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EU free trade talks close in on tougher issues

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A New Zealand free trade agreement with the European Union by the end of the year looks unlikely as the EU grapples with Brexit and other issues.

With the fifth round of talks just concluded in Brussels, senior MFAT official Michelle Slade told a room of Waikato exporters that the tougher issues are starting to come to the fore.

That is set to include the thorny issue of geographical indications, though the Treaty of Waitangi exception to safeguard the interests of Māori – often dealt with towards the end of other negotiations – has been agreed up front.

Along with Brexit, the EU has been preoccupied with finishing a deal with the Mercatur group of Argentina, Brazil, Uruguay and Paraguay, as well as going into a change of administration, Slade said at the event organised in July by the Waikato branch of ExportNZ.

That means concluding an agreement this year as originally planned is looking increasingly unlikely.

Slade described the EU as the “big missing link” in New Zealand’s FTA framework, and the numbers suggest the potential benefits are large.

The EU is New Zealand’s third largest trading partner after China and Australia, with $23 billion in two way trade in 2018. Minus the UK, two-way trade with continental EU will still be $15 billion a year.

When it comes to services trade, the EU is second largest for New Zealand, and in 2018 the EU accounted for more than 14 percent of New Zealand’s total trade.

The EU agreement, once concluded, will mean around 65 percent of New Zealand’s  trade would be covered by preferential and improved free trade agreements, Slade said.

She said agricultural market access was an important objective for New Zealand, with  a lot of trade currently under quite restricted quota conditions.

“That is something we are seeking to address in the negotiations. It is a very sensitive area with the EU; they have long resisted those kinds of more open provisions.

“So we’re not under any illusions that that area is going to be an easy one, but New Zealand’s objective remains seeking comprehensive tariff elimination for goods and seeking ways in which we can address the sensitivities.”

One of the trickier areas is set to be around geographical indications, most commonly used for European wines and spirits.

“Champagne is a very classic example, where the geographical indication, the quality and reputation of that particular product, is anchored in where the goods come from, and is able to be established as such.

“The EU has a very active policy on pursuing protections for its geographical indications.”

The system is elaborate and not black and white even for countries within the union. Slade gave feta as an example, with debates about whether Denmark can produce a product called feta or only Greece can.

The EU is seeking protection for around 2100 names in its negotiations with New Zealand, most of them for wines.

“We already have legislative protection for wine and spirit geographical indications, but in New Zealand we don’t extend that GI protection at the moment to food products, and so this is likely to be a very central and challenging part of the negotiations.”

Meanwhile, Slade said both the UK and New Zealand had been clear since the Brexit referendum that they would look to negotiate an early and high-quality free trade agreement once Britain is in a position to do so.

She said New Zealand had been quick to establish trade policy dialogue with the UK, as one of three priority free trade agreement partners along with Australia and the US.

Significant progress has been made on regulatory continuity with similar agreements negotiated to those with the EU, ready to kick in once Britain leaves.

There has also been discussion around market access arrangements. Slade described that as a complex area, with New Zealand’s access into Britain governed for the past quarter century by WTO commitments made by the UK as part of the EU. “You may have seen some references in the media to the way that the UK would like to propose to deal with those, post-Brexit, that give rise to very real concerns for our exporters as to diminished quality and quantity of the access.”

MFAT has also been seeking to raise awareness of potential practical issues of trade disruption, including issues like large queues at customs checkpoints.

“The bulk of these practical issues won’t be New Zealand-specific, they will be much more to do with the requirement in a no-deal Brexit situation for each side of the Channel to be doing customs inspections and things that they haven’t been doing for 40 years. There’s a lot of potential for third parties like New Zealand traders to be caught up in that.”

Getting the most from free trade agreements

Slade urged exporters in her audience to access the ministry’s tariff finder (https://www.tariff-finder.govt.nz/) in order to maximise benefits from free trade agreements. It gives comparative benefits under different schemes and Slade said it was worth keeping a watch on because in some agreements tariffs are phased over time.

She also said to let the ministry know if there were concerns over non-tariff measures.

“As tariffs at border have come down, regulatory requirements have become more significant, and we have seen in some instances non-tariff measures have sprung up.

“In some cases, particularly onerous labelling requirements or particularly complicated standards or the way they are enforced can be more than you would expect in that circumstance and therefore something we can take up. Let us know.”

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