Every New Zealander knows well the images of French dairy farmers protesting vehemently against any threat to their well-protected patch. In that context, the European Union's agreement to pursue a free trade pact with this country takes on some significance. Nothing much will happen immediately. There are European Parliament elections this year, and the Prime Minister's announcement in The Hague talked only of scoping work prior to further talks in 2015. But the EU's change of attitude is undoubtedly a welcome development.
Most obviously, it raises the possibility of improved access to the large and affluent European market. Currently, New Zealand exporters face hefty tariffs, including, for example, 8.2 per cent on kiwifruit. A free trade pact would boost trade in products such as that, as well as encouraging new business links with Europe thanks to the lowering of entry costs. The strength and importance of the present relationship can sometimes be overlooked. Two-way trade between New Zealand and the EU, with its 28 member states and 500 million people, is worth $16 billion a year, compared with a figure of $18.2 billion for China.
Over the past few years, the growth in trade has been minor, and most of the talk about Europe has centred on the economic woes of Greece and Spain. But that focus overlooks longstanding wealth in countries like Germany and the emergence of a number of more recent EU members, such as Poland, whose economies are resilient and whose people have increasing money to spend. In that respect, there is a similarity with China, and a free trade agreement could significantly increase trade in both directions.
Indeed, a further reason to welcome the European interest is the very fact that China has become so important to this country. The trade target announced last week in Beijing contained the implicit warning that New Zealand could come to depend overly much on China. That, as John Key noted, could be dangerous if consumer preferences changed there, or China's economy ran into trouble. From that perspective, an agreement with the EU would be especially welcome, as would the proposed bilateral pacts with Russia (now sidelined by the crisis in Crimea), South Korea and India. It takes on even more significance given the stalling of World Trade Organisation initiatives and progress on the Trans-Pacific Partnership agreement, which appears sluggish at best. A deadline of late last year passed with signs of differences seemingly more apparent than any advances.
One reason for that is the United States' pursuit of its own free trade agreement with the EU. Europe has also been finalising an ambitious pact with Canada. Some of the concessions made by the Canadians, notably in the area of patent protection, are controversial there. Previously, the EU had also pursued free trade agreements with South American countries, including Chile, whose kiwifruit exports to Europe have a considerable advantage over those from this country. Now, New Zealand is one of just six countries that are part of the WTO and not either in a free trade agreement with the EU or negotiating one.
There is good reason for that. Europe has taken some major steps towards reducing its protectionist system, but its farmers have come nowhere near to embracing the changes that their counterparts in New Zealand accepted many years ago. Their stern opposition can be taken for granted. Nonetheless, the message from the EU is clear. New Zealand has been striving for a long time to make progress towards a free trade agreement. Finally, there is a sign of encouragement.