An EU-New Zealand free trade agreement is on its way

Trade arrangements with one of our traditional trading partners are to take a significant step up in modernity. New Zealand and the European Union have made a commitment to start Free Trade Agreement (FTA) negotiations, it was announced today.

Prime Minister John KeyIn a joint statement, New Zealand Prime Minister John Key, European Commission President Jean-Claude Juncker, and European Council President Donald Tusk agreed to start discussions on a comprehensive Free Trade Agreement (FTA).

The discussions will focus on the next steps required to formally launch negotiations, including the scope and overall approach.

“The EU and New Zealand share a strong and close bond and today’s discussions have underlined our mutual desire to further strengthen our relationship,” says Key.

“I am pleased that we are able to announce a critical first step towards a FTA that should provide greater access to European markets and make it easier for Kiwi and EU companies to do business with one another.”

The announcement builds on the EU’s recently revised Trade Policy Strategy, which sets out an increased focus on the Asia-Pacific region.

The commitment to progress free trade agreement talks with the EU follows the successful conclusion of the Korea FTA and Trans-Pacific Partnership negotiations.

The Prime Minister says these agreements are part of the Government’s wider plan to diversify the economy by building strong trade, investment and economic ties around the world.

“The EU is a key trading partner for New Zealand with two-way trade totalling over $19 billion.  It is also our second-largest investment source, as well as our largest research and development partner.

“We look forward to working with the EU and its Member States on next steps and to starting formal negotiations as soon as possible,” Key says.

The joint statement from the Presidents of the European Council and European Eommission and the New Zealand Prime Minister refers to the commitment to start negotiations to “achieve swiftly a deep and comprehensive high-quality FTA”.

“We believe an FTA will support sustainable growth and investment, opening up new trade and business opportunities and generating new employment for our peoples,” the joint statement says.

NZIBF-NZ-EU-FTA-9-SEPT-2015The New Zealand International Business Forum (NZIBF) has warmly welcomed the news.

“The Prime Minister’s visit to Brussels has helped affirm New Zealand’s strong interest in an ambitious, high quality, comprehensive and forward-looking free trade agreement with Europe,” says NZIBF executive director Stephen Jacobi.

An FTA could deliver significant benefits for agriculture and food as well as technology, services such as tourism, education and environmental services, niche and high-value manufacturing, research and investment.

“We have just concluded the milestone TPP agreement. An FTA with the EU is the next big piece in the puzzle. We are eager to work with our European business counterparts to build the case for a high-quality agreement which will truly modernise our economic relationship,” says Jacobi.

The Meat Industry Association and Beef + Lamb NZ were two of the contributors to a NZIBF discussion paper prepared earlier this year Towards a New Zealand-European Union FTA: A Business Perspective . This outlines the reasons why an EU-NZ FTA would be beneficial pointing out that “Our access arrangements are 30 years old and leave New Zealand at a disadvantage compared to competitors with their own preferential arrangements.”

Among many other items, it talks of New Zealand’s benefits as a counter-seasonal and market-orientated producer, which can contribute to year-round supply in Europe, and other markets, or offer supplementary supply in times of market volatility.

The document shows that the EU is still a significant export market for New Zealand red meat, particularly for sheepmeat and also for beef, wool, hides and skins, offals and other products. The total value of the trade was worth $1.9 billion in 2014, attracting around $70 million in duties.

Improving market access for New Zealand beef will be one of the aspects of negotiation.

“New Zealand beef enjoys a country-specific tariff quota and can also enter under various other tariff quotas. However, while New Zealand product faces a product tariff of 20 percent, competitors such as Canada will enter duty-free under its sizeable quota negotiated in its recent bilateral FTA. Others such as the US and Mercosur are also in negotiation with the EU. The out-of-quota tariffs for beef are high and currently inhibit trade,”

In addition, New Zealand will be keeping an eye on non-tariff trade barriers that restrict entry for its products.

The NZIBF discussion paper  on the benefits for an EU-New Zealand FTA published in July 2015 is available here

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