EU trade nod sends pointed message
For years the prospect of a free trade deal with Europe has seemed like a fanciful dream for New Zealand. Images of buttermountains in Brussels and angry French farmers sent a clear message that our cheaper, unsubsidised agricultural exports were not welcome — at least not without costly tariffs.
So the European Union announcement that formal negotiations will proceed, for deals with both Australia and New Zealand, is very welcome.
Prospects exceed the expectations of most trade officials when scoping talks began in 2015. It’s hoped the deal might now be done within two years.
Challenges remain — we’re unlikely to get a free ride on key agricultural products — but there seems to be serious momentum and a significant lift in enthusiasm out of Europe.
Which begs the question — what has changed? The answer has something to do with a much larger political power game. In progressing quickly on trade deals with Australia and New Zealand, the EU sends a not-so-subtle message to Britain, which has talked up its prospects for going it alone with bilateral deals post-Brexit. It also sends a broader message to the United States — as President Donald Trump ramps up his protectionist rhetoric — that the EU remains committed to a path of globalisation and trade liberalisation.
In New Zealand too it’s a timely reminder that, despite having changed to a left-leaning Government, we have been spared the ravages of isolationist nationalism. New Zealand remains open for business and — as this Government heads into battle with employers over workplace relations — it can point to its stance on trade as evidence of ongoing economic pragmatism.
Labour can claim it is a party of progress on free trade. Former Prime Minister Helen Clark drove the successful China Free Trade Agreement. And, when push came to shove, the current leadership did what was required to ensure the Trans-Pacific Partnership (now CTPP) got across the line.
For many on the left an EU deal may be less problematic because of a greater alignment on issues of human rights and intellectual property.
Political signals aside, any movement on tariffs in Europe is effectively money in the bank for local exporters. Latest trade figures show New Zealand exports to the EU total $5.2 billion, comprising $1.9b in services and $3.3b in goods. The EU’s own estimates of the value of a deal suggest a GDP boost for New Zealand of between $1.2b and $2b, and a 10 to 20 per cent increase in exports.
These estimates can prove conservative once an FTA heightens the focus on a region. New Zealand’s exports to China have increased five-fold since that free trade deal was signed in 2008.
China was going through a historically unprecedented phase of economic growth in this period, of course. Europe is a mature market.
But regardless of the exact gains New Zealand achieves with this deal it will, along with the CTPP and an upgraded China FTA, provide some muchneeded security in a time of increasing trade tensions.