Fran O'Sullivan: New Zealand stands to gain more than EU from trade liberalisation with bloc

European Commission President Jean-Claude Juncker and New Zealand Prime Minister John Key participate in a media conference after a meeting at EU headquarters in Brussels. Photo / AP

One of the upsides of competitive trade liberalisation is that New Zealand is finally getting onto the runway to launch free trade talks with the European Union.

There has been a great deal of skilled work by officials from both sides to get to the point where the Prime Minister could announce in Brussels this week that the first step towards a " deep and comprehensive high-quality free trade agreement" was under way.

In truth, there is a great deal of politics which underpins the high-minded sentiments in the press statements emanating from Brussels.

New Zealand's decision to be a path breaker for the Trans-Pacific Partnership (TPP) - which will knit 12 Asia-Pacific nations together in an economic partnership covering 40 per cent of global GDP - is a factor. So, too the deep funk into which the European Union sank after a number of its members became economically marginal after the Global Financial Crisis. And the fact that the EU has been inexorably drawn towards the Asia-Pacific which contains the world's major growth engines.

In Brussels - and also in briefings in New Zealand - EU officials have talked about how there is little real financial upside for their companies from a European deal with New Zealand. That's because New Zealand already has a very low tariff regime and the overall market is small.

But it is also clear that European companies who have their sights on New Zealand investments stand to be disadvantaged when the threshold for companies from the 12 TPP nations who are seeking to make investments in New Zealand is lifted.

The more obvious upside is for NZ firms seeking to export more products to the EU countries, particularly if a high-quality deal is forged which results in zero tariffs over a lengthy phase-in period.

Currently, two-way trade between New Zealand and Europe stands at $19 billion. This should increase if an FTA can be forged that results in greater access to a 500 million strong consumer market.

The formal statements say both sides believe that a FTA will support sustainable growth and investment, opening up new trade and business opportunities and generating new employment for our peoples.

But the free trade talks do not stand on their own. The EU is focused on increasing its own soft power. Hence the nod to investing in an enhanced dialogue on foreign and security affairs to contribute to greater peace and prosperity, including in the Pacific and in Europe, on issues such as the Ukraine. There was also a joint affirmation to find a political solution to the conflict in Syria and address global migration and the refugee crisis.

The joint commitment to secure an internationally legally-binding climate change agreement at COP21 in Paris - "which is ambitious, effective, durable, fair, transparent and dynamic" - might prove problematic for New Zealand which is still a relative recalcitrant when it comes to dealing with climate change. But it has been a useful wedge for New Zealand to push open the European doors wider.

What is also interesting from a business perspective is the focus in the EU's latest trade strategy on the business that takes place within global support chains - the detail on this will be fascinating when it emerges.

EU officials have distinguished a more open negotiating mode for the forthcoming free trade deal with New Zealand, from the heavy secrecy imposed for the TPP talks.

This is a useful reflection on the different negotiating environments between the EU - which provides a single trade negotiating arm for the combined countries which make up the European Union - and the US and others. But frankly, what really matters more is the final result. It may be that more transparency - while keeping civil societies happy - also fosters opposition from those sectors which are opposed to NZ's agriculture sector (in particular) making major gains.