NZ's trade negotiators found EU trade negotiators believed the FTA was all about managing New Zealand’s access into the market, not about free trade at all. They were told “many, many times last week, we care about Australia, we don’t care about you”

The negotiations concluded recently in Brussels have gained some significant advantages for New Zealand exporters other than meat and dairy in return for very little of substance for the EU. New Zealand’s negotiators were in an unenviable position, attempting to gain concessions on key products from a highly protectionist trading bloc with no high cards in their hand.

From the meat industry’s perspective there is little enthusiasm for either the additional sheep meat quota or the small beef quota agreed, as there is little incentive to develop meaningful sales programmes for EU customers with no gain over alternative market options.

Rick Walker, ANZCO GM Sales and Marketing, had three years’ experience working in Brussels on trade policy for Fonterra which gave him insight into how the EU works, so he is neither surprised nor disappointed by the outcome for the red meat sector. He says New Zealand had very little bargaining leverage, unlike the recently completed UK free trade agreement, where Britain was eager to demonstrate its ability to negotiate new deals outside its previous EU partners.

In his view the deal for New Zealand as a whole was reasonable and may not have remained on the table if we had tried to play hard ball and pushed for greater concessions on the two major agricultural products beyond those in other categories. This contrasts with the reaction from DCANZ, Beef + Lamb NZ and the Meat Industry Association which all believed Jacinda Ardern had unintentionally or deliberately reduced the EU’s expectations of how committed New Zealand was to demands for meaningful concessions for meat and dairy at the expense of a deal.

A contrasting company view came from Alliance Group’s General Manager Sales Shane Kingston said: “The EU is an important market for all of our products, so we’re extremely disappointed with the beef access announced in the EU-NZ FTA. For Alliance Group, the FTA does not create significant new opportunities in a market of 6.5 million metric tonnes. This means it’s simply not viable for any exporter to build a beef sales programme in the EU.” AFFCO’s Mark de Lautour also confirmed there was nothing in it for them.

The person closest to the deal was Vangelis Vitalis, New Zealand’s chief trade negotiator, who told the Primary Industries Summit last week in Auckland the EU is “the most protectionist agricultural trade bloc in the world.” He said it had been extremely challenging to deal with 27 sets of trade negotiators who believed the FTA was all about managing New Zealand’s access into the market, not about free trade at all.

Vitalis told the Summit the EU did not need to complete a deal with New Zealand, a market of 4.8 million which already provides largely tariff free access for EU products. In contrast Australia is much more important, both because of the size of the market and the high tariffs applied to EU imports. He said he was told “many, many times last week, we care about Australia, we don’t care about you.” That is presumably apart from the perceived dangers posed by our dairy and beef exports, as well as the WTO sheep meat quota, which the EU would no doubt dearly love to get out of. If this quota had not been guaranteed as a result of Britain’s original accession to the EEC in 1973, New Zealand’s sheep and beef farmers would have faced the necessity of even more traumatic land use change.

Vitalis also warned the deal is not yet done, as it must be approved by the European Parliament, a process which at least avoids the trap Canada fell into of having to get approval from individual parliaments on the agreement translated into multiple languages. However EU farming interests including its Federated Farmers equivalent Copa Cocega believe their dairy, sheep and beef farmers “are the sacrificed lambs” of the deal and have already held crisis talks in parliament about how to fight it.

What was actually achieved in the FTA, assuming it is eventually ratified, appears impressive, albeit the figures may exaggerate the benefits somewhat: 91% of NZ trade, rising to 97% after seven years (presumably by category, not value), will enter the EU free of duty which economic modelling estimates at up to a $1.8 billion increase in exports, adding $1.4 billion to GDP. Over seven years beef access will increase by 3,333 tonnes immediately and 10,000 tonnes after seven years incurring a 7.5% tariff, sheep meat quota will rise by a further 38,000 tonnes (although the present quota of 112,000 tonnes is not being filled), while butter, cheese and milk powder will also benefit from improved access. It is not certain how much of these allowances will be taken up.

Apart from the small access for meat and dairy, what was actually achieved for all sectors was pleasing. Key beneficiaries will be horticulture with savings particularly on kiwifruit, onions and apples, seafood and fish, wine and honey, and services and manufactured goods. Manuka honey specifically gains tariff free status from day one, as do 99.9% of horticultural products and 99.5% of seafood.

NZ’s negotiators refused to budge on other contentious issues, including Zespri’s single desk seller status which the EU wanted dismantled and patent terms for agricultural chemicals, veterinary medicines and human pharmaceuticals which the EU were eager to extend beyond 6-8 years. The latter is critically important to the preservation of the Pharmac generic purchasing model, while Zespri has proved itself as a very profitable and innovative method of maximising earnings from kiwifruit. Movement on any of these items would have had serious cost implications.

All things considered this FTA may not be perfect, but in the longer term it should boost the economy as well as providing a base for review and improvement.

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