Trade update – June
Trade Update June 2021
It has been a busy month on all fronts. Export New Zealand would like to express particular gratitude to Trade Minister Hon Damien O’Connor and MFAT Deputy Secretary Vangelis Vitalis for travelling to the UK and Europe to progress New Zealand’s negotiating efforts. When this update is published both will be beginning two weeks in MIQ after returning from this travel. This will be the second MIQ stint for Vangelis.
UK – New Zealand FTA
The O’Connor visit to the UK appears to have been particularly successful. Hard on the heels of an announcement of “agreement in principle” between the UK and Australia the Minister has been able to announce that New Zealand will be accelerating negotiations with the UK with a view that “agreement in principle” will be reached by the end of August. We understand that an understanding has been reached with the UK that, if New Zealand can agree something comparable in standard to what Australia is agreeing on services, investment and intellectual property then New Zealand should be expecting to be offered something very similar to what has been offered to Australia on goods market access, including agriculture. This is big forward movement on where things stood even at the beginning of Minister O’Connor’s talks in London.
It may be that New Zealand can go further than Australia in some areas of services, investment regulation and intellectual property. This would suggest the possibility of New Zealand doing slightly better than Australia in some areas.
The most important thing now is for New Zealand and the UK to work hard to have the negotiations on services, investment and intellectual property completed over the next 6 weeks or so. Should agreement in principle in the overall negotiation indeed by achieved in August there is no reason why the final agreement cannot be signed, ratified and enter into force by about the same time that the UK-Australia FTA enters into force. The last thing New Zealand exporters want to see is Australia getting any early market advantage in the UK market over New Zealand.
The details of the Australia – UK FTA of most interest to New Zealand are:
· Tariffs on Australian wine will be eliminated when the agreement enters into force.
· Beef tariffs will be eliminated after ten years. During the transition period, Australia will have immediate access to a duty-free quota of 35,000 tonnes, rising in equal instalments to 110,000 tonnes in year 10. In the subsequent five years a safeguard will apply on beef imports exceeding a further volume threshold rising in equal instalments to 170,000 tonnes, levying a tariff safeguard duty of 20 per cent for the rest of the calendar year.
· Sheep meat tariffs will be eliminated after ten years. During the transition period, Australia will have immediate access to a duty-free quota of 25,000 tonnes, rising in equal instalments to 75,000 tonnes in year 10. In the subsequent five years a safeguard will apply on sheep meat imports exceeding a further volume threshold rising in equal instalments to 125,000 tonnes, levying a tariff safeguard duty of 20 per cent for the rest of the calendar year.
· Dairy tariffs will be eliminated over five years. During the transition period, Australia will have immediate access to a duty-free quota for cheese of 24,000 tonnes, rising in equal instalments to 48,000 tonnes in year five. Australia will also have immediate access to a duty-free quota for non-cheese dairy of 20,000 tonnes. There will be a further duty-free transitional quota for butter of 5,500 tonnes rising to 11,500 tonnes in year five.
The breakthrough in the Australia and New Zealand FTA negotiations with the UK has eased the way for the already announced UK application for membership of CPTPP. It has been announced that formal negotiations of this accession have begun.
The addition of another G7 economy to CPTPP (Canada and Japan are already members) greatly enhances the credibility of the Partnership and it is encouraging interest from others in joining. At the point this interest seems strongest from Korea, Thailand, Taiwan and the Philippines.
The EU has yet to markedly improve its market access offer to New Zealand in this negotiation but understands that this is necessary. Progress is being made in less critical elements of the negotiation but it will not be unblocked until New Zealand receives a more satisfactory offer on agriculture.
The good news is that both sides appear keen to have this negotiation concluded by the end of the year. If it stretches into 2022 a French election and a French EU Presidency may complicate and delay the negotiation.
Digital Economic Partnership Agreement
Interest in the Digital Economic Partnership agreement is also growing with Canada and Korea shaping up as potential members alongside Singapore and and Chile.
Agreement on Climate Change, Trade and Sustainability (ACCTS)
The fifth round of negotiations on the ACCTS have been concluded. This initiative, announced in 2019, involves New Zealand, Costa Rica, Fiji, Iceland, Norway and Switzerland and is seeking the removal of tariffs on environmental goods and new binding commitments on environmental services; disciplines to eliminate fossil fuel subsidies; and the development of guidelines to inform the development of and implementation of voluntary eco-labelling programmes.
Once negotiations are completed membership of ACCTS will be opened to other jurisdictions. The hope is that this plurilateral agreement will add impetus to processes underway at a global level in the WTO.