it is clear that the threat is real and an investigation into anti-dumping duties is warranted.
A separate Potatoes New Zealand commissioned Economic and Community Impact Report from Business and Economic Interest Limited (BERL), concludes that in the absence of a duty, potato processors would be forced to cut production and demand for potatoes from NZ growers would drop. Inevitably, this would lead to a loss of employment and a threat to the viability of some potato growing businesses. The imposition of an anti-dumping duty on dumped imports of frozen potato products, would help to maintain demand for New Zealand grown potatoes, and ensure the continuity of employment and business in the growing sector. A duty would mean that the potato growers would experience the same market conditions, including competition between themselves and fluctuations in market prices, as they did before the dumping occurred.
Effects on potato
There are five potato processors in New Zealand and they directly employ a total of approximately 450 people. These processors will be the first to be harmed by the dumping of frozen potato products into the New Zealand market.
Effects on downstream
The principal downstream industries from potato processing are the food service industries, particularly the fast food sector. These industries might enjoy lower input prices while dumping continues, but they could face disrupted supplies, and potentially higher prices, once the European market conditions improves. A countervailing duty would leave these industries no worse off than they were before the dumping.
It should be noted that there is no guarantee that the benefit of lower prices will be passed on to consumers. It is probable that any advantage of low prices to consumers will not endure. Dumping occurs because overseas producers have a glut of produce or a collapse in demand in their own markets, and both these conditions are unlikely to be sustained. Accordingly, a longer term consequence for consumers is that they could face higher prices if New Zealand based processors and growers are forced out of business by the dumping.
At the national level, potato growing and processing is a relatively small industry, but it still directly and indirectly provides employment for almost 5,000 people. Potatoes are one of the few crops grown outside, produced in most regions of New Zealand and harvested all year round. The industry is therefore an important provider of widely distributed and stable employment.
Dumping of imported frozen potato products into the New Zealand market will have a range of damaging effects. Steps should be taken to avoid these impacts. The BERL report can be read in full upon request and on the PNZ website https://potatoesnz.co.nz/news-info/resources/ (links cannot be opened directly from a PDF).
MBIE will review the PNZ application for correctness and evidence. Once they initiate an investigation, as we anticipate, a non-confidential copy of PNZ application will be available on MBIE’s public file.
NZ Potato Industry Fast Facts:
- The NZ potato industry value is just over $1 billion dollars per annum
- NZ processed potatoes account for 55% of NZ potato industry value
- 85% of all fries eaten in NZ are NZ fries
- 15% of fries consumed in NZ are imported
- ½ NZ fries produced are exported = $100 million