Allegations New Zealand's canned peach producers are being threatened by a flood of cut-rate Chinese competition will now be investigated by regulators, in a politically sensitive move
The Government is looking into whether preserved Chinese peaches are being dumped into the New Zealand market at abnormally low prices, following complaints from local producers concerned about damage being done to the domestic industry.
The Ministry of Business, Innovation and Employment (MBIE) has started the first stage of an investigation into the matter, just three years after lifting tariffs which had been in place for over a decade.
Under the rules of the World Trade Organisation, countries can impose "anti-dumping" duties if a company is exporting a product at a price lower than what it normally charges in its own domestic market.
Heinz Wattie's, which is the only producer of preserved peaches in New Zealand, lodged an application in August asking officials to carry out an investigation into 'dumped' Chinese imports which it alleged were leading to "loss of market share, price undercutting, price depression and price suppression".
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While the company had been forced to increase the cost of its preserved peaches in the past two years because of rising inflation and costs in the manufacturing process, the import price from China had in fact fallen by one percent over the same period.
"Commercially this does not make sense given both the New Zealand and Chinese industries are exposed to the same input commodity cost increases, in particular cans."
China's market share of preserved peach imports into New Zealand had increased from 34 percent before June 2020 to an average of 44 percent since, suggesting "importers are now taking advantage of preserved peaches from China in increasing volumes".
While many of the figures in the company's application were redacted because of commercial sensitivity, it suggested Chinese producers could be exporting peaches for as little as half the price they would sell for in their home market.
"Due to the magnitude of the material injury, [Heinz Wattie's] is requesting provisional anti-dumping duties be applied as soon as possible to prevent this ongoing material injury," the company said.
In a formal response to the application last week, MBIE said there was "evidence to show that imports of the subject goods from China have increased in absolute and relative terms", while there was also evidence of price undercutting and suppression because of the alleged dumping.
While the ministry suggested the price discount of the Chinese peaches was more modest than Heinz Wattie's' figures suggested, it concluded there was "sufficient evidence to justify investigating whether goods imported into New Zealand are being dumped, and whether the alleged dumping is causing material injury to the New Zealand industry".
The investigation is just the latest instance where Kiwi producers have taken aim at alleged peach dumping from China. Anti-dumping duties were first imposed on preserved Chinese peaches in 2006, and were only lifted in 2019 after Heinz Wattie's successfully challenged an earlier government decision to scrap the duties in early 2018 as part of a "sunset review"; the High Court ordered MBIE to reconsider its original decision, but the ministry again concluded the duties were no longer necessary.
"New Zealand’s relationship with China is one of our most significant and important. This investigation is a standalone process, which does not relate to any other aspect of our bilateral relationship." - Matthew Molloy, MBIE trade and international manager
New Zealand imposes duties on canned peaches from Greece and South Africa, as well as preserved peaches from Spain. However, the decision to investigate Chinese imports comes with a greater degree of sensitivity, given the Asian superpower's reaction to such allegations in the past.
In 2016, Beijing reportedly threatened "retaliatory measures" against New Zealand exports of dairy, wool and kiwifruit over an investigation into whether Chinese steel was being dumped into the Kiwi market at below market rates.
MBIE ultimately concluded Chinese government subsidies were not significant enough to merit action, but the investigation still caused political headaches for the Government, and the geopolitical climate has become significantly more volatile since then.
In a statement, MBIE trade and international manager Matthew Molloy told Newsroom the first step of the investigation would take up to 180 days, at which point Commerce and Consumer Affairs Minister David Clark would need to decide whether there was dumping causing injury to the domestic industry.
If that were the case, Clark would then have to determine the suitable rate of anti-dumping duty to be applied, before MBIE's chief executive Carolyn Tremain started a "step two" investigation into whether it was in the public interest to impose such duties.
"New Zealand’s relationship with China is one of our most significant and important. This investigation is a standalone process, which does not relate to any other aspect of our bilateral relationship," Molloy said.
The Chinese government has been informed about the investigation, which will take place in line with domestic laws and New Zealand's WTO obligations.
Heinz Wattie's did not respond to a request for comment about its decision to apply for an investigation into Chinese products.
