New Zealand wins $1.8b trade deal with EU at eleventh hour

Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen signed a...
Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen signed a policing agreement ahead of announcing a trade agreement. Photo: Thomas Coughlan
After four years of often torturous negotiations, New Zealand and the European Union have agreed a free trade deal.

Prime Minister Jacinda Ardern, who helped conclude negotiations in Brussels said it would help grow exports to the European Union by $1.8 billion a year by 2035.

Ardern had played down hopes of a deal earlier this week, saying she was "very willing to come away from Europe without final conclusion" if it did not offer significant market access.

But around midday Brussels time, final talks were concluded by New Zealand's chief negotiator Vangelis Vitalis and trade minister Damien O'Connor, just hours before Ardern was scheduled to leave Brussels for London.

"Despite many challenges, we got there, and today we deliver an agreement that represents improved trade opportunities for our exporters," Ardern said, as she announced the deal with European Commission President Ursula von der Leyen.

A full 91 per cent of tariffs will be eliminated on the day the agreement comes into force, with 97 per cent eliminated by the seventh year.

Parmesan safe, but say au revoir to New Zealand made feta

There had been fears New Zealand primary industries and cheesemakers would be big losers under the deal, with cheesemakers being forced to stop using names like parmesan, gouda, halloumi, mozzarella, brie and camembert, which the EU sought to protect for use by European producers under its system of geographic indicators, or GIs.

Those fears have not been realised in full, with New Zealand retaining the right to use the names of many famous cheeses.

New Zealand cheesemakers can still call their cheeses camembert, gouda, halloumi, mozzarella and brie. Producers who are currently making parmesan can continue to use the name, though no more will be able to, once the agreement comes into force - when that happens, the only new producers of parmesan will have to come from the Italian region of Parma.

Producers who have been making gruyère for more than five years will continue to be able to use the term, but no one else apart from its traditional European manufacturers will.

The only losers from the GIs deal are producers of feta and port, who will have to drop the terms within nine years of the deal coming into force. From then, the only products sold as feta and port in New Zealand will have to come from Greece and Portugal.

New Zealand producers can keep on making these products, they will just have to call them something else.

Red meat sector unhappy

New Zealand has secured some wins for primary industries, but some in the sector have said it is not enough.

Dairy and beef are expected to get $120 million of new export revenue from when the agreement enters into force, growing to $600m within seven years. On beef, for example, New Zealand will be allowed to export 10,000 tonnes to the European Union at a tariff of 7.5 per cent a year.

The red meat sector was not happy with that access. Sirma Karapeeva, chief executive of the Meat Industry Association said she was "extremely disappointed" the deal did not include "commercially meaningful access for our exporters".

Beef + Lamb chief executive Sam McIvor said the deal was a missed opportunity to "return better prices to both companies and farmers", and said the EU had failed to "live up to their rhetoric of being free traders".

O'Connor said that both sides had made concessions on agriculture which was "sensitive" to both economies.

"It's probably fair to say that no one likes it, so we probably have it about right," O'Connor told a press conference.

He said both sides had to "compromise" because both had "the same passion and commitment to support their food producers".

Both sides conceded it was agriculture that had held up talks, which began in 2018.

Ardern said the compromises were worth the deal, which she felt could not be left on the table.

"The calculation we have to make is if we walk away, do we lose the opportunity altogether. My calculation is that we would, and walking away from $1.8b is not something I was willing to do for the New Zealand economy," Ardern said.

Kiwifruit, fisheries, and Pharmac the big winners

Big winners include the kiwifruit and seafood industries.

On day one of the agreement, kiwifruit, wine, onions, apples, mānuka honey and manufactured goods will receive tariff-free access to the European single market.

Since the 1970s, kiwifruit exporters had been paying $8.80 per $100 of exports to the EU. That tariff will be completely eliminated on day one of the deal.

Zespri chairman Bruce Cameron said the agreement would set New Zealand up to "expand our exports to Europe, providing more European consumers with the highest-quality Zespri kiwifruit and helping deliver strong returns for our growers".

Seafood currently has a 25 per cent tariff but this will also be eliminated on day, one saving New Zealand exporters $25 per $100 of exports.

There had been fears the cost of medicines would increase under the agreement, with the European pharmaceutical industry lobbying for an extension of patent terms that would push up the price of drugs, hurting national drug-buying agency Pharmac.

New Zealand has managed to push back on that ask, leaving patent terms unchanged, by the agreement, potentially saving Pharmac hundreds of millions of dollars a year.

What the EU gets

The EU wins the removal of all New Zealand tariffs on day one of the agreement entering into force. This is less of a win than it sounds, as New Zealand's tariffs are already low and mainly exist so that they can be offered as a concession in trade negotiations.

One novel area of the FTA is the way it incorporates the Paris agreement into trade.

If either side believes the other one is falling short of its Paris goals it can take that accusation to arbitration and possibly apply penalties if the allegation is proved to be correct.

While there is a risk either side could find themselves penalised on those rules, Ardern said it "sets the bar high" for other trade deals the EU does with other countries, setting higher international standards that could benefit New Zealand producers.

The agreement was concluded so late that the full text will not be released for another week.

Do not expect the agreement to come into force any time soon. To fully apply, it would need to be ratified by all 27 EU member states. The EU concluded an FTA with Canada in 2014 and it has yet to be fully ratified, although many parts of it entered into force in 2017.

Ardern said the deal would deliver greater benefits than the FTA concluded with the United Kingdom late last year. That deal included bigger wins, including the winding back of 100 per cent of tariffs, but the EU is a market of about 450 million high-income consumers, making the relative benefits much greater.

Speaking after her meeting with von der Leyen, Ardern highlighted New Zealand and the EU's coordinated response to Russia's aggression against Ukraine.

"While this is an incredibly important day for our trade relationship, it's also a time to acknowledge the extraordinary time and challenges that Europe is facing," Ardern said.

"We stand shoulder-to-shoulder with the European Union in condemning Russia's unprovoked and unjustified war of aggression against Ukraine," she said, adding New Zealand's "unwavering support" for Ukraine's "independence, sovereignty and territorial integrity within its internationally recognised borders".

Some international commentators had floated the idea of Ukraine giving up territory to appease Russia. Ardern's statements in Brussels today suggest New Zealand is very unlikely to back such a move.

New Zealand and the EU also signed a policing deal, agreeing to greater collaboration between the New Zealand police and European agency Europol.

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