NZ losing out in EU trade without modern FTA

The rules governing trade with the EU date back to the outcomes of the 1994 Uruguay Round of the General Agreement of Trade and Tariffs.

New Zealand exporters are at a "growing competitive disadvantage" to competitors in European markets in the absence of a modern free trade agreement with the European Union, says the New Zealand International Business Forum in a paper advocating that negotiations begin as soon as possible.

The rules governing trade with the EU date back to the outcomes of the 1994 Uruguay Round of the General Agreement of Trade and Tariffs, whereas "most of Europe's trading partners have already negotiated or are currently working on various preferential trade agreements," says the report.

"New Zealand exporters still face some formidable tariff barriers into Europe and a range of so-called 'non-tariff barriers', which exacerbate the growing competitive disadvantage caused by others' preferential agreements."

The NZIBF push follows yesterday's release of a refreshed trade policy agenda by the New Zealand government, which proposes to 'pivot' towards Europe and Latin America while continuing to build on its deepening Asia region trade relationships, and apparently giving up for now on hopes of FTAs with India or the Gulf States, where momentum has stalled.

It also follows a paper published in July by the Brussels-based European Centre for International Political Economy that nominated New Zealand as "the unexpected candidate" for a new generation of FTAs that the EU is likely to want to pursue, especially if the current Trans-Pacific Partnership negotiations are successful.

"The EU-New Zealand FTA would match the regulatory disciplines of the TPP, as well as open up the door towards Australia and ASEAN," the ECIPE paper said. "This door could very well be Europe's last chance of overtaking TPP."

New Zealand would be a logical negotiating partner rather than Australia, because it was a smaller economy and "thereby less threatening", and because there was strong political endorsement from Britain and Germany for an EU-New Zealand FTA to be attempted.

Also in New Zealand's favour was the fact that it was not a producer of grains or sugar, which are very politically sensitive in Europe.

"If an FTA cannot be done with New Zealand, it cannot be done at all," said ECIPE, noting that the absence of FTAs with Australia, New Zealand and Brunei represented "a blind spot worth US$1.5 trillion", even though New Zealand takes only 0.2 percent of the EU's total exports and is ranked by size as the region's 56th trading partner.

From New Zealand's perspective, the EU is the third-largest trading partner, its third-ranked export market and one of the top two sources for imports.

A decision about whether to launch negotiations is expected later this year.

"Although the relationship is in reasonable shape, many New Zealand exports still face barriers at the border or behind it, which add costs, generate uncertainty or in some cases, even make trade uneconomic," said NZIBF executive director Stephen Jacobi.

"A high quality ambitious and comprehensive FTA with the EU is strongly in the interests of the New Zealand business community, and would be good for Europe too."

The ECIPE paper promotes an FTA with New Zealand as part of an EU strategy to engage more deeply with the Asia-Pacific region, where New Zealand has deep and evolving trade relationships already and where the balance of global economic activity is shifting.

"This eastern shift in the world's economic centre of gravity is undisputed," the ECIPE paper says. "And so is the relative decline in importance of Europe's domestic markets.

"Given that Europe's aggregate income fall from TPP will be equal to the gains the EU expects from TTIP (the US/EU equivalent to TPP currently under negotiation), Europe is left with no option but to negotiate with each of the TPP and ASEAN countries to secure exports. The picture is especially worrisome for EU exporters of agricultural products," ECIPE researchers said.