Why trade is a big deal on Ardern’s trip

Analysis: It’s the single most important item on the prime minister’s agenda in Europe, and a free-trade agreement (FTA) with the European Union is by no means a done deal.

Jacinda Ardern’s biggest obstacle is French President Emmanuel Macron who, while not necessarily against a deal with New Zealand, does have reservations.

Ardern’s meeting with Macron overnight was to cover a range of globally significant issues – including recent air strikes in Syria, the use of the veto at the United Nations Security Council, climate change and Pacific issues.

But an impending vote by European Union member states on whether to allow the negotiating arm of a 23-country bloc to begin formal talks with New Zealand has elevated the FTA to the top of the agenda.

Here’s what it could mean:

What are the benefits?

An FTA with the European Union would represent about $15 billion in two-way trade. The EU is the world’s biggest market and the removal of tariffs on goods at the border would be a huge economic boon to small and medium-sized businesses, in particular, in New Zealand.

At the same time, the cost of importing European goods would be significantly reduced. Goods like wine, food, clothing and cars are among key imports – $8.9b worth of goods each year.

Is it far away?

Both parties are hopeful negotiations can start towards the end of this year but, first, the EU must obtain a mandate to begin the talks. It’s expected member states will vote on that next month.

It’s understood the EU Commissioner is tentatively booked in to visit New Zealand for the formal launch in June – subject to how the vote goes.

Who supports it?

An FTA with New Zealand does have strong support within the EU, but not unanimous support. France is one of the hold-outs, which is why Ardern is placing such high importance on the talk with Macron. Agriculture is likely to be the biggest sticking point, with concerns New Zealand’s highly competitive industry could undercut French farmers should protectionist tariffs be removed, but it’s something New Zealand negotiators have had to navigate at every table.

Germany has been publicly supportive of a deal, and is the single most powerful economy within the EU. With the impending exit of the United Kingdom, Germany and France are the biggest drivers of direction within the bloc. It is hoped that, if France can be persuaded, then the handful of other countries that have reservations might follow suit.

Are there any other issues?

There always are. Free-trade agreements these days cover far more than just tariffs. The final deal would likely dictate policy on areas such as climate change, labour standards and animal welfare.

The Government has introduced policies to exclude the use of ‘‘investor state dispute’’ clauses, which technically allow private overseas companies to sue governments over policy that might leave them worse off, despite an extremely high threshold to do so. The Government has also banned foreign buyers from purchasing property in New Zealand, which has become a feature of a number of other trade agreements.

New Zealand also has concerns over how tariff quotas might be applied between the EU and the UK, as they eke out a divorce deal.

Can Macron be persuaded?

Ardern told Stuff ahead of the trip that she would be making the point that issues surrounding the highly competitive agriculture sector can be thrashed out at the negotiating table. New Zealand has seen similar concerns with countries like China, and the multilateral Comprehensive and Progressive Trans-Pacific Partnership with 10 other countries.

As the United States and China push further down a road of a tit-fortat trade war, Ardern would also be reaching for common ground with Macron on the preservation of the World Trade Organisation’s rulesbased system – that makes a case for more multilateral trade deals.

What about Russia?

New Zealand’s perceived stance on Russia had raised eyebrows in the EU and the UK. Both suggested any moves to press on with a free-trade agreement with Russia would likely affect the progress of trade deals with them. But strong statements since – in support of the UK in the wake of a likely-Russian chemical attack on a former double agent and his daughter, albeit delayed – have mostly put the issue to rest.

The coalition agreement with NZ First outlined a priority plan to kickstart negotiations with the Kremlin. Both Ardern and Foreign Minister Winston Peters have since confirmed efforts to restart trade talks had been shelved in the wake of the Salisbury chemical attack.

A face-to-face assurance from Ardern might be sought, and, if so, it would be given. But it’s likely the issue is no longer a priority for France and the UK, which will both be seeking support for missile strikes against the use of chemical weapons in Syria.