Incredulous dairy industry leaders had to pull the Prime Minister Jacinda Ardern into line ahead of the final stages of trade talks with the European Union after she made comments the industry now believes delivered the final blow to its hopes for commercially meaningful access to the market of 450 million people.
Ardern’s conclusion of four years of negotiations with the EU in Brussels earlier this month has been met with a hail criticism from the key pastoral sectors.
While the deal eliminates tariffs for second-tier industries such as kiwifruit, mānuka honey and wine, it fell well short of the market access wins the dairy and beef industries had been hoping for.
And now it can be revealed dairy leaders had to pull Ardern aside after she made comments they believe may well have tipped off the Europeans to a last-minute change in New Zealand’s bottom lines in the trade talks.
In a press conference prior to leaving for Europe, the PM was asked if she was prepared to walk away from the talks if she couldn’t secure anything more than a “low-quality” deal for NZ exporters.
“Of course, what we are seeking is an improvement on the status quo,” Ardern replied.
It is understood that in the weeks leading up to the conclusion of the talks Cabinet amended the negotiating mandate given to NZ’s trade negotiators from a “commercially meaningful” deal for key exports to the lower threshold of an improvement on status quo market access.
NZ negotiators would still have pushed for a commercially meaningful deal but were now authorised to conclude a lower-standard one if required.
Ardern’s comments were not reported by the media and the dairy industry only picked them up when a transcript of the press conference was released.
Dairy Companies Association of NZ chair Malcolm Bailey was on his way to Brussels for the final week of talks when he was alerted.
He said he was alarmed because he feared the PM had revealed a weakening in NZ’s negotiating position to the EU side.
“DCANZ went to the highest level and expressed concern at the comments and suggested…a different approach,” Bailey said.
After being contacted by DCANZ, Ardern and other ministers changed tack again to stress the Government remained committed to “commercially meaningful” outcomes for dairy and meat exports and was prepared to walk away from the talks if these couldn’t be achieved.
“We encouraged the Government to toughen the language…but it was obvious that the EU side simply did not believe this,” he said.
“The damage had already been done.”
He said Ardern’s comments were a “gift” to the EU’s agricultural protectionists in the negotiations.
“We felt that this signalling was a gift to the hardliners on the EU side who then knew that they could just stonewall.
“We have great NZ negotiators but this signalling made their task seem like mission impossible for dairy and beef.”
A senior executive at a big dairy exporter, who did not want to be named, was certain Ardern’s comments would have been relayed to EU negotiators.
“If I was the EU ambassador in Wellington I would be reporting back to Brussels assiduously any change in the language, any nuance, because it is really important,” they said.
“It is a real scoop for them if they figure out that the balance around what we are looking for [from the talks] has changed.”
A meat industry source, who attended the talks in Brussels but who also did not want to be named, said they were at a loss to understand the PM’s comments.
“I do not know if that this was part of their strategy to let the Europeans know we are ready to make a deal now or whether it was just a blunder,” they said.
The source said the first the meat industry knew about the change in mandate was when they were briefed by NZ negotiators when they arrived in Brussels.
“That seems to have been the goal that they went into final stages of negotiations with,” they said.
“Which is quite disappointing because the status quo was pitiful and even one tonne over the status quo is an improvement.
“So therefore the Government has achieved its mandate.”
The source was also bemused by Ardern’s comments at the press conference following the announcement of the agreement where she alluded to possible improvements.
“She said this is the first step. I have no idea what she means by that,” they said.
“In all my negotiating history once the deal is done it is done.
“There is no first step, second step, third step.
“Maybe in ten or 15 years there might be a review or an upgrade.
“It is all just very, very disappointing.”
The dairy industry executive said the decision to accept a substandard deal with the EU set a unwelcome precedent which would come back to haunt the dairy and meat sectors in future trade negotiations.
“We have agreed to an absolutely minimalist outcome on dairy with one of the world’s largest dairy markets,” Bailey said.
“It establishes a very clear precedent and where that precedent will be relevant is down the track.”
A spokesperson for Ardern did not respond directly to DCANZ’s allegations that she revealed NZ’s negotiating bottom lines ahead of the talks’ conclusion.
She reiterated the benefits of the deal and said walking away in the end was not an option for the Government given the benefits for the entire economy.
“To walk away from the deal would have been to walk away from $1.8b to our exporters ,and risk us dropping down the queue, and see other countries negotiate deals ahead of us,” the spokesperson said.
However, DCANZ’s Bailey questioned the $600m of predicted benefits for dairy which would most likely not accrue because of the still high in-quota tariffs which would make their use unviable most of the time.