Trade update - May

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Trade update - May

20 May 2021 | BusinessNZ

Trade update - May

The focus is very much on the negotiations with the EU and UK.  In the case of the EU chances of rapid progress are receding.  With the UK the pressure is coming on for a more rapid agreement.

EU

We have been worried about the politics of this negotiation for a while.  There are two big elections coming up in the EU, Germany in September and France in April 2022.

It seems unlikely that really tough calls on agriculture will be possible close to either election.  But there is a window of opportunity after the German election and before the French election really hots up for progress to be achieved.

Unfortunately internal EU processes have thrown a spanner in the works.  The EU has decided to draft a new standard chapter on sustainable development for use in all future FTAs.  This needs consultation within the EU and it seems that the earliest that this will be finalised is October.  Originally this new template Chapter was not meant to apply to negotiations underway, but this position has been reconsidered and it seems that the EU intends to negotiate on the basis of the new policy in the negotiation with New Zealand.  As a chapter on trade and sustainable development is desired by both the EU and New Zealand it will be impossible to conclude the FTA negotiation before the EU is in a position to negotiate on it.

Meanwhile New Zealand continues to await an improved market access offer from the EU.  No one seems to know when this will arrive.

A further round of negotiations is expected to begin in June.

UK

The fun and games we reported last month have continued with the UK.

Australia has, for some reason, agreed to strive towards in principle agreement on the UK-Australia FTA by the time of the G20 meeting in June.  Given the state of negotiations this has meant intense activity between the UK and Australian negotiators.  Meetings are occurring daily and Trade Ministers are talking every Friday.

The concern for New Zealand is not that Australia might conclude before New Zealand. It is that Australia might agree a poor deal.  This has happened before.  And if Australia settles, the UK will seek to use the Australia outcome as precedent for the New Zealand outcome.  The UK is well aware of this dynamic and regular media stories are being leaked with the apparent intent of putting pressure on New Zealand.

But never fear, Damien O’Connor is here.  Well he is flying to the UK in June along with senior trade official Vangelis Vitalis to meet with his UK counterpart Liz Truss.

Hopefully Minister O’Connor will not make the mistake of agreeing to a deadline for concluding this negotiation.  Clearly there is much work still to be done.

We have been surprised to discover that the two sides have yet to exchange offers for services and investment.  This is a major interest for the UK.

New Zealand has yet to submit the text of proposed chapters on gender and indigenous issues.

And there is a stand-off on market access.  The UK states that a commercially meaningful offer is on the table.  New Zealand is pleased that the UK has improved on the original market access offer for goods.  But this is still not deemed as sufficiently good to allow this negotiation to move to the final stages.

Both sides are holding the details of this market access offer close to their chests.  But is seems clear that the UK is not offering a zero tariff end point and tariff only outcome to New Zealand in all product areas.  Tariff quotas seem part of the mix.  And for horticulture, seasonal tariffs are also probably on the table.

The good news is that the UK seems to accept that the end result of this negotiation must be an improvement on the existing quota arrangements with the old EU.

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