July Trade Update
Japan and the EU have reached an agreement on a FTA. This is probably the biggest FTA ever concluded. It is not the highest standard FTA ever concluded but it ups the stakes on TPP 11. While the EU-Japan FTA is very similar to the terms agreed by Japan under TPP (it seems to be better than TPP for soft chesses) there could be very negative consequences for New Zealand exporters if TPP 11 does not happen. This is because the EU exports pretty much everything New Zealand produces. If the EU deal goes through but TPP does not it would mean that the EU would have a very substantial margin of preference over New Zealand product when selling into the Japan market. Opponents of TPP 11 might like to reflect on this recent development.
Officials are due to meet shortly in Japan to discuss next steps towards achieving implementation of TPP without the United States.
There has been considerable discussion in the media about a rapid New Zealand or US or Australian FTA with the UK. President Trump seems particularly upbeat. We advise caution. The UK cannot negotiate a trade agreement with anyone until it leaves the Customs Union with the EU. As a minimum we are talking another 18 months but this period could take much longer. The actual Brexit negotiations between the EU and UK have hardly begun. They are extremely complicated. There is also the possibility of a “transition period” being negotiated. This would apply post Brexit negotiations but would see the UK remain in the Customs Union until an agreement between the UK and EU is negotiated. This may take several years. As long as the UK is part of the Customs Union negotiating with anyone else is not possible.
So long as all this talk of NZ-UK has not annoyed the EU we are still on track for a launch of negotiations in November.
As foreshadowed in our last update a big announcement was indeed brewing at the Pacific Alliance summit. It was certainly worth having two Ministers at the meeting as it was announced that New Zealand and several others were to begin negotiations about a trade agreement with the Alliance (Mexico, Colombia, Peru and Chile). This is good news. Colombia and Mexico are major markets. This is a good fallback should TPP 11 fail. Also Colombia is not part of the TPP process.
News continues to be bad in terms of relations between Qatar and most other members of the Council.
There is no progress to report since our last report.