NZ-EU free trade agreement: National says 'step forward' but agriculture 'missed opportunity'

Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen signed a policing agreement ahead of announcing a trade agreement. Photo / Thomas Coughlan

The National Party says the European Union free trade agreement is a "step forward" but farmers here have "every right" to feel let down as agriculture has been largely left out.

Trade spokesman Todd McClay gave the deal a "6 out of 10", given major wins for kiwifruit, seafood and Pharmac.

"It is a good agreement. It is a step forward. There are many parts of the economy that will benefit from this. It does allow us to take steps forward with the European Union."

He said he would not have "walked away", but would have kept the negotiations going around meat and dairy open.

He also cautioned the wider implications in terms of the precedent it set in negotiations with other countries and the missed opportunity for diversifying further away from China.

"The real challenge that we have now, though, is when the Government or future governments negotiate with the United States or with India or with any other group of countries, they will start from a position of offering very little in, you know, dairy and meat."

New Zealand has secured some wins for primary industries, but some in the sector have said it is not enough.

Dairy and beef are expected to get $120 million of new export revenue from when the agreement enters into force, growing to $600m within seven years. On beef, for example, New Zealand will be allowed to export 10,000 tonnes to the European Union at a tariff of 7.5 per cent a year.

Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen signed a policing agreement ahead of announcing a trade agreement. Photo / Thomas Coughlan

The red meat sector is not happy with that access.

Sirma Karapeeva, chief executive of the Meat Industry Association, said she was "extremely disappointed" the deal did not include "commercially meaningful access for our exporters".

Beef and Lamb chief executive Sam McIvor said the deal was a missed opportunity to "return better prices to both companies and farmers", and said the EU had failed to "live up to their rhetoric of being free traders".

Asked how realistic it was to achieve more for agriculture given the EU had one of the most protected agricultural sectors in the world, still with subsidies in place (unlike New Zealand), McClay said gains had been made in the past.

"We do have free access for these products to the UK, and we do with China as well. It's a shame that we didn't gain more in as far as EU is concerned.

"It's a shame because it feels like in respect of two of our biggest commodity exports and missed opportunity.

"With beef, the Prime Minister's right, there's an eight-fold increase in what we can export to Europe.

"But we exported such a very small amount to start with, we now will be able to send in 10,000 tonnes a year the European Union consumes or import 6.5 million tonnes. And so those gains are quite small for New Zealand."

"But in other areas of the agreement, it is good the kiwifruit growers and our wine exporters and seafood will be quite delighted."

National Party trade spokesman Todd McClay says there are "modest wins" in the EU FTA, but meat and dairy have been largely left out. Photo / Andrew Warner

Still, while New Zealand looked to gain $1.8 billion annually, the EU estimates its exports could grow by up to $7.5b.

McClay also cautioned it would do little to decrease New Zealand's reliance on China for exports.

The portion of New Zealand goods exported to China (by value) sat at 30 per cent in the year to April, according to Statistics New Zealand.

This was on par with 2021, and up from 28 per cent in 2020, 25 per cent in 2019, 23 per cent in 2018 and 3 per cent in 2000.

Goods exported to China were worth $20b in the year to April.

New Zealand is heavily reliant on China for its three largest categories of exports. About 40 per cent of the country's dairy, beef and sheep meat exports go to China. Meanwhile, 55 per cent of New Zealand's forestry exports go to China.

These portions have been on an upward trajectory, particularly since 2008, when New Zealand and China signed a free trade agreement (FTA).

"New Zealand need to continue to diversify its trade access around the world so that we're not reliant upon any one country. For dairy trade, we are extremely reliant upon China; this would have been an opportunity for us to diversify more, but it is a missed opportunity, unfortunately," McClay said.

Green Party trade spokeswoman Golriz Ghahraman said while they were awaiting the final text, they supported the way the agreement incorporated the Paris climate change agreement into trade.

Under the FTA, if either side believes the other one is falling short of its Paris goals it can take that accusation to arbitration and possibly apply penalties if the allegation is proved to be correct.

"Including a chapter which, we are told will be legally binding and enforceable upon all parties, to uphold their climate commitments is a positive sign," Ghahraman said.

"But the reality of free trade deals has been that not everything is necessarily equally enforceable - which is why we need to see the detail of the agreement to know how climate action will be guaranteed through our trade with the EU."

Ghahraman said respective parliaments in NZ and the EU should have an opportunity to see the text and debate these issues before the Government binds.

"Trade needs to be inclusive, support action to cut climate pollution, advance labour rights, women's rights and indigenous peoples' rights. That's what we called for and that's what we'll be looking for in the final text."

Act Party trade spokeswoman Brooke van Velden said they welcomed the tariff reductions in some areas, but overall it set a "bad precedent" for sheep, beef and dairy farmers in future trade deals.

Van Velden also said the climate change inclusion could set a "dangerous precedent", as the EU could penalise New Zealand exporters if it felt they weren't doing enough in that area.

National's McClay said it was good to have the climate change ambition but he too feared it could unfairly impact New Zealand exporters because of the "power imbalance".

"We have given them complete access on day one, while they have held off. If they decide to they can unilaterally sanction us; it is fanciful to think we'd restrict them in the same way given the impact it could have on us."