RNZ | 27 August 2022

EU-NZ trade agreement ’by no means a done deal’

by Katie Scotcher

Prime Minister Jacinda Ardern in July announced a finalised European Union (EU) trade deal but, after 14 years of lobbying and negotiations, insiders warn more effort will be needed to get it across the line.

Once signed, the agreement would remove tariffs on 91 percent of goods sent to the EU - New Zealand’s fourth-largest export market - including kiwifruit, wine, onions, mānuka honey and seafood - increasing to 97 percent within seven years.

The government touted the agreement as a big political win, but while it meant big wins for argiculture and horticulture groups, other primary producers were not happy.

It would deliver up to $120 million worth of new annual export revenue for New Zealand’s red meat and dairy sectors from day one, rising to $600m within seven years, but the Meat Industry Association said that amounted to just 0.1 percent of EU consumption in a potential market of nearly 500 million people.

New Zealand dairy farmers and cheese producers were also frustrated: The deal would see New Zealand producers of feta-style cheese forced to change the name within nine years. The rule will also apply to new producers of parmesan and gruyere cheeses, though producers already using those names could continue doing so.

Such "Geographical Indicators" are product names denoting a particular geographical location’s quality, reputation or special characteristics, and something the EU was never likely to back down on.

But European farmers were not happy either - Copa Cogeca represents European farmers and its secretary general Pekka Pesonen said New Zealand had very little to offer the bloc which New Zealand already counts as its biggest import partner.

He said they could consider opposing the deal, but would want to see how import quotas would be managed and how they would work.

"We have, undoubtedly, some sectors where we have a major problem with the proposal or the outcome of the negotiations ... very much focused on dairy, sheep and beef."

At the time the deal was finalised, Trade Minister Damien O’Connor put a positive spin on the sticking points: "It’s probably fair to say that no one likes it, so we must have it about right".

But National’s Trade spokesperson Todd McClay - who as Minister at the time spent a year between 2015 and 2017 trying to make the case for negotiations in as many countries as he could - said New Zealand should have stayed at the negotiating table, pushing for a better outcome.

"For New Zealand it’s about slow and gentle persuasion. We’re not a large country so it’s very hard for us to demand but actually we have a reputation of being fair when it comes to trade and being free traders ... and that’s about the only commodity we really have when we go to the US or into Asia or, I suppose, the European Union countries.

"What was another six or seven months of negotiation, banking what we’ve already agreed and continuing to talk? ... if Australia gets a better deal than us, the primary sector will have questions to ask."

It’s understood Ardern’s political lobbying was what got the deal over the line. Touring the region on one of her trade-and-tourism focused overseas trips this year, she had met with leaders of France, Spain, Germany, Italy and Denmark.

Leading up to the announcement however, Ardern had said she would be "very willing" to leave without a deal if it did not result in commercially meaningful access for New Zealand exporters.

New Zealand’s chief negotiator Vangelis Vitalis told the Primary Industry Summit that month he had shared the views of New Zealand farmers, but leaving Europe without a deal would have seriously risked losing the gains New Zealand’s negotiators had made.

"I am as frustrated and was as angry as they are - and so you should be. I think the EU was shameful in what they did," Vitalis said.

"I have no doubt that if we walked away we would have been put right to the back of the queue ... I’ve got to say, small countries walking away from big countries where the big country does not need you is a pretty tough call."

Timing was also key: against the backdrop of the burgeoning war in Ukraine, 15 European governments had called for the EU to accelerate free trade negotiations to ensure long-term economic growth and geopolitical standing.

What’s more, the changing political situation in Europe could have damaged future negotiations.

"Are they going to be more open and more interested in free trade when they’re still at war ... when the French Parliamentary elections have meant that Macron has no longer got a governing majority and the new minister of agriculture in France is now called the ’Minister of Agriculture and Food Sovereignty?"

Vitalis said the EU was the most protectionist agriculture bloc in the world, and some of the Europeans’ demands were seen as unacceptable to New Zealand: extensions to medicinal and agriculture chemical patents, which would have seen New Zealanders paying vastly more for things like generic drugs and fertilisers.

"I can’t tell you how challenging that’s been over the last four years to be talking to 27 countries that believe that free trade agreements are actually about managing New Zealand’s access into the market, and it beggars belief when you’re talking to a counterpart who thinks that 0.1 percent of their market risks destabilising it," he said.

But New Zealand cannot rest on its laurels: the deal’s text must be translated into 24 different languages to then be verified by New Zealand officials before being introduced to the European Parliament. There, it will need to be ratified - a stage requiring a majority and where several South American countries have stumbled and had to renegotiate.

Vitalis said it would require a "major political effort", with the likes of Copa Cogeca rallying opposition.

"It is by no means a done deal and if you look at the reactions of both the dairy industry and the federated farmers equivalents in Europe you can already see that they’re starting to muster their forces ... about how they were going to oppose this deal with New Zealand.

"This is going to be challenging, this is going to take a lot of political effort ... there’s going to be a huge diplomatic effort to push this across the line."