"Global value chains means trade policy can no longer be approached from a narrow mercantilist angle," writes Cecilia Malmstrom. Photo / AP
"Global value chains means trade policy can no longer be approached from a narrow mercantilist angle," writes Cecilia Malmstrom. Photo / AP
Trade talks with EU may take years to start, writes Audrey Young.
When the going gets tough, as it inevitably will, when New Zealand's trade negotiators are sitting across the table from their European Union counterparts, the Kiwis could perhaps invoke the words of EU Trade Commissioner Cecilia Malmstrom to inspire an improved offer.
"There is no advantage to be gained from resorting to protectionist measures, even in the difficult economic circumstances of today," Malmstrom wrote in her blueprint for trade released last week.
"Global value chains means trade policy can no longer be approached from a narrow mercantilist angle."
It is an admission that the Old World wants to modernise its approach to trade deals.
And the fact that the strategy gave a green light to New Zealand, its 50th largest export market, suggests the EU sees a helping role for the sassy free traders from New Zealand.
As Business Europe's Luisa Santos told the Herald last week: "There was never a huge push by our members, to start negotiating with Australia and New Zealand, I'll be very blunt."
But there was "a logic" to broadening potential markets despite the clear sensitivities around agriculture and geographic indications.
The bigger prize for Europe will be the larger Australian market and its raw materials. Separate talks with Australia will be held concurrently.
Santos was talking from her offices which were still in lockdown from the previous day's demonstration timed to coincide with a summit in the European capital. The lockdown was a precaution taken because her offices were occupied a year earlier by 60 masked protesters whom the police refused to remove.
The formal launch of New Zealand's talks will be the prerogative of respective leaders.
The reality is it could take as long as two years for negotiators to get ready to tango - and the two parties will arrive with vastly different recent histories in trade.
The EU has recently concluded a deal with Canada (CETA) and is in the middle of two bilateral negotiations with Japan and the more controversial United States talks in the Transatlantic Trade and Investment Partnership (TTIP).
The 11th round of TTIP talks has been taking place in Miami this week - part of a bid to finalise a deal before the end of the Obama Administration.
A big feature of the bilaterals is the alignment of deeply ingrained regulatory systems on both sides.
New Zealand will come to the EU table fresh from the Trans-Pacific Partnership (TPP) with 11 other countries after five years negotiating.
Santos said she expected any EU-US deal to be higher quality than TPP - notwithstanding that the actual text has not yet been released - and likewise any EU deal with New Zealand or Australia.
"We expect to go higher for a very simple reason - TPP has countries with very high standards ... but it also has others with lower standards. The more countries you have, the more difficult it is go in there because you need to do a lot of concessions for a lot of people."
Eminent Brussels trade specialist Hosuk Lee-Makiyama said the conclusion of TPP was a "major shock to Europe".
"We didn't believe it could be done, partly based on our own history of negotiating FTAs but also our own attempts to integrate our own economies," Lee-Makiyama said.
People in Europe may have thought there was only one way of doing things - the European way, he said after appearing at a seminar with the EU's chief TTIP negotiator, Ignacio Garcia.
And what is the European way?
New Zealand will come to the EU table fresh from the TPP with 11 other countries after five years negotiating. Photo / Brett Phibbs
"Copy and pasting our regulations into other countries, not giving up any ground in terms of opening up our economies," Lee-Makiyama says.
Europe, he says, has only ceded tariffs in trade deals, not regulations. "We haven't changed a single line of regulation in Europe - something you can afford to do when you have half a billion consumers."
He thinks TPP is the biggest thing to happen in trade since the formation of the World Trade Organisation.
"This is the catalyst the world economy has been waiting for," said Lee-Makiyama, who is director of the think-tank European Centre for International Economy.
Lee-Makiyama believed the agreement was about the United States securing its ability to remain an economic player in a region in which its influence would diminish during the coming decades.
And he saw China taking an interest because it would be very expensive for it to stand outside of the pact.
"China is a very rational actor," he said. "It if sees that the net benefits are plus, they will make the necessary sacrifices to join."
In that respect, TPP played a more central role in terms of preserving current standards of non-discrimination in trade.
"TTIP is a completely different nature. It is basically between two legacy economies which are both facing relative declines, where one, Europe, is probably deemed to have an economic trajectory which is very close to zero growth for the foreseeable future."
Lee-Makiyama detailed a 15-page policy brief on why it would be in the EU's strategic interests to negotiate with New Zealand as part of making required inroads into the Asia-Pacific region and delivering a template for a "third generation" FTA.
He says any threat the EU faced from trade liberalising with New Zealand was greatly exaggerated with many products already entering duty-free.
Added to that was the phasing out of support for dairy, pork, wine and sugar under the EU's Common Agriculture Policy. Existing levels of regulatory co-operation were high too.
"The crude reality is that if an FTA cannot be done with New Zealand, it cannot be done at all."
Eu Trade Agenda
• Finished FTA with Colombia and Peru in 2012, Ecuador joined in 2014. • Finished Economic Partnership Agreements with 27 African nations. • Finished FTA with Canada, South Korea. • In the midst of FTAs with United States, Japan, investment treaty with China and Myanmar. • Planning FTAs with Australia, NZ. • Planning investment talks with Hong Kong and Taiwan. • Modernise existing agreements with Mexico and Chile.
NZ Trade Agenda
• Finished FTA with Taiwan and South Korea. • Finished Trans-Pacific Partnership talks. • Waiting for the Gulf Co-operation Council FTA to be approved. • In the midst of Regional Comprehensive Economic Partnership. • Updating China FTA. • Planning EU FTA.
Groser said it was a very exciting period for New Zealand trade and it was time to start "joining the strategic dots". Photo / Ben Fraser
Trade Minister Tim Groser is on his way to Brussels for talks next week with counterpart Cecilia Malmstrom but will be attending to TPP business in Asia en route - business that could lead to others joining what he calls "the TPP bus".
He has scheduled meetings with the Asean giant Indonesia and in Hong Kong.
Groser expects the Trans-Pacific Partnership to be top of the agenda in both meetings.
The trade talks finished in Atlanta three weeks ago.
As Groser put it, four of Indonesia's partners in the 10-member Asean are already part of TPP (Singapore, Malaysia, Brunei and Vietnam), while Thailand and the Philippines have talked about joining.
Indonesia had to be thinking about the disadvantages of not being a part of it.
