In which we like the good parts of the NZ EU FTA….

Who remembers the curate’s egg?  It’s when the nervous Curate, asked by the Bishop, if everything is ok with his boiled egg, replies “It’s good in parts, my Lord”.  So too the recently concluded NZ/EU FTA, which has been some six years (and more) in the boiling.  To have arrived at this moment has not been without the extraordinary efforts of New Zealand’s talented trade negotiators. To fault them would rightly risk the Bishop’s wrath.  That a deal was concluded at all with the European Commission, representing 27 member states and 450 million consumers was something of a miracle, but there is no getting around the fact that while it is most certainly very good in parts, in others it is not.

That a deal was concluded at all with the European Commission, representing 27 member states and 450 million consumers was something of a miracle, but there is no getting around the fact that while it is most certainly very good in parts, in others it is not.

The good parts are very good

To accentuate the positive – the deal delivers tariff free access for a range of important export products to the EU, including apples, kiwifruit, other horticulture, honey, fish and wine, as well as better access for services and manufactured products.   There are a range of other positives too – including a chapter on Māori economic co-operation, enhanced and enforceable provisions on sustainability as well as commitments on the digital economy including steps to promote paperless trade.

The undertaking of both parties to be held accountable for meeting Paris Climate Change commitments is a world-first, although how such a broad undertaking could be made actionable in a trade agreement is a little unclear.  

The EU gets its share of the egg – it will enjoy tariff free access to the NZ market, better conditions for investment, including a higher investment screening threshold similar to other FTA partners, and better access to government procurement.

On intellectual property, the agreement does not extend patent protections for pharmaceuticals, something the EU would really have wanted but could have raise the cost of medicines.  The copyright term will be extended but eleven years earlier than provided for in the NZ/UK FTA despite the protestations of many.

The not so good parts are, well, not good at all 

Quite simply, despite the best efforts of negotiators, the FTA will not in the assessment of the exporters themselves deliver commercially meaningful outcomes for dairy and meat, which account for 40 percent of goods exports.  They will gain access to only a marginal proportion of EU consumption (generally less than 1 percent).  Even after full implementation, the dairy and meat sectors will face small quotas and high in-quota tariffs, restricting their ability to grow the market.  

Yes admittedly some new access is granted for butter, cheese, milk powders and beef, but the levels are very small and the quota arrangements are likely to be difficult to meet.  That means that the agreement’s usefulness in terms of encouraging more “trade diversification” (as the Government’s mantra goes) will be strictly limited.  A lot of honey and onions will need to be sold to the EU to come anywhere close to the amount of dairy and meat sold to China.  What’s more the deal sets a worrying precedent for future negotiations which may be no easier to conclude than with our old adversary the EU.

Who fettered my feta?

The EU has convinced New Zealand to adopt new regulations about the way certain geographical names are used in international trade – especially names associated primarily with dairy products, wine and some meat products.  We wrote about this earlier here. 

If anything the final agreement is less draconian than might have been feared, but it is regrettable that it includes some names which have become generic rather than related to a certain geography:  the use of feta and prosecco will be prohibited and the use of parmesan and other terms will be limited to existing producers.

It’s fair enough to claim that this FTA was the best deal that could be obtained in the circumstances and that continuing negotiations might have led to a worse or even no outcome.  That is a judgment call for the Government to make but while there are undoubtedly positives for New Zealand, when it comes to the dairy and meat sectors, there is understandable disappointment that a once-in-a-lifetime opportunity to set the conditions for trade in dairy and meat with the EU has not been realised.  No wonder the curate is left feeling a little nervous when eating the Bishop’s egg.

This post was prepared by Stephen Jacobi, Executive Director of NZIBF.