New Zealand and the European Union reach historic free trade agreement
New Zealand and the European Union have reached a historic free trade agreement, “opening up access to one of the world’s largest and most lucrative markets” after four years of difficult negotiations.
Prime Minister Jacinda Ardern and European Union President Ursula von der Leyen unveiled the details in Brussels, but it was unclear whether a good enough deal could be struck.
Negotiations went to the limit, with Ardern and Trade Minister Damien O’Connor involved in the final phase of the talks, just hours before the official announcement.
The deal – around 14 years in the making – means New Zealand considers it “commercially significant” and worth putting on paper.
Ardern said it was a “strategically important and economically beneficial agreement that comes at a crucial time in our export-led Covid-19 recovery”, spanning 27 EU member states.
“It offers tangible gains for exporters in a restrictive agricultural market. It reduces costs and bureaucracy for exporters and opens up new high-value market opportunities and increases our economic resilience by diversifying the markets to which we can export more freely. “, she said.
By 2035, the value of New Zealand exports to the EU will grow by $1.8 billion a year, which Ardern said was more lucrative than the benefits from the recent New Zealand-EU deal. UK.
Eventually, 97% of New Zealand’s current exports to the EU will eventually be duty free, and more than 91% of customs duties will be removed the day the FTA comes into effect.
There will be an immediate elimination of tariffs 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.
Meat and dairy products have always been difficult to sell due to the protected European market; Once fully implemented, this agreement will provide new quota opportunities worth more than $600 million in annual export earnings, with an eightfold increase in the amount of beef that can be sold in Europe. Duty-free access for sheepmeat has been expanded by 38,000 tonnes each year.
Red meat and dairy products will generate up to $120 million in 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 whey protein.
The vast majority of dairy tariffs will be eliminated within seven years, but the current system is a little trickier. New Zealand had World Trade Organization quotas for butter and cheese, but exporters could not use them because the “tariff rates” were so high that it was uneconomical to use them.
For example, butter has an annual quota of 46,000 tonnes, but the tariff rate was 38%.
Under the new deal, 36,000 tonnes of that quota will have a 5% tariff over seven years – once fully in place, that’s a benefit of $258 million each year.
There has been a halt in New Zealand cheese exports to the EU for the past five years, for the same reason.
But under the FTA, there will be immediate access through an annual duty-free quota of 31,000 tonnes – worth around $187 million a year to local industry.
Another particular element of the agreement concerns “geographical indications”; product names that have a strong connection to a specific area and those that the EU wishes to protect against use by anyone outside that region.
For cheese makers and cheese lovers, New Zealand may continue to use the names gouda, mozzarella, haloumi, brie and camembert.
Feta, beloved of Greece, will no longer be on the table and producers here will have to find another name in nine years.
Cheese makers will be able to continue to use the name “Gruyère”, as long as they have done so five years before the entry into force of the agreement; same for the “parmesan”.
There was an exclusion for New Zealand and Pharmac drugs because patent requirements demanded by the EU would have made drugs here hundreds of millions of dollars a year more expensive – New Zealand refused and it is not part of the agreement, the only country in the OECD to have this exemption.
Ardern described the agreement as “high quality, inclusive and ambitious”, containing “groundbreaking commitments on the environment, labor rights and gender equality as fundamental elements of a trade chapter and sustainable development”.
“I am delighted that this FTA also includes a dedicated chapter on Maori trade and economic cooperation,” she said.
As Ardern rallied support from European leaders at the NATO summit in Madrid, Trade Minister Damien O’Connor spent the last week in Brussels ironing out the final details.
He says the deal has provided “access to products that were previously stuck in the historically hard-to-reach European market”.
“This agreement responds to 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,” he said. said O’Connor.
“Strong” trade agreement
European Commission President Ursula von der Leyen said it was a “modern and solid” trade deal.
“With this agreement, we should be able to increase trade between us by 30% – that’s a big step,” she said during the press conference with Ardern.
“Our farmers on both sides will benefit and they will benefit far beyond the tariff reductions as we work together on sustainable food systems.”
The EU is New Zealand’s third largest trading partner.
On the EU side, she said that this meant that European investments could increase by around 80%, that a large number of geographical indications of food products had been protected and that almost all customs duties on exports to New Zealand have been discontinued.
It’s a different kind of deal, covering modern digital rules, and “several firsts,” von der Leyen said, for example, from “sanctionable commitments” to the Paris climate accord.
“This is the very first time that we have made such commitments in a trade agreement, (…) and it contains, again, for the first time provisions on fossil fuels, she declared.
“And we are showing the same ambition on core international labor standards and on gender equality, to advance women’s economic empowerment.
“This agreement will therefore bring major benefits to our economies, but also to our societies.”
New Zealand and the EU also signed an agreement for closer law enforcement cooperation, allowing for greater information sharing and collaboration to help disrupt and respond to transnational organized crime, drug trafficking, money laundering, sexual exploitation of children, cybercrime, violent extremism. , and terrorism.
“Deeply disappointed” – Meat Industry Association
Red meat exporters are “extremely disappointed and concerned” by what they describe as a “shoddy” deal with the European Union, representing a “missed opportunity” for farmers.
The Meat Industry Association said the deal reached would see only a ‘small quota’ for New Zealand beef in the EU – 10,000 tonnes in a market that consumes 6.5 million tonnes of beef per year – “much less than the red meat sector’s expectations”, and which continues to put them at a disadvantage in a large market.
“We are extremely disappointed that this agreement does not provide commercially meaningful access to our exporters, particularly for beef,” said Sirma Karapeeva, the industry association’s chief executive.
“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 result maintains small quotas which will continue to limit our companies’ ability to export to the EU,” she said. “This deal falls short of our expectations and the promise of an ambitious, high-quality trade deal.”
Diversification was even more important with increasing volatility in global markets and a high-quality deal was “essential” to help exporters expand their access to other markets, Karapeeva said.
“This is a missed opportunity for farmers, exporters and New Zealanders.
“This will mean that our sector will not be able to extract the maximum value from our products, depriving the New Zealand economy of much needed export revenue at a time when the country relies on the primary sector to deliver when it counts. most.”