The European Union will consider a free trade agreement with New Zealand, Prime Minister John Key says.

The presidents of the European Commission and European Council agreed to consider a deal after talks with Key in The Hague, Radio New Zealand reported.

Key said New Zealand had been struggling to make progress in free trade agreement (FTA) negotiations with the EU for a very long time.

"That puts New Zealand in an unusual position because there are only six countries who are part of the World Trade Organisation who are either not in negotiations or haven't negotiated an FTA with Europe," he told Radio New Zealand.


Any deal would eliminate the costs New Zealand businesses pay to sell goods in Europe, Key said.

"What we've agreed with the commission today is that there'll be scoping work undertaken, which would be a precursor potentially to a free trade agreement.

"That's of great significance to New Zealand because essentially there's $16 billion of trade currently taking place between Europe and New Zealand. Put that in context - China is $18.2 billion as we sit here today."

The trade talks took place alongside the Nuclear Security Summit in The Hague.

A press release issued by the Prime Minister's office said it was the first time the EU had agreed to consider a Free Trade Agreement "as one such option" for refreshing the trade and economic relationship over the next 12 months.

"The EU is our third largest trading partner with over $16 billion in two-way trade of goods and services. It is also a long-standing close friend and partner. We share common interests, values and history," said Key.

"However, we can't afford to be complacent, especially given the shift in economic gravity to Asia. We've agreed to consider our options for refreshing our trade and economic relationship over the next 12 months."

Key said the news was "a significant development. We've always said a Free Trade Agreement is the obvious next step. We're not there yet, but the issue is now on the agenda - and that's a step forward. We're going to come back to this in 2015 to take decisions on what to do next," he said.


"Our relationship is broader than just trade. We're also working to conclude a new Partnership Agreement which will provide a blueprint for all aspects of our relationship well into the 21st century."

"The EU's decision to upgrade its diplomatic mission in Wellington is a positive demonstration of its commitment to the relationship. I look forward to welcoming the EU's first resident Ambassador in Wellington." said Key.