June Trade Update
Prime Minister Bill English was very upbeat on New Zealand’s trade negotiating agenda late last week. It is unclear why this was. There seem few examples of good progress having been achieved. Maybe something is brewing with the Pacific Alliance. The following is our understanding of the state of play in current and planned negotiations:
The prospect of a negotiation is looking promising. Both sides have released a summary of the joint scoping study agreed a few months ago. This is a good sign that we can look forward to a more transparent approach to this and other future negotiations.
There are two hurdles in the way of formally launching negotiations. One is the German election, the other is the New Zealand election. Both events are delaying finalization of negotiating mandates.
If all goes well and the New Zealand Government post-election still wants to negotiate a FTA with the EU we anticipate a visit to New Zealand by Cecilia Malmstrom the EU Commissioner for Trade in November (she is due to visit Canberra at the same time). The announcement of the commencement of negotiations can be expected during this trip.
A low level dialogue continues but the UK is not legally allowed to begin negotiations with New Zealand or anyone else until it has left the EU Customs Union. The weaker position for the UK Government post-election and open talk by some senior Tory politicians about a “soft Brexit” must put a big question mark about this FTA possibility. “Soft Brexit” for some means remaining part of the Customs Union. This would mean that the UK cannot negotiate its own free trade agreements.
The counterfactual is the announcement that the UK has appointed former New Zealand Deputy Secretary Trade and WTO Ambassador Crawford Falconer as its Chief Trade Negotiations Advisor on a five year contract. His job description would suggest that the current UK Prime Minister is envisaging a Brexit at the harder end of the spectrum. A “softer Brexit” would still give Crawford some work as the UK would probably still need to develop a WTO persona separate to the EU. But it would not be able to enter FTAs independent of the EU.
The idea of implementing TPP without the United States remains alive and will be the subject of dialogue between senior officials in July.
The importance of achieving agreement on TPP 11 has increased with news that the EU and Japan are close to finalizing a FTA. The EU achieving better access to Japan than New Zealand would be concerning in several agricultural and services areas (a read of leaked text for the negotiation would suggest that there is still considerable work needed to finalise this negotiation).
Pacific Alliance (Mexico, Colombia, Peru, Chile)
It is interesting that Foreign Minister Gerry Brownlee is to attend the next meeting of Pacific Alliance Leaders. Normally New Zealand would be represented by the Trade Minister.
Might there be a breakthrough with regard to New Zealand’s long held desire to become a FTA partner of the Alliance? Watch this space.
Nothing much happening.
The current breakdown in relations between Qatar and the rest of the GCC membership has very negative implications for the unblocking of the GCC-New Zealand FTA.
RCEP (India, ASEAN, China, Korea, Japan, Australia and New Zealand)
There is zero chance of agreement to anything close to an acceptable standard by the end of the year. Negotiations are continuing but progress is slow.
Agreement has been reached but three of the larger Pacific markets (PNG, Vanuatu and Fiji) have decided to stay outside the agreement at this point in time.
The New Zealand Russia FTA remains in the freezer. There is no point thawing it out until Russia improves its behavior in Ukraine, EU attitudes change, or President Putin moves on.