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Stuff | 1 July 2022
EU and New Zealand secure free trade agreement
by Glenn McConnell
- New Zealand and the European Union (EU) have secured a highly anticipated trade deal, through last-minute negotiations.
- The deal is estimated to be worth $1.8 billion annually to New Zealand, when it’s fully rolled out by 2035.
- Geographic indicator rules (GIs) will mean Kiwis can’t sell products called “feta” or “port” in nine years.
- The deal includes sanctionable commitments to the Paris Climate Agreement.
New Zealand has secured a free trade agreement with the European Union, estimated to be worth $1.8 billion annually when it’s fully implemented.
The agreement will remove 91% of duties on New Zealand products as soon as the deal is actioned, and the removal of many tariffs will save exporters an estimated $100 million.
Negotiations for the deal ran to the very last moment, with the EU and New Zealand only agreeing a few hours before Prime Minister Jacinda Ardern arrived at the European Commission in Brussels, Belgium, to either sign an agreement or confirm she was leaving without one.
Those inside the negotiations described it as “intense”, confirming that the talks continued through the night and into Thursday morning.
Ardern, Trade Minister Damien O’Connor and European Commission executive vice president Valdis Dombrovskis all confirmed that agriculture had been “sensitive”, and a sticking point in the negotiations.
New Zealand had been unhappy about the limited access for dairy and beef in previous EU offers. Some EU states were concerned about the environmental credentials of New Zealand agriculture, and also that areas New Zealand excelled in such as dairy and beef would go head-to-head with local farmers.
The deal will increase New Zealand dairy and red meat exporters’ access to the EU. However, shortly after Ardern and European Commission president Ursula von der Leyen confirmed a deal was struck on Thursday afternoon, the Meat Industry Association said it was “disappointing” as it only lifted the red meat quota to 10,000 tonnes.
Geographic indicators, which stop New Zealand businesses from using certain names, were clawed back from previous offers. But notably, New Zealand-made feta – which is seen as culturally important to Greece – will not be able to be called “feta” in nine years.
The deal also includes the possibility that New Zealand or the EU could impose sanctions on each other if they fail to meet the commitments of the Paris Climate Agreement.
On Wednesday, the day before the deal was signed, Ardern said she was willing to leave Europe without a free trade agreement.
The prime minister arrived in Brussels on Wednesday night, planning to stay for a single day – while O’Connor had been in the city since the start of the week. She said O’Connor had been briefing her multiple times a day on the negotiations in Brussels, so she could push European leaders at Nato to agree to the deal.
Insiders from both sides said agreement was only reached through negotiation between the political leaders, with officials at an impasse.
Ardern said she was “absolutely serious” about leaving without a deal, and said her 22 hours in Brussels was essential to “keeping the pressure on”.
“Continuing to push all the way through made a tangible difference, but today we leave with $1.8 billion that we otherwise wouldn’t have,” she said.
Negotiations for the deal have been ongoing for four years.
Geographic indicators, known as GIs, prohibit businesses in certain regions from selling goods under names considered unique to other regions. The Ministry of Foreign Affairs and Trade (MFAT) confirmed the EU originally provided a list of 2000 names it wanted to be covered by GIs.
This included a range of cheeses, such as Halloumi, mozzarella, Brie, and Camembert. Almost all of the significant GIs have been pulled back, but some remain.
Companies will be given nine years to adjust to the GIs that have been agreed to.
For Parmesan, anyone already producing Parmesan in New Zealand would continue to be able to do so, Ardern said, in a “grandparenting clause”.
Ardern said that in the give-and-take of negotiation, GIs had to be agreed to in return for more market access.
“When you think about the long list of GIs that the EU asked of us, in return for some relatively minor changes we have $1.8 billion worth of trading opportunities,” she said.
MFAT said enforcing GIs in New Zealand would require “significant changes to our existing laws”.
Dairy, meat and seafood
Announcing the deal, Ardern said negotiators had “fought hard for our dairy and beef exporters”.
Some tariffs will remain for certain dairy and meat products, but they would be rolled back over the next seven years.
O’Connor said there was a “huge opportunity” for seafood, with a 25% reduction on fish tariffs.
Cheese is a complicated area in this free trade agreement. It is hardest hit by the GIs. However, the agreement does open the EU to New Zealand’s cheese exports. Previously, the EU had imposed fairly protectionist policies on cheese imports.
Negotiators form New Zealand and the EU called this a “green deal”.
The specifics of the sanctions if one of the parties failed to live up to the Paris Climate Agreement are yet to be laid out. O’Connor said there would be a mechanism for one part to take the other to international arbitration.
Dombrovskis said the sanctions played a part in getting some less enthusiastic EU members, such as France, over the line.
Ardern said New Zealand was targetting “the discerning customer”, and should focus on selling sustainable, premium goods.
She said there was no concern that New Zealand would face sanctions, as the Government had already legislated for a 1.5 degree global warming target.
“Replicating that ambition in a trade agreement, in our mind, actually raises the bar for our competitors,” she said.
“Kiwifruit is finally able to come into Europe tariff-free.” The opening of Europe to New Zealand’s kiwifruit was one of the first things Ardern mentioned when she announced the deal.
Previously, Chile – New Zealand’s main kiwifruit competitor – had been able to export to the EU without tariffs due to its own free trade agreement.
Zespri Chairman Bruce Cameron said the deal was major. In the past year, he said Zespri had paid $46.5 million in tariffs to the EU.