EU-New Zealand Free Trade Agreement : toward a new European trade era ?

, by Jean Jouanin

All the versions of this article: [English] [français]

EU-New Zealand Free Trade Agreement : toward a new European trade era ?
Chris Hipkins, former New Zealand Prime minister, and Ursula von der Leyen, president of the European Commission, on 9 July 2023 during a press conference preceding the signature of the free trade agreement

At the end of November 2023, the Council of the European Union has validated the EU-New Zealand free trade agreement (FTA), celebrated has a cornerstone for the European trade policy by the European Commission. After four years of negotiations led by the Commission, the European Parliament has ratified the agreement before the twenty-seven Member States gave their endorsement at the European Council. The FTA will enter into force on the 1st May 2024, after New Zealand’s Parliament ratification of the treaty. As the FTA permits to strengthen EU-NZ trade relations, it also has an extremely tense geopolitical context within it. The European Union, the fourth-largest trade partner of New Zealand, or Aotearoa (as the country is called in the local Māori language), has inaugurated its new approach in terms of trade and sustainable development. In this article, we will review this FTA, ushering a new trade era for the EU.

What to expect from this trade agreement

This trade agreement, although standard, includes various novelties and enshrines itself in a key geopolitical and disputed region, the Indo-Pacific. As a reminder, an FTA is an international treaty between at least two states or international organisations. Its goal is to decrease or remove trade barriers between the different signatories in order to benefit their respective markets and thus stimulate economic growth and employment on both sides.

The new FTA is no exception; This agreement between the EU and NZ is expected to remove the latter’s tariffs on EU exportations. Products imported from Europe are mainly pork, wines and spirits, dairy products, chocolate and various biscuits and sweets. Until now, NZ has imposed tariffs of around 5% on these products, which are now set to be eliminated. In return, the EU will remove tariffs on existing importations from NZ, such as lamb, wine and kiwi fruit.

Another standard measure of an FTA involves recognising 163 protected European geographical indications, such as certain cheeses, wines, and spirits. In practice, this recognition allows for the prohibition of commercialising a product bearing a geographical indication if it doesn’t adhere to European production norms. This measure aims to protect producers, establish intellectual property rights, and enhance consumer awareness among NZ citizens about the products they buy.

Moreover, this agreement allows the opening of NZ’s services market in key sectors like telecommunications, maritime transport, delivery services and financial services. European companies will have access to NZ’s government procurement contracts. From both sides, investors will be guaranteed a non-discriminatory treatment. Small and medium sized enterprises (SMEs) will not be outdone, as the text provides specifications of assistance in increasing their exports.

To sum up, this agreement permits to facilitate investments and the trade of goods and services between the two parties, while it also permits augmenting trade exchanges between them. According to certain impact analysis reports, the agreement would result in a 30% increase of trade exchanges between the EU and NZ, with a 140 million of Euros per year saving thanks to the tariffs removal on both sides. Additionally, European investments on the island country could potentially rise by up to 80% in the upcoming years.

Toward a new trade agreements’ era?

If the main measures remain standard for an FTA afterwards, this agreement could be labelled as “groundbreaking” by the European Commission. Valdis Dombrovskis, the European Commissioner for Trade, has emphasised in a press release that these are “the most ambitious sustainability commitments in any trade agreement ever”. Indeed, this FTA is composed of a sustainable development section, coupled with sanctions in a case of non-respect of the Paris Climate Accords. The protection of fundamental workers’ rights is also enshrined in this treaty and any violation of it would expose either side to sanctions. For the first time, an FTA is being a crucial part of the EU Green diplomacy and includes a chapter on sustainable food systems, while also highlighting trade and gender equality provisions. Lastly, an environment-related clause that revolves around a reform of trade and fossil fuels subventions also exists.

However, despite the commitments for sustainable developments, the agreement is criticised for its goods exportation to Europe produced by NZ farmers using chemical substances prohibited in the EU. Farming organisations are worried that it could create an unfair competition if those goods, imported to Europe and produced with these chemical substances, happen to be cheaper than those produced in the EU. A criticism echoing those was also raised against the FTAs signed with Mercosur and Canada. However, this particular FTA remains innovative as it displays a social and environmental dimension of international trade.

Indo-Pacific strategy

Ursula von der Leyen, President of the European Commission, declared during a press release following the signature of the FTA that “New Zealand is a key partner for us in the Indo-Pacific region, and this free trade agreement will bring us even closer together […]. This new agreement between the European Union and New Zealand comes at an important geopolitical moment.” As underlined above, this FTA with NZ follows a tense geopolitical context, marked by the Russian invasion of Ukraine and the endless Chinese expansion in the Indo-Pacific, also aided by Russia. The EU deploys its Indo-Pacific strategy, which aims at insuring stability, prosperity and sustainable development in the region, while promoting democracy, human rights, rule of law and international law. The new FTA is aligned with this policy and aims to reinforce the European position in this region.

The agreement also follows the “Global Gateway” strategy launched by the European Commission, aspiring to offer an alternative to China’s “Road and Belt Initiative”, and thus to contain Chinese influence around the globe. The Indo-Pacific region, producing around 60% of the world’s GDP, is even more crucial as it’s located at the heart of global trade and investments flows. Therefore, reinforcing the ties with its partners plays a crucial part for the EU, and the EU-New Zealand FTA perfectly highlights it.

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