NZ - EU trade deal takes giant step

New Zealand has the prospect of another giant free trade deal. Photo / iStock

The ink is barely dry on the TPP and New Zealand has the prospect of another giant free trade deal in the offing with the European Union taking the first steps towards an FTA with New Zealand.

It was announced early this morning that the EU Commission will seek to negotiate separate FTAs with both New Zealand and Australia as part of its trade strategy for the next four years.

The caveat is that talks will take in account "EU agricultural sensitivities."

The announcement is the culmination of years of effort on the part of New Zealand to improve trade conditions in what is a market of 500 million consumers.

Currents settings are about 30 years old and many New Zealand exporters have become steadily disadvantaged as FTAs and preferential deals were done with other countries.

EU Trade Commissioner Cecilia Malmstrom told the New Zealand Herald after the release of the strategy that it made political and economic sense to hold talks with New Zealand.

"When I started this job [a year ago] I was a bit surprised that we have free trade agreements either concluded or ongoing with so many part of the world but not with New Zealand and Australia who are national allies, friends, partners in so many other issues."

Talks were happening already to establish the level of ambition which would be announced soon.

"This is a message of intent from our side. We think it would make sense economically and politically to engage with New Zealand," she said.

"We know New Zealand has very offensive interests in dairy and agriculture, absolutely no secret, and you are very competitive there," she said.

"But there are other items as well where we could deepen our co-operation as well."

Agriculture in the EU is still heavily subsidised, with payments under the Common Agriculture Policy accounting for 40 per cent of the EU budget but the levels of subsidy are reducing over time.

The next steps will be for the EU to conduct an impact assessment of the FTAs - which are likely to be held separately but in parallel.

Then a scoping study will occur to look at areas of negotiation The "authorisation" will eventually come from the Council of ministers of member states but that is likely to be a formality because a high level of consultation with the 28 member states has already occurred for the strategy.

But all of that means talks may not begin for perhaps two years.

The EU is New Zealand's third largest export market with $7.7 billion in goods and services last year.

The value of EU imports is higher at at $11.13 billion but New Zealand is 51st in EU ranking.

The EU is in the midst of negotiations with the United States on the Trans Atlantic Trade and Investment Partnership (TTiP). It is expected to adopt some similar approaches with the New Zealand talks, including a special chapter on small and medium businesses and proposals for a reform of investor state dispute procedures.

- Audrey Young is visiting Brussels courtesy of the European Commission to New Zealand in New Zealand and Air New Zealand.