FTA or an albatross?

Simin Williams

Opinion

While in Opposition, Todd McClay said Australian farmers were correct in expressing major reservations with New Zealand’s Free Trade Agreement (FTA) with the European Union:

“It was a good deal for everything except dairy and meat. That’s a shame because they are the most heavily protected sectors in the world, and those are the ones we produce very well. The FTA only allowed for an additional 10,000 tonnes of New Zealand beef into the European Union which consumed 6.5 million tonnes of beef annually. The Government had rushed to a deal where Australia had kept negotiating. Mr McClay said his Australian contacts were telling him Australian negotiators were making inroads, particularly with beef.”

Now, as our new Trade Minister, McClay says: “. . . legislation ratifying the EU FTA is one of the Government’s top priorities”.

It will soon be referred to the Foreign Affairs and Defence Select Committee, which will invite public submissions. The European Parliament ratified it in late November.

While much has been said about the benefits of increased access to the EU market of 450 million people, little has been discussed about the fact that under this FTA, New Zealand and the EU can hold each other to account for their commitments under the Paris Agreement.

So, while this FTA removes $150m in tariffs annually from our products entering EU, it introduces a new non-tariff barrier, ie, our carbon footprint.

The EU FTA includes an enforceable promise by both parties to “effectively implement” their 2030 climate targets under the Paris Agreement and refrain from any action or omission which “materially defeats the object and purpose of the Paris Agreement”. New Zealand’s target is a net cut of 50 percent off 2005’s gross greenhouse gas (GHG) emissions, which translates into roughly 150m tonnes less of emissions over a decade.

We do not know how New Zealand can achieve this without large offshore purchases of carbon credits, the cost of which can easily wipe out the expected GDP increase of $1.4bn a year from this FTA.

Signing up to a binding climate obligation in a trade deal was highly significant. Germany’s top climate diplomat, special envoy Jennifer Morgan, described the deal as a “breakthrough” which she hoped other countries would follow. Chapman Tripp lawyers Nicola Swan and Kate Wilson Butler, both climate specialists, said the requirement to “effectively implement” Paris Agreement obligations was a significant commitment because, to date, New Zealand had “tended to refrain” from signing up to commitments in treaties that enforce commitments made in other forums, such as climate pledges.

“These commitments could come into sharp focus if, for example, New Zealand walked back from its Paris Agreement commitments, and the EU challenged this using the state-to-state dispute resolution provisions in the FTA.

“The FTA allows the EU to ultimately press for compensation if New Zealand was found to have taken steps to ‘materially defeat’ the object of the Paris Agreement.”

Economist John Ballingall said making the sustainability chapter of a trade deal binding was new, and significant. EU executive vice president and trade commissioner Valdis Dombrovskis, counterpart of Damien O’Connor in signing the agreement, said:

“. . . the deal contains the most state-of-the-art sustainability commitments of any EU free trade agreement ever, including on climate and labour rights”.

Mark de Lautour, who is regularly involved with selling NZ’s primary produce on the international marketplace, when asked about the requirement that we reduce our GHG footprint to meet the demands of the international marketplace, said: “To date we have had no restrictions; the key issue is that no consumer is currently prepared to pay a premium for product with a reduced carbon footprint. There continues to be a lot of media hype and large corporations making statements about carbon reduction but nobody has answered the important ‘who is going to pay’ question.” He added: “Large European supermarkets will struggle to limit supply from New Zealand as our carbon footprint is already a lot lower than that of local produce, even considering freight, so let’s not fret about being locked out of markets.”

While under the agreement our beef quota rises from 846 tonnes per annum currently to 10,000t within seven years, regulations intended to rein in Brazilian deforestation could make sales into the bloc a nightmare for New Zealand. Selling beef to the bloc’s 27 member countries requires proof that the products have not contributed to deforestation since 2020 and may require geo-location data for every piece of beef.

Is this FTA going to be an albatross around our farmers’ necks in coming years? Farmers and their representatives inside and outside of the Parliament have one last chance to look at the fine details before it is too late!