NZ must show benefits to Europe of free trade deal, says EU

If New Zealand wants a free trade agreement with the European Union it will first have to explain what is in it for Europe, a senior EU trade official says.

Ambassador Mauro Petriccione, who is in charge of the EU's bilateral trade relations with North and South America, the Far East, Australia and New Zealand was in Wellington for talks with the Government yesterday.

Apart from longstanding differences over agricultural subsidies and the use of place names for food (like Parmesan cheese), bilateral relations were very smooth, Petriccione said.

But whether they could advance to the point of an FTA, of the kind the EU is negotiating with Canada, would depend.

"It is not difficult to see why it is in the interests of New Zealand, but what do we get out of it?" he asked.

"I don't think we would imagine negotiating an agreement which does not include agriculture, but that is part of the difficulty. The conclusion may well be that it is not negotiable."

Trade Minister Tim Groser said what would be in it for Europe was a fair question. "Large countries do deals with New Zealand for strategic not commercial reasons."

Groser said an agreement was on the agenda, however: "We are approaching it not first from a trade point of view but in terms of a whole pattern of shared interests that New Zealand and the EU have. I'm hoping we will get there, but it is a matter of pushing the boat out quite gently."

Petriccione described the state of the World Trade Organisation's Doha Round negotiations as "very difficult".

"We have a deal on the table which is not what we would have wanted. I think that view is widely shared here. We still think it is worth having. The [financial] crisis has shown that."

But for progress in the round to occur, key countries would have to shoulder their responsibilities.

"We have, on agriculture. We have made concessions we never dreamed of making when we started negotiating." he said. "The United States points out, rightly, the [overall] deal is not very satisfactory. But they can't bring themselves to accept that this is the best we can get at this stage and it's invaluable."

India, Brazil and, particularly, China needed to make bigger efforts, commensurate with their role in world trade, he said.

"China wants to play a serious role in world politics. We think they are honest when they say they are not interested in asserting their power, that their primary objective is the development of the country. But they have to realise that, whether they like it or not, their impact on the world is gigantic and and they have to act in a way that is commensurate with that role."

Preliminary estimates from Eurostat, the EU's statistical agency, last week put the EU's overall trade balance for 2009 as a deficit of €105 billion ($203 billion), as a surplus in trade in manufactured goods was outweighed by imports of fuels and other resources.

By far the largest bilateral deficit (€123 billion by the end of November) is with China.

Europe was increasingly concerned about China's exchange rate policy, Petriccione said.

"There is a big debate in Europe about how much this affects us as opposed to how much it affects the United States. But the temperature is rising very rapidly. It is an unstable situation."

In the end the only way to address it was to persuade the Chinese that manipulating their currency was not in line with the role they wanted to play in the world.

"China's policies don't change very quickly unless it is something very mechanical, where they can easily predict the consequences.

"On something which is as inherently unpredictable as exchange rate policy the Chinese will be extremely prudent - which doesn't mean that they will do nothing, but they will do it slowly and carefully."