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A tale of two free trade negotiations

Newsroom | 15 April 2021

A tale of two free trade negotiations

by Sam Sachdeva

After a breakup, there can be a sense of competitiveness as each side looks to rebound and move on - a sentiment which arguably extends to Brexit.

The United Kingdom has certainly been keen to show it can thrive outside of the European Union, which in turn has tried to show it is business as usual.

That has been to New Zealand’s benefit, as both partners have pressed ahead with negotiations for a free trade agreement which would open up improved access for Kiwi businesses to significant markets.

The EU benefited from a two-year head start in formal negotiations, thanks to the UK’s protracted withdrawal process - but after 10 rounds of NZ-EU talks over almost three years, meaningful progress seems to have stalled somewhat.

The largest obstacle to an EU FTA remains the gap between the two sides on the market access offer for Kiwi agricultural exporters.

When a copy of the EU offer leaked in European media last June, the then-Trade and Export Growth Minister David Parker derided it as “a paltry offer” and spoke to Phil Hogan, the EU’s Trade Commissioner at the time, to register his dissatisfaction.

“They’ve got a two to one trade surplus with us, they want us to give ground on geographic indicators and various other things that are important to them, and they think that we can convince New Zealanders this would be wise,” Parker said at the time.

It’s understood the EU has not submitted an amended offer since then, meaning a resolution on the matter may be months away at least.

The EU’s proposals for geographical indications (or GIs) to preserve the identity of produce in a certain region or area are also a work in progress, with pushback from some sectors in New Zealand to the thousands of GIs on a draft list.

A potential complication to talks is the EU’s decision to carry out an internal review of its trade policy in response to growing global instability, the rise of China and the acceleration of climate change concerns among other factors.

While the review is unlikely to give rise to any fundamental differences of opinion with New Zealand - and in areas like stronger environmental protections and a push for World Trade Organisation reform, could bring the two partners closer together - efforts to build “open strategic autonomy” may take precedence over wrapping up FTA talks.

An additional hurdle is potential political changes within EU member states, with Germany’s elections set to take place in late September and French voters going to the polls in April next year.

With farmers in both countries having taken to the streets in recent years to protest against their governments, there is always the possibility of fear mongering over a flood of New Zealand imports (as occurred to some degree in India with the RCEP trade deal).

Taking all that into account, some observers consider it would be ambitious to expect an agreement before the end of the year - two years later than the initial timeframe proposed by European Commission President Jean-Claude Juncker.

EU Ambassador Nina Obermaier told Newsroom discussions on some issues were becoming more complicated as the two sides approached the final phase of negotiations.

The EU had “heard New Zealand’s message about the revised market access offer...loud and clear”, and knew a new offer would be one of the necessary “building blocks” to finish negotiations, Obermaier said.

She was not frustrated with the pace of progress, but was keen for negotiations to be concluded as swiftly as possible.

“Trade negotiators do their job, but sometimes this takes longer, and sometimes issues that you didn’t think were complicated turned out to be complicated - it’s just a process that needs to be worked through.”

She would not give a timeline for when the talks might wrap up, saying: “The reply you will get from every trade negotiator is we can’t prioritise speed over quality, we’ll have to make sure this deal is right for both sides.”

Bullish Brits

In contrast, the British media have appeared bullish about the prospects of a swift conclusion to the UK’s own FTA negotiations with New Zealand, with a fourth round of talks having started this week after discussions formally began last June.

The Sun reported the UK was “within an ace” of securing a deal, having agreed to cut tariffs on Kiwi produce if reciprocal gains were made for British exports such as vehicles, while the Daily Express said British negotiators were hopeful of agreeing final terms before June.

It is possible there may be an element of gamesmanship in the British government’s briefings to the media, with New Zealand negotiators having highlighted “key gaps” in the UK’s agriculture offer after the third round of talks in late January and early February.

“The nature of these initial offers indicate there is some work to do to reach an agreement that achieves our shared ambition of a high quality, comprehensive outcome that removes tariffs,” a New Zealand report concluded.

In a foreign policy speech last week, British High Commissioner Laura Clarke said the country would “champion the free flow of trade, capital and knowledge as the best way to drive economic growth, and the recovery from Covid”.

“We see trade as a global good, and not just in economic terms: it also enhances bilateral relations and ensures a level of co-operation and interdependence that reduces the risk of conflict,” Clarke said.

A British High Commission spokeswoman told Newsroom the UK “look[ed] forward to securing an ambitious trade deal with New Zealand that builds upon our two countries’ shared values and creates new opportunities for our businesses and people”.

Trade and Export Growth Minister Damien O’Connor’s office did not respond to a request for comment about New Zealand’s view of the state of play with the two sets of FTA talks.

 source: Newsroom