New Zealand signs free-trade deal with European Union after years of ‘hard negotiation’

New Zealand has signed a long-negotiated free-trade deal with the European Union, promising tariff-free access to 27 countries for many exports.

Prime Minister Chris Hipkins and Trade Minister Damien O’Connor were in Brussels, Belgium, overnight on Monday for the signing of the agreement, which is expected to come into effect in mid-2024.

The European Union is New Zealand’s fourth-largest trade partner, and the agreement will eliminate much of the $115 million in tariffs paid by New Zealand exporters, as well as improve market access conditions for many major agricultural exports. For Europe, the agreement would be less economically meaningful, but it was the first such deal reached in many years.

“We didn’t get everything that we wished for, but we got a substantial amount of what we need,” O’Connor said. “It was a hard negotiation.”

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O’Connor signed the agreement at the European Commission on Sunday afternoon, Brussels time, along with EU trade commissioner Valdis Dombrovskis​​ and EU presidency representative Marcos Alonso Alonso​​. Hipkins and EU President Ursula von der Leyen watched on.

“With this agreement, we should be able to increase trade between us by 30%, and EU investment in New Zealand by 80%,” von der Leyen said.

Negotiations for the agreement began in 2018 and lasted 12 rounds of negotiations, before concluding in 2022.

All 27 EU countries have now agreed to the deal, allowing the union executive and New Zealand to sign – however, the European Parliament, which has turned down free-trade agreements in the past, will also have to consent.

Hipkins has said New Zealand will continue to lobby hard to get the deal across the line, although European officials have indicated the deal will be well-supported and through the Parliament by the year’s end. New Zealand’s Parliament may not ratify until mid-2024 due to the election in October.

The agreement will eliminate much of the $115 million in tariffs paid by New Zealand exporters to the union. When it comes into force, 94% of product lines will be tariff-free and after seven years this will be 97%.

Horticulture products, including kiwifruit and apples, as well as wine and seafood will become tariff-free exports.

Tariffs and quotas will remain on many dairy and meat products, however, the duties and limits on these exports will be improved. As with the recently completed NZ-UK free trade deal, the agriculture sector in Europe strongly opposed the deal for fear of tariff-free New Zealand products damaging their market share.

Dombrovskis, the EU trade commissioner, said there were “always sensitivities around agriculture” but the agreement retained “appropriate precautions” for the likes of beef and sheep meat remained.

‘It levels the playing field’

At a New Zealand business event earlier in the day, Yvan Elebaut, Europe manager for beef and lamb producer ANZCO, said the deal would reduce the duties paid by his firm from 20% to 7.5%, meaning more money could return to farmers.

“It levels the playing field, because South America and other countries already have done those kinds of deals. New Zealand’s had good access to Europe, but that was done 25, maybe 30 years ago, and in the meantime, other countries [have] advanced.”

The deal extends beyond market access for export goods, which was New Zealand’s major focus. There are also provisions allowing countries to tender for government contracts, agreements on climate and Māori trade, and a requirement that “geographical indicators” – the names of agreed products that originate from either Europe or New Zealand not be used by the other.

This will mean New Zealand farmers will have to stop using “feta”, “sherry”, and “port” in the coming years. O’Connor, jokingly, has suggested farmers may choose to call their cheese “Wheta”, drawing from te reo Māori.

Villa Maria Europe manager Vincent Lensveldt said the agreement removed the 12 euro cents tariff that the wine brand currently pays on each bottle exported, and it would simplify customs procedures.

“If you look at other wine producing countries, like South Africa and Chile, they already have free-trade agreement since 2000 and 2003. So it will give us the same competitive advantages.”

But the benefits of the agreement also rely on the businesses succeeding in the European market. Lensveldt said Villa Maria, which sells in all but one of the EU countries, still “had a long way to go”.

“If you look at the wine consumption in Europe … for example, Belgium, only 26% of the wine consumers, they know New Zealand is a country of origin. So we also have to create more awareness for New Zealand products.”

Alongside the free-trade agreement, a research agreement between New Zealand and the EU was signed to provide New Zealand researchers the opportunity to participate in the bloc’s NZ$160 billion “Horizon Europe” science and research programme.

“We are looking forward to pooling our best minds and talents so that we can work together,” von de Leyen said.