The EU free trade opportunity

On 22 May, Trade Ministers from the EU’s 28 Member States agreed to formally launch negotiations for a Free Trade Agreement (FTA). The negotiations will begin shortly in Wellington, and are expected to last two to three years.

We look at the scope and significance of the negotiations.

The scope of the negotiations will be broad, including market access for goods, sanitary and phytosanitary measures, technical barriers to trade, services and investment, digital trade, intellectual property, sustainable development, good regulatory practice and regulatory cooperation, and transparency and anti-corruption.

The proposed FTA is important for a number of reasons:

  • it is a critical opportunity to level the playing field for New Zealand exporters in the EU market. New Zealand is one of only six WTO members without a trade agreement with the EU, which is our third largest export destination taking $5.2 billion worth of goods and services annually
  • it will allow the New Zealand Government to explore new ways to ensure that trade agreements play a proactive role in advancing sustainable development, the environment, and other matters such as gender equality, indigenous rights and labour standards, and
  • it is an endorsement by one of the world’s largest trading entities of the ongoing value of the rules-based trading system, now under threat by the current US administration and public anti-globalisation sentiment worldwide.

Market priorities

Key priorities for New Zealand will be improved market access for agricultural products (always a sensitive area, particularly for France) and for services. The EU is New Zealand’s third largest export destination for trade in services, after Australia and the US.

Also of interest will be the impact of Brexit. Traditionally the United Kingdom has been one of the strongest proponents of trade liberalisation in the EU so its departure on 30 March 2019 may give a greater voice to some more protectionist interests.

New Zealand and the United Kingdom have already commenced a trade dialogue and will likely begin work towards an FTA after March 2019.

Chapman Tripp comment

It has taken a while to get to this point. The intention to negotiate an FTA was announced in October 2015, so it is encouraging that the government’s work – first under National, now under Labour – has paid off.

Inevitably, New Zealand’s negotiators will have to navigate some stumbling blocks along the way, but the prize will be well worth the journey for New Zealand exporters.

The negotiation promises to be an interesting one too as the New Zealand Government looks to put its stamp on FTAs through a greater focus on sustainable development and other non-trade goals, and the EU pushes its new approach to investor state dispute settlement (ISDS), which would include replacing the current system of ad hoc tribunals with a permanent international investment court.

The New Zealand Government has stated that it will not negotiate ISDS in future FTAs, but it has yet to state a position on the EU approach.

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Related topics: International trade agreements; Fair trading

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