New Zealand's Free Trade Agreement with the EU May Further Boost Onion Trade

New Zealand's recent approval of a Free Trade Agreement (FTA) with the European Union (EU) marks a significant milestone in the country's trade history. This landmark deal is poised to eliminate tariffs on a wide array of New Zealand exports, potentially increasing export earnings by over USD 600 million. Among the many sectors that stand to benefit from this agreement, the onion trade may see considerable growth.

The FTA is crucial for New Zealand's agricultural sector, seeking to diversify its export destinations and reduce its dependence on traditional markets. With its vast consumer base, the EU offers a lucrative market for New Zealand's high-quality agricultural products, including onions. Historically, onions have been one of the country's successful horticultural exports, with a reputation for quality that has been recognized globally.

Removing trade barriers under the FTA will give New Zealand onion exporters a competitive edge. When entering the EU market, New Zealand onions face a tariff of up to 9.6%. The FTA will gradually reduce these tariffs, eventually eliminating them. This tariff reduction will make New Zealand onions more price-competitive. Still, it will also simplify the export process, making it more attractive for businesses to invest in expanding their reach within the EU.

Figure 1: New Zealand's Fresh Onion Export Volume 2019-2023

Source: Tridge

The overall export volume of onions from New Zealand has been decreasing since 2019, gradually reaching 139,129 metric tons (mt) in 2023, a 42.64% decrease from the highest levels in 2021 and a 6.76% year-on-year (YoY) decline from 149,226 mt in 2022. Indonesia was the number one destination in 2023, with 33,254 mt of fresh onions delivered, followed by Germany with 21,290 mt. European countries showed improvements in yearly comparison, with exports of onions to France skyrocketing 96.71% YoY to 12,405 mt in 2023.

Other Southeast Asian countries have shown an upsurge in demand for New Zealand onions, with Malaysia and Thailand importing 15,789 and 12,938 mt, respectively, in 2023. However, diminishing exports are causing anxiety among New Zealand onion producers who want to diversify their markets and pursue new prospects. The government has also announced initiatives to assist and incentivize onion producers to enhance production methods and raise yields to satisfy rising demand from domestic and foreign markets. Despite the industry's troubles, New Zealand remains a prominent player in the global onion market because of its high-quality supply and adherence to sustainable farming practices.

The FTA between New Zealand and the EU presents a significant opportunity for the onion trade to expand and flourish. The agreement lays the groundwork for increased trade and economic growth by reducing tariffs and aligning standards. Other factors that may contribute to increased exports include insufficient supply and high prices of onions in the EU. In this part of the season, New Zealand competes with Egypt, which has issued a ban on onion exports, paving the way for New Zealand traders. Tridge expects New Zealand onion exporters to increase volumes shipped to the EU, driven by tariff reductions and government support for producers.