Strong sustainability focus in new EU-New Zealand FTA

After four years of intensive negotiations, the EU and New Zealand have reached agreement on a comprehensive new bilateral free trade agreement.

The agreement, described by EU vice-president Valdis Dombrovskis as “a state-of-the-art trade deal”, was signed off on Thursday (30 June) following a meeting in Brussels between New Zealand prime minister Jacinda Ardern and Commission president Ursula von der Leyen.

The agreement is the first new FTA to be completed under the von der Leyen Commission – and it puts a strong focus on sustainability issues.

New Zealand is to remove tariffs on all goods upon entry into force, while the EU, under pressure from its agricultural lobby, has agreed fairly restrictive tariff rate quotas for sensitive agricultural products such as beef and milk powder.

The deal contains no investment protection provisions, and as such it can be ratified by the EU under the sole competence of the Council and the European Parliament. This will increase the prospects of the deal being signed off by EU governments and MEPs in due course – as compared with ‘mixed’ agreements like the EU-Canada FTA, which has still not yet been ratified by all EU governments.

Dombrovskis described the deal – completed on the very last day of the French presidency of the EU – as “a partnership built on shared values, with sustainability at its core”.

It is the first EU trade deal to make compliance with the Paris Agreement on climate change an ‘essential element’ of the deal – meaning that sanctions can be applied in the event of a material breach of the agreement.

Building on the shared values of the two sides, the deal also includes binding provisions on promoting core labour rights, as well as dedicated chapters on trade and gender equality, trade and fossil fuel subsidies, and liberalisation of green goods and services.

There is also an agreement on fishing subsidies which largely replicates the provisions of the WTO agreement reached earlier this month.

“Simply put, these are the most ambitious sustainability commitments in any trade agreement ever,” claimed Dombrovskis.

New Zealand trade minister Damien O’Connor was similarly enthusiastic, declaring the deal to be “about more than just economic value.

The FTA, he said, was rather “reflective of our shared values and our commitment to the international rules-based trading system.”

The main elements of the new agreement are as follows:

New Zealand will eliminate all tariffs upon entry into force of the agreement. This notably removes tariffs of 5-10% on key products like cars and auto parts, chemicals products, biscuits and sparkling wine.

The EU will likewise remove all tariffs on industrial products.

But quite restrictive tariff rate quotas have been agreed for sensitive agricultural products. The key parts of the agreement on agriculture are:

Beef: a TRQ of 10,000t, at an in-quota tariff rate of 7.5% – the same as was agreed for Mercosur imports – phased in over seven years.

Sheepmeat: a new duty-free TRQ of 38,000t, phased in over seven years, to add to the existing WTO-bound TRQ.

Milk powders: a TRQ of 15,000t with in-quota tariff rate set at 20% of the MFN level, phased in over seven years

Butter: a complicated deal to gradually reduce the in-quota tariff on the existing TRQ from 38% of the MFN rate to just 5% of MFN for some 21,000t of the existing 47,000t quota. An additional quota of 15,000t is also being created.

Cheese: a new duty-free TRQ of 25,000 is being created, while the in-quota duty on New Zealand’s two existing TRQs is to be reduced to zero.

However, imports of other key New Zealand agricultural export products, such as wine, apples and kiwi fruit, will be fully liberalised.

There is also a wine annex to facilitate bilateral trade, and a chapter on ‘sustainable food systems’ which locks in the sustainability-focused policies which both sides are currently pursuing.

This chapter includes closer cooperation on food loss and waste, pesticides, and fertilisers, as well as the phase-out of antimicrobial agents as growth promoters and a reduction in the use of antimicrobial agents in animal production.

A chapter on sanitary and phytosanitary rules largely reaffirms the provisions of the WTO SPS Agreement. The EU has stressed that there is nothing in the agreement which jeopardises its existing controls on genetically modified food or hormones in beef.

The deal includes full bilateral cumulation, as well as a 10% margin of tolerance on product-specific rules of origin. Self-certification of origin will be permitted to make the provisions less burdensome for traders.

The agreement is a relatively advanced one which prohibits “unjustified” data localisation requirements, protects source code, and promotes the use of e-contracts and e-invoicing or paperless trading.

However, the EU is satisfied that it has preserved “a high level of personal data and privacy protection”.

A complication arose in the latter stages of the negotiations about the possible incompatibility of the deal with the Waitangi Treaty – which governs New Zealand’s relationships with its indigenous Māori people. This has reportedly been resolved by statements inserted into the text.

The agreement is the first to integrate the EU’s new approach to trade and sustainable development chapters, which was published last week.

As such, the new FTA includes sanctionable commitments “as a matter of last resort” to the Paris Climate Agreement and core ILO labour standards.

Such core labour standards include freedom of association and the effective recognition of the right to collective bargaining, the elimination of all forms of forced or compulsory labour, the effective abolition of child labour, and the elimination of non-discrimination in respect of employment and occupation.

In addition to the Paris agreement, both sides have agreed to implement the Convention on Biological Diversity, or the Convention on International Trade in Endangered Species of Wild Fauna and Flora – CITES.

Both sides also agreed a dedicated article within the TSD chapter on trade and gender equality.

The EU executive explains that this article contains commitments to not “weaken or reduce the levels of protection nor to waive or otherwise derogate from its laws aimed at ensuring gender equality or equal opportunities for women and men, in order to encourage trade or investment”.

Elsewhere Wellington and Brussels agreed dedicated provisions on trade and fossil fuel subsidies.

The commission states that this “reflects the common goal of progressively reducing FFS and the EU and NZ agree to work together on reforming fossil fuel subsidies, in particular through the WTO”.

The deal opens up market access for a wide range of sectors, including notably delivery services, telecommunications, financial services and international maritime transport services.

There are also “advanced provisions” on the movement of professionals for business purposes.

The deal goes beyond the provisions of the WTO Government Procurement Agreement, and opens up new possibilities for EU companies bidding for New Zealand government contracts.

Notably, this covers transportation services managed by local authorities, such as municipal bus services.

The EU will extend to New Zealand-based service providers access to sectors such as the procurement of health-related goods by regional government entities, and public utility providers operating in the fields of ports and airports.

In this area New Zealand has made some significant concessions to the EU, including the introduction of artists’ resale rights (within 2 years of entry into force of the agreement), and the protection of registered designs, with a term of protection of at least 15 years.

It has also agreed to extend copyright for performers’ sound recordings from 50 to 70 years – an arrangement which New Zealand had already assented to in the framework of its FTA deal with the UK.

New Zealand has been compelled to create a new GI system to accommodate the demands of the EU FTA.

The full list of almost 2,000 EU GIs for wines and spirits are to be protected under the deal, along with 163 agri-food products. Twenty-three New Zealand wine GIs are to be reciprocally protected in the EU.

A number of transitional agreements have been agreed.

New Zealand wine producers have five years to phase out use of terms like ‘madeira’, ‘sherry’ and ‘prosecco’, while continuing use of the terms ‘port’ and ‘feta’ is permitted for up to nine years.

In addition, New Zealand dairies who have an established track record of producing ‘gruyere’ and ‘parmesan’ cheese can continue to do so under so-called ‘grandfathering rights’.

Tags: bilateral free trade, imports, sheepmeat, tariffs, kiwi fruit, apples, TRQ, wine, New Zealand, milk powder, agreement, butter, EU, Cheese, Beef, negotiations, agricultural products