Guy Trafford reviews the NZ-EU free trade deal and finds ... not much. Certainly little to benefit NZ, and the EU conceding nothing. He worries it may set a precedent of failure in other FTA negotiations

Even though the New Zealand-European Union Free Trade Agreement (FTA) was announced last week, it's still managing to make headlines in the national news. Given that bad news tends to hang around longer than good, this is not a good sign that the FTA has been a great result.

To be fair there are some sectors, largely around horticulture and vegetable growing (kiwifruit and onion growers have been picked out) as two sectors that have benefitted from the FTA. Once the deal is ratified - and given the UK FTA is still awaiting sign-off don’t hold your breath - it may take until next year to get the final i’s dotted and t’s crossed, the immediate benefits will amount to something like NZ$110 million per year in saved tariffs. This should mean cheaper New Zealand goods to the EU consumer and presumably more sold.

The Government has estimated that by 2035 this will be worth another NZ$1.8billion. This sounds a worthy outcome but when you consider that New Zealand trade with China has risen from an estimated NZ$9 billion per annum pre the China FTA to around NZ$32 billion now, the EU FTA in it’s current form pales into insignificance.

The biggest disappointment in the deal comes from the lack of any real benefit to New Zealand’s cornerstone exports of red meat and dairy products.

For these sectors, new quota opportunities worth over $600 mln in annual export revenue for dairy and red meat sector have been negotiated once fully implemented, with an eight-fold increase in beef access to the EU market. The beef quota increase is an 800% increase on very little, which results in not much, and given the size of these sectors a NZ$600 mln increase is small change.

If the Government had expected the deal to be a catalyst to enable New Zealand primary sectors to shift their reliance away from China, this deal is going to do next to nothing to incentivise this. Some commentators have felt the lack of benefits to the major primary sectors has shown a chink in New Zealand’s negotiating armour and may weaken our case when trying for future FTA’s with other countries, notably India which to date has effectively shut most of New Zealand goods out.

Part of the problem is, when New Zealand is negotiating with countries or blocs which are largely secure in their food security from domestic sources, then New Zealand doesn’t have a lot to leverage with. In the EU FTA case, as with most countries (Russia the main exception now) there are no or very little barriers to exporting goods to New Zealand, so nothing to trade off.

In the EU case we seemed to be relying largely upon the goodwill established over history.

However, when dealing with the EU, who have a lot of stroppy farmers to keep happy, we were always going to struggle to make any meaningful gains in the meat and dairy sectors. One area where I believe New Zealand livestock farmers have been ‘sold a pup’ is around the benefits that await them from going down the emissions reduction route and the additional returns from markets this was going to achieve.

This FTA was the opportunity to test this, and it has come up with a big fat “fail”.

Sadly, having agreed on the deal it is going to be very difficult to regain lost ground in the future.

It has taken over 4 years to get to this stage since negotiations were initiated so the EU will not be wanting to relitigate the deal unless something dramatic happens from ‘left field’ but this in an unlikely occurrence.

So, should New Zealand have walked away from the deal? We will never know if that tactic would have brought a better deal, eventually. No doubt the smaller sectors who have made the greatest gains would have been disappointed and so this deal has been described as a pragmatic result. But the government shouldn’t be expecting to get any brownie points from the livestock sectors as largely they will see this as an opportunity lost even if it was to be at some later date.

A glimmer of hope that EU farmers may have their wings clipped comes from the Netherland’s where farmers are protesting in their thousands about impending rules that may limit their ability to farm. To date they seem to have avoided the methane debate with the focus on the Dutch government’s plans to rein in emissions of nitrogen oxide and ammonia.

The ruling coalition has earmarked an extra €24.3 bln (NZ$40 bln) to finance changes that will likely make many farmers drastically reduce their number of livestock or get rid of them altogether. While no cohesive plan seems to be coming out of the EU Parliament regarding real reductions in agricultural emissions it may be that as individual countries ratchet up their moves to reduce emissions, future opportunities may start to appear (maybe) for New Zealand exports.

At the moment however, with what has been agreed to by the New Zealand government it looks as though they believe that livestock systems cannot be relied upon into the future with growth coming from the horticulture and the other (currently) smaller sectors.