EU trade deal on track for formal signing this year

Nina Obermaier, European Union Ambassador to New Zealand. Photo / Dean Purcell

Despite some big cultural differences regarding the protection of meat and dairy farmers, New Zealanders should see the European Union as an ally in the global push for fair and open trade, says Europe’s Ambassador to New Zealand Nina Obermaier.

In recent years the rise of protectionism, the US/China trade war and efforts to weaken World Trade Organisation (WTO) rules have seen the EU take more of a leadership role in global trade, she argues.

“This is also one of the reasons why we were so keen to conclude a free trade agreement with New Zealand right now because we’re really close partners and New Zealand is very active in the WTO.”

Maintaining and safeguarding the global rules-based trading system where trade supply chains were open was important to prosperity.

“So for us, continuing to work in partnership, concluding both bilateral and multilateral trade agreements, is absolutely on top of our agenda,” Obermaier said.

“And it will become only more important now with the fight for critical raw materials where we think the right approach is to do this in a co-operative manner.”

The EU and New Zealand reached an agreement on a free trade deal last June.

That’s expected to be formally signed later this year, coming into force from the beginning of 2024.

“We’ve worked on both sides very hard to get this ready for a signature because as you know, the EU is a very complicated institution,” Obermaier said.

“We work in 24 languages, 24 official languages, but before we get to even translating it into the languages, we’re looking at the so-called legal scrubbing process.

“So lawyers on those sides have worked hard to consolidate the text of the agreement, which is thousands of pages long.”

This was completed in October, which was in record time and demonstrated the priority both sides have given to the agreement, she said.

“We now hope to be able to sign this in the middle of this year.”

New Zealand exported $3.9 billion worth of goods to the EU in 2021.

The Ministry of Foreign Affairs and Trade has estimated tariff savings will exceed $100 million per year when the trade deal comes into force, rising to $110m after seven years.

Federated Farmers has called the free trade agreement with the EU a “slap in the face” arguing the minimal nature of tariff reductions for dairy and meat made it not worth doing. Photo / Rebekah Parsons-King / RNZ

The New Zealand Government has said it hopes this deal can grow export earnings from Europe by $1.8 billion by 2035.

The deal was hailed as good news by horticulture, forestry, wine and honey exporters.

But Federated Farmers called it a “slap in the face” arguing the minimal nature of tariff reductions for dairy and meat made it not worth doing.

Unsurprisingly, Obermaier disagrees.

“When it comes to market access, which was very much at the core of the political debate here in New Zealand, we’re looking at 91 per cent of all New Zealand imports accessing our market - and European exports to New Zealand - entering tariff-free as of day one.

Dairy and meat tariffs would be further reduced over time so that 97 per cent of exports were eventually tariff-free.

“Basically it comes very close to full market liberalisation across sectors, with some notable exceptions.”

Of course in the context of the New Zealand economy, those are big exceptions but Obermaier argues the deal that was reached did involve big concessions from European farmers.

“I’ve heard the New Zealand beef and dairy industry expressed their concern at what they thought was not in accordance with their expectations when it comes to market access,” she said.

“Let me reassure you that our beef and dairy farmers weren’t happy with the result, because they thought we had given we had given too much, which is an indication that they are also operating under quite challenging conditions at the moment.”

As with farmers in New Zealand, EU farmers were being squeezed. Fertiliser prices have gone up as a consequence of the Ukraine War war and unlike in New Zealand, they were also dealing with soaring energy prices.

On top of that - something New Zealand and European farmers shared - was increasing sustainability regulations that would demand added costs and require a lot of change, she said.

“So we’ve got a debate about emissions reduction, about sustainability commitments and all the requirements imposed on farmers. That provides a challenging environment, and therefore [they] are not very open to adding any other pressures.”

Obermaier describes the specific protections that remain for Europe’s dairy and beef farmers as a cultural difference.

It is there to protect what Europeans consider a traditional and essential way of life, she argues.

“Also I think it’s important to understand that the European Union is coming from a post-war founding period when we had food security issues,” she says.

So the whole focus is very different to the New Zealand export-oriented culture, she says.

In New Zealand, the abolition of farmers’ subsidies in the 1980s was not entirely voluntary either, she notes.

The big winner from the FTA would be horticulture - including fruit, vegetables, wine and honey - and also timber and fisheries, where there would be tariff-free access from day one for most products, Obermaier said.

There would also be new opportunities in the services sector - education services, air transport services and technology - where New Zealand had some very special skills that it will be able to export to the European market.

These benefits were harder to calculate in advance because the exports were coming off a very low historic base.

“I’m expecting an increase in exchanges and because New Zealand has so many small and medium-sized enterprises, we’ve put a particular focus on that,” she said.