New Zealand and European Union secure historic free trade deal

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NZ Prime Minister Jacinda Ardern
NZ Prime Minister Jacinda Ardern ... touch and go as to whether a good enough deal could be agreed. Image: TV1 screenshot APR

By Jane Patterson, RNZ News political editor, and Katie Scotcher, political reporter, in Brussels

New Zealand and the European Union have struck an historic free trade deal, “unlocking access to one of the world’s biggest and most lucrative markets” after four years of tough negotiating.

Prime Minister Jacinda Ardern and President of the European Union Ursula von der Leyen unveiled the details in Brussels, but it was touch and go as to whether a good enough deal could be agreed.

The negotiations went right to the limit, with Ardern and Trade Minister Damien O’Connor involved in the last phase of the talks, just hours before the official announcement was made.

The agreement — about 14 years in the making — means New Zealand views it as “commercially meaningful” and as worth putting pen to paper.

Ardern said it was a “strategically important and economically beneficial deal that comes at a crucial time in our export led covid-19 recovery”, covering 27 EU member states.

“It delivers tangible gains for exporters into a restrictive agricultural market. It cuts costs and red tape for exporters and opens up new high value market opportunities and increases our economic resilience through diversifying the markets that we can more freely export into,” she said.

By 2035, the value of New Zealand exports to the EU will increase by $1.8 billion a year, which Ardern said was more lucrative than the benefits gained from New Zealand’s recent deal with the United Kingdom.

Eventually duty free
Eventually, 97 percent of New Zealand’s current exports to the EU will be duty-free, and more than 91 percent of tariffs will be removed the day the FTA comes into effect.

There will be immediate tariff elimination for all kiwifruit, wine, onions, apples, mānuka honey and manufactured goods, as well as almost all fish and seafood, and other horticultural products. It will also become easier for a range of service providers to access the EU, including education.

NZ Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen
NZ Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen at EU headquarters in Brussels … negotiations went right to the limit. Image: RNZ/AFP

Meat and dairy have always been a tough sell due to the protected European market; once fully implemented this deal will deliver new quota opportunities worth over $600 million in annual export earnings, with an eight-fold increase to the amount of beef able to be sold into Europe. Duty free access for sheep meat has been expanded by 38,000 tonnes each year.

Red meat and dairy will get up to $120 million worth of new annual export revenue on day one of the deal, with estimates of more than $600 million within seven years.

Quotas have been established for butter, cheese, milk powders and protein whey.

The vast bulk of dairy tariffs will be eliminated within seven years, however the current system is a bit trickier. New Zealand had World Trade Organisation quotas for butter and cheese, but exporters couldn’t make use of them as the “in-tariff rates” were so high it was not economic to make use of them.

For example, butter has a 46,000 tonne annual quota, but the tariff rate was 38 percent.

Cheese break through
Under the new deal, of that quota, 36,000 tonnes will have a 5 percent tariff over seven years — once fully in force that is a $258 million benefit each year.

There has been a stop on New Zealand cheese exports to the EU for the last five years, for the same reason.

But under the FTA there will be immediate access through a tariff-free, annual quota of 31,000 tonnes — worth about $187 million each year to the local industry.

Another particular element of the deal is “geographical indications”; names of products that come with a strong connection to a specific area and ones the EU wants protected from use by anyone outside of that region.

For the cheese makers and the cheese lovers — New Zealand will be able to keep using the names gouda, mozzarella, haloumi, brie and camembert.

Feta, beloved to Greece, will be off the table though and producers here will have to find another name in nine years’ time.

Cheese makers will be able to keep using the name “gruyere”, as long as they had been doing so five years before the deal comes into effect; the same with “parmesan”.

Medicines carve out
There has been a carve out for New Zealand medicines and Pharmac, as patent requirements sought by the EU would have made medicines here more expensive by hundreds of millions of dollars a year — New Zealand refused and that is not part of the deal, the only country in the OECD to have that exemption.

Ardern described the deal as “high quality, inclusive and ambitious”, containing “ground-breaking commitments on environment, labour rights and gender equality as foundational parts of a trade and sustainable development chapter”.

“I am pleased that this FTA also includes a dedicated chapter on Māori Trade and Economic Cooperation,” she said.

While Ardern was drumming up support with European leaders at the NATO Summit in Madrid, Trade Minister Damien O’Connor spent the past week in Brussels nailing down the final details.

He said the deal provided “access for products that were previously locked out in the historically difficult to access European market”.

“This agreement delivers on what has been a long-standing objective of successive New Zealand governments — an FTA with the European Union, which will help accelerate New Zealand’s economic recovery at a time of global disruption,” O’Connor said.

‘Solid’ trade agreement
European Commission President Ursula von der Leyen said it was a “modern and solid” trade agreement.

“With this agreement, we should be able to increase trade between the two of us by 30 percent — that’s a big step”, she said at the media briefing with Ardern.

“Our farmers on both sides will benefit and they will benefit way beyond tariff cuts because we will work together on sustainable food systems.”

The EU is New Zealand’s third largest trading partner.

On the EU side, she said it meant European investment could grow by about 80 percent, a large number of food products geographical indications have been protected, and nearly all tariffs on exports to New Zealand have been eliminated.

It is a different kind of agreement, covering modern digital rules, and “several firsts”, said von der Leyen, for example, “sanctionable commitments” to the Paris Climate Agreement.

“This is the very first time that we take such commitments in a trade deal… and it contains, again, for the first time provisions on fossil fuels,” she said.

“And we show the same ambition on core international labor standards and on gender equality, to advance women’s economic empowerment.

“So this agreement will bring major benefits to our economies, but also to our societies.”

New Zealand and the EU have also signed an agreement for closer co-operation between law enforcement agencies, allowing greater information sharing and collaboration to help disrupt and respond to transnational organised crime, drug trafficking, money laundering, child sexual exploitation, cybercrime, violent extremism, and terrorism.

‘Deeply disappointed’ – Meat Industry Association
Red meat exporters are “extremely disappointed and concerned” with what they describe as a “poor quality” deal struck with the European Union, representing a “missed opportunity” for farmers.

The Meat Industry Association said the deal agreed will see only a “small quota” for New Zealand beef into the EU — 10,000 tonnes into a market that consumes 6.5 million tonnes of beef annually — “far less than the red meat sector’s expectations”, and one that continues to put them at disadvantage in a large market.

“We are extremely disappointed that this agreement does not deliver commercially meaningful access for our exporters, in particular for beef,” said chief executive Sirma Karapeeva of the Industry Association.

“We have been clear from the outset that what we need from an EU-NZ Free Trade Agreement is market access that allows for future growth and opportunity.

“Unfortunately, this outcome maintains small quotas that will continue to constrain our companies’ ability to export to the EU,” she said. “This agreement is not consistent with our expectations and the promise for an ambitious, high quality trade deal.”

Diversification was even more important with the increasing volatility in global markets and a high quality deal was “critical” to helping exporters broaden their access to other markets, said Karapeeva.

“This is a missed opportunity for farmers, exporters and New Zealanders,” she said.

“It will mean our sector will not be able to capture the maximum value for our products, depriving the New Zealand economy of much-needed export revenue at a time when the country is relying on the primary sector to deliver when it matters most.”

This article is republished under a community partnership agreement with RNZ.

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