After clearing a major hurdle, the New Zealand-EU trade deal is just weeks away from being signed. Both sides are trumpeting the deal’s benefits – but also battling the side effects of FTA fatigue. Sam Sachdeva reports from Brussels
If New Zealand were to adopt an official slogan for its free trade deal with the European Union, 'better late than never' would have a strong case to be the favourite.
Negotiations between the two sides wrapped up in July 2022 after four years of talks, falling well past then-European Commission president Jean-Claude Juncker’s admittedly ambitious goal of a late 2019 conclusion.
Now, almost a year after talkies ended, yet another major hurdle – but not the final one – has been cleared in the push towards ratification, with the European Council giving its approval for the deal to be signed.
READ MORE: * Better free trade outcome 'an illusion' - EU politician * Inside the NZ-EU trade talks
Confirmation came on Tuesday via a press conference at a sparsely populated briefing room in Brussels, where EU trade commissioner Valdis Dombrovskis and Swedish foreign trade minister Johan Forssel extolled the virtues of the agreement.
Forssel said concluding the deal had been a priority for Sweden during its stint in the EU Council’s presidency – a six-monthly, rotating role it is due to give up at the end of June – and highlighted “the most ambitious sustainability commitments ever included in an EU trade agreement”.
While Dombrovskis said important economic gains would come from the deal, it quickly became apparent that its symbolic value was as important as its financial value – if not more so.
“Strong trade relations tie us closer together and also shrink the distance between countries and regions,” Forssel said, mentioning increased engagement between the EU and Indo-Pacific nations.
“Getting this very ambitious FTA in place is therefore not only important in relation to New Zealand, but also a manifestation of engagement with … a region of ever growing strategic importance,” he added.
The sentiment was echoed by Dombrovskis who mentioned separate EU work with Japan and South Korea on digital trade.
That bullish talk is a sharp contrast to what Finland’s trade minister Ville Skinnari described as free trade “fatigue” earlier in the year, as the EU struggles to make headway on long-running talks with more difficult negotiating partners.
“To some extent these trade agreements now are almost virtue signalling of the EU with these countries to show we still work together, and we still want to develop a global trading system.” – Niclas Poitiers, Bruegel Institute
It is a sentiment that may feel similar to some in New Zealand, with talk about whether the country has reached “peak FTA”.
Niclas Poitiers, a researcher at the Bruegel Institute in Brussels, told Newsroom the EU was “in a funny spot” when it came to trade deals, with the breadth of its negotiations offset by the diminishing returns from new deals.
“If you talk to … the trade department, they are all still very excited about all the trade agreements that are signed. Then actually, as an observer, you see that the countries they're done with are smaller and smaller and smaller – and no offence to New Zealand, it's not a massive economy, right?”
While some European countries were increasingly unwilling to upset farmers and other constituencies with limited economic upside, Poitiers said others believed the EU needed to “stand its ground” in protecting the multilateral system from growing threats.
“To some extent these trade agreements now are almost virtue signalling of the EU with these countries to show we still work together, and we still want to develop a global trading system.”
Scepticism about those virtues was on display during a meeting of the European Parliament’s international trade committee on Tuesday morning (EU time), shortly before news of the council’s decision broke.
“Slicing out a bigger share of a smaller cake to our trading partners is not good table manners." – Pekka Pesonen, Copa Cogeca agriculture union
Mazaly Aguilar, vice chair of the EU’s agriculture and rural development committee, said she had “major concerns” about the impact of New Zealand imports on agricultural producers in Europe.
“I find it difficult to understand who is going to benefit in Europe from this. We don't disagree with the concept of international and global trade, but what I would argue strongly is that you need to look at things from the point of view through the eyes of our farmers.”
Pekka Pesonen, the secretary general of European agricultural union Copa Cogeca, offered qualified praise for the deal’s sustainability commitments and the protection of European geographical indications, but said the reduced tariffs on New Zealand agricultural exports would “increase our structural and negative trade balance … in a period where we are struggling with high costs of production” and greater expectations around sustainability.
“Slicing out a bigger share of a smaller cake to our trading partners is not good table manners,” Pesonen said.
While such comments could suggest the deal’s final ratification may be at risk, Poitiers said New Zealand’s small size should help it through the process.
“I could imagine that there are a number of agricultural interests that are not happy with this, but it's not something that really has been very politicised … it's also not been super high on people's agenda.”
Dombrovskis indicated the deal could be signed within weeks, a timeline that would conveniently align with Prime Minister Chris Hipkins’ visit to Brussels in early July ahead of the Nato summit.
A signing ceremony would be a feather in Hipkins’ cap, but is hardly the end of the process. The European Parliament must still give its consent to the deal, with trade committee member Daniel Caspary indicating the voting process could begin in October.
From multilateral moves to 'autonomous measures'
In a pre-recorded message marking the council’s decision, Trade and Export Growth Minister Damien O’Connor said he hoped the deal could enter into force in the first half of 2024 - by which point the current government may not be positioned to reap the rewards, depending on the outcome of the October 14 election.
For its part, the EU is supplementing its work on new free trade deals with what are sometimes called “autonomous measures”, unilateral tools it can put to work in the trade space without needing the agreement of others.
Poitiers mentioned the recently adopted anti-coercion instrument as one example, allowing the EU to take action against economic coercion by other states without going through the World Trade Organisation process.
The carbon border adjustment mechanism was another, making up for the lack of an international agreement on carbon prices by placing a tariff on high-carbon imports.
“You have all these kinds of initiatives which try basically to use the EU’s market power in ways to influence other country's economic policies…this is really where the energy is, the things that will at the end of the day define the EU’s trade strategy.”
Such initiatives may not be music to the ears of New Zealand policymakers, who have placed an emphasis on agreements through multilateral organisations, although the EU still continues to work through the World Trade Organization and other groupings in addition to its unilateral measures.
Given the dysfunction dogging a number of those organisations, however, as well as the growing willingness of larger nations to throw their weight around, the European approach is a trend we can’t ignore.
Sam Sachdeva is in Brussels courtesy of a media grant from the European Union.
