Trade Minister McClay upbeat about progress on FTA front with EU

Two-way trade between New Zealand and the EU is worth $20 billion a year.

Trade Minister Todd McClay is upbeat after European Commission president Jean-Claude Juncker said he wants to ink a free-trade agreement with New Zealand by October 2019 but acknowledged it will be a challenge.

"I was pleased to see Mr Juncker wants to get it done by 2019, which is excellent news for New Zealand but it's going to be a very intense negotiation," Mr McClay told BusinessDesk. "I have had discussions with all EU member states. They have all said they are supportive of the launch of a free-trade agreement with New Zealand, they are supportive of a conclusion, but there are going to be some difficult issues on the way through," he said.

Two-way trade between New Zealand the EU is worth $20 billion a year.

In a state of the union address overnight Wednesday, Mr Juncker said he was proposing to open trade negotiations with Australia and New Zealand and the aim was that those agreements – and several others – be finalised by the end of the current five-year mandate on October 31, 2019.

Mr McClay said he expects the talks to be formally launched by the end of the year after the European Commission has its negotiating mandate approved by the European Council. In New Zealand, the cabinet has already approved the mandate, he said.

"The negotiating mandate very much focuses on getting the best deal we can for New Zealanders," he said. Key areas of focus will be better agricultural access, guarantees for New Zealanders who will invest in the EU, services, opportunities for small businesses as well as large, and ways to enhance digital trade between New Zealand and Europe.

"It needs to be modern and has to deliver for everyone," he said.

Mr McClay said agriculture will remain one of the main sticking points: "It's going to be very difficult because in Europe there's a lot of protection and subsidy in agriculture. We know European farmers are concerned about New Zealand."

Still, he noted New Zealand has the same amount of arable land available as Lithuania and therefore the ability for New Zealand to have an impact on the European market "is not significant."

In a scoping document, both sides agreed that all products will be part of the negotiations.

The agreement should aim at full tariff liberalisation and provide for the elimination and prohibition of export duties. It was agreed that most tariffs should be eliminated when the agreement enters into force, with any phasing out of tariffs to occur over a relatively short period.

However, in recognition of "possible sensitivities," such as agricultural goods, it was agreed consideration should be given to these sensitivities during negotiations using a range of possible methods. This could include long phase-out periods for tariffs or tariff rate quotas, the document said.

David Parker, Labour's spokesman for foreign affairs, said the opposition party would also be firmly behind at FTA with the EU. Both agriculture and services need to be key priorities, he said.

"We are absolutely supportive of it. It's long overdue that we have an FTA with Europe, which is collectively a huge economy, a wealthy economy, that shares our values both on environment and land market issues," he said.