Trade Minister Damien O’Connor is in Brussels this week, with Prime Minister Chris Hipkins, to sign the NZ-EU Free Trade Agreement before the PM heads to Stockholm and then the Nato Leaders’ Summit in Lithuania. O’Connor explains what the deal means for Kiwis.
Tariffs on the bulk of our exportsto Europe will be eliminated when the Free Trade Agreement with the European Union comes into force – so it’s with a lot of enthusiasm I head to Brussels with the Prime Minister to put pen to paper.
With 27 member states, the EU is a market of 450 million high-value consumers in an economy worth around $27 trillion. The significance of New Zealand having secured an FTA with this huge market can’t be understated.
It opens significant new opportunities for our exporters – including horticulture and agriculture – and provides assurance of access to a key market in the event of further increases in global trade protectionism.
Based on current trade, $100 million worth of tariffs on New Zealand exports will be eliminated from day one of the FTA entering into force.
But these reductions in the tariffs we currently pay is only the beginning. Currently our goods exports to the EU are worth nearly $5 billion – projections suggests that the FTA will grow our exports to the EU by up to $1.8 billion annually.
The NZ-EU FTA will be the seventh FTA we’ve signed or upgraded since 2017 and it further diversifies our opportunities to grow exports. These deals mean 74 per cent of New Zealand’s exports will go to markets covered by a legally enforceable FTA, up from just over 50 per cent six years ago.
To put the scale of this agreement into perspective, there will be a tariff saving on our kiwifruit exports of at least $37 million at commencement. $37 million is the total tariff savings we received at entry into force for all exports through the UK FTA, which as we know is a very good deal for New Zealand.
The total immediate tariff saving through the EU FTA of $100 million is nearly three times that of the deal with the UK.
Current exports of fish and seafood to the EU are worth around $241 million. The agreement will save these businesses $20 million in tariffs. That is not pocket money.
It’s well known that the EU is a tough market to access for agricultural producers around the world. The wins we nevertheless gained for these sectors mean we are in a good position relative to other exporters of similar products to the market.
Based on current trade figures New Zealand would have the opportunity through combined FTA and WTO quotas to provide up to 60 per cent of the EU’s butter imports – up from 14 per cent today - and 15 per cent of their cheeses, up from 0.5 per cent. Meanwhile, the FTA built on our already sizable WTO quota for sheep meat meaning that if farmers use this new access, we will account for up to 96 per cent of EU imports. This provides further trade resilience for our exporters, while expanding by eight-fold our access for beef.
Damien O'Connor addresses a media conference via video link last week, at the European Council building in Brussels on the EU-New Zealand free trade agreement. Photo / AP
Critically too, we will finally be on a level playing field with the likes of Chile when it comes to export of key horticultural products, such as kiwifruit, and will have a significant tariff advantage over some other major fruit and vegetable suppliers, such as the US, China and India.
This hasn’t happened by accident. This FTA delivers economic value, but also reinforces our shared values with the EU. It includes strong and enforceable sustainability commitments, including for labour standards and the environment.
Our credentials on sustainability mattered in these negotiations. The securing of this deal demonstrates how well our primary sector work dovetails with our trade agenda, where we’ve strategically invested across consecutive Budgets in supporting farmers to demonstrate their credentials to markets.
Importantly, the FTA also means our businesses will be able to move staff and their families more easily into the market. The deal cuts red tape, has positive gains for our education sector, recognition of professional qualifications, and paves the way for more investment into New Zealand from the EU. And critically too, we have future-proofed this agreement. Any benefits the EU extends through future negotiations with other partners in services and investment will automatically be extended to New Zealand.
It took four years to reach conclusion on this deal, with much of the work done on electronic platforms at unsociable hours through the pandemic. I want to acknowledge the hard work by our negotiating team.
What the EU sees in us is a partner with shared values who they can do business with. The integrity of our systems, and in particular our sustainability credentials, matter to them.
The Government has opened the opportunity in this huge market for Kiwi businesses to capitalise on and take our economy forward. I’m proud to be the one who will sign it.
