The very model of a modern trade agreement: scoping an EU-NZ FTA

The outline of a modern, comprehensive, high-quality and ambitious FTA with the European Union is set out in a new consultation paper just released by the New Zealand government.

 
New Zealand and the European Commission agreed in March to proceed with FTA negotiations (see our blog here). The new paper sets out the shared ideas on scope and ambition that emerged during the preparatory process. There is a strong case to be made for an FTA: the EU is our third-largest trading partner and second-largest investor, with two-way goods and services trade worth nearly NZD$20 billion, and there is clearly scope not only to grow bilaterally but also to deepen value chains linking New Zealand, Europe and Asia.

The paper is a demonstration of the Government’s commitment to enhanced transparency and public engagement on trade under the ‘Trade Agenda 2030’ strategy, and forms part of the public consultation process for the FTA. The hope is to get formal negotiations underway in the fourth quarter of this year, and to wrap up an agreement relatively quickly (hope springs eternal!).

The proposed FTA scope reflects the evolution of business and trade patterns, encompassing not just goods but also services, investment and movement of businesspeople, the digital economy, government procurement, competition policy, intellectual property, SMEs, non-tariff barriers, sustainable development and the protection of the environment, and a commitment to ensuring that both sides can continue to regulate in the public interest (including the New Zealand Government’s Treaty of Waitangi obligations).

Needless to say, there are clearly areas of sensitivity. On agriculture, while the overall aim is full tariff liberalisation, the paper also notes European sensitivities on “certain agriculture products” and signals both long tariff phasing and the use of tariff rate quotas (while conditioning this on “meaningful commercial outcomes” for New Zealand). On intellectual property, the paper signals a possible new framework on geographical indications (GIs) for food products – a contentious element that has long been a concern for the New Zealand dairy industry, as a producer of commercially-valuable generic cheeses – but notes that this would be “subject to a satisfactory overall outcome” for New Zealand.

Finally, on the controversial topic of investment, the paper notes that a mechanism for investor-state dispute settlement (ISDS) will be included, although the detail is still to be negotiated. The EU has its own model – a permanent multilateral investment court (a very different approach to that taken under the TPP) – but the Commission will no doubt be giving further thought to its approach in light of a recent decision by the European Court of Justice which confirmed that any ISDS mechanism must be approved by all 38 sub-federal European parliaments (unlikely to be unanimous fans of ISDS), and not just by Member State representatives.

This post has been prepared by Stephanie Honey, Associate Director of the New Zealand International Business Forum.

For our 2015 discussion paper on an EU-New Zealand FTA, click here.

The European Commission’s webpage on the NZ FTA can be found here.