Thursday, August 18, 2022

Good NZ-EU deal or no deal

Primary Industry leaders are hoping the Prime Minister Jacinda Ardern can get a meaningful trade deal with the European Union over the line.

Meat and dairy exporters had thrown their arms up in despair at continued stonewalling from European negotiators as the Prime Minister Jacinda Ardern arrived in Brussels last week to try and break deadlocked trade talks.

Despite nearly round-the-clock talks last week the European Union’s negotiators were rigidly sticking to the very limited openings of the EU dairy and beef markets previously rejected by their New Zealand counterparts in four years of talks.

“The EU tactics seem to be very much [to] stall,” one source said.

“They are leaving the hard stuff for the ministers…at this stage it is our trade minister but the last roll of the dice could be the PM.”

Ardern arrived in Brussels on Thursday NZT after Farmers Weekly’s deadline.

Two days of talks had been scheduled for Ardern including with the head of the European Commission Ursula van der Leyen. Trade Minister Damien O’Connor had been in Brussels since earlier in the week.

Representatives of Beef + Lamb NZ, the Dairy Companies Association, Fonterra and the Meat Industry Association were also there and were being briefed up to four times a day on the state of the talks by NZ negotiators last week.

While the negotiations had not made the progress hoped for the lobbies had been encouraged by comments from Ardern on her way to Brussels that the Government could still walk away from the talks if they did not deliver sufficient market access gains for exporters.

That had helped allay fears a deal could have been agreed with only negligible benefits for dairy and meat exporters in return for scrapping modest tariffs on second-tier products such as kiwifruit and honey.

There were also concerns Ardern might have signed a substandard agreement to burnish NZ’s credentials with Western allies in the face of the rising military threat from China and Russia.

“That was quite a change in tone,” one source said.

“The appropriate language is never that we walk away.

“Instead we keep talking because we cannot conclude at this time.”

The source accepted that it might be some time before talks resume but that was preferable to accepting a substandard deal now and setting a poor precedent for NZ’s negotiating positions elsewhere in the world in the future.

One meat industry source said the negotiations had been slow-going despite both sides having set a deadline to have them concluded by the end of this month.

The source said EU negotiators had offered to cut in-quota tariffs for NZ beef imports but refused to discuss how large the quotas could be.

Instead, the Europeans had dwelt on the technicalities of how any increase in quotas would be administered.

“They are skirting around the volumes and talking about how you would administer things which is fine and needs to be done but really it is the wrong way around because you really need to know the volume and the administration stuff is just tidying stuff up.

“We would say there is still quite a way to go before we would be at what we would call a commercially meaningful outcome.”

A dairy company executive had a similar story for his sector.

“The sorts of administration details that they are trying to put in place would be extremely protectionist…this is the overall problem that the fundamental protectionism of the European position has not as yet been anyway moderated.”

The meat industry source said EU negotiators were worried NZ’s attempts to lessen its dependence on exports to China could backfire on its own farmers and were using this as an argument to continue to limit access to their market.

“If China goes funny then we have to look at diversification but it would not simply be transferring [product] from one market to another it would more broadly and where we are going to generate returns globally.”

Asked what additional arguments Ardern had left to deploy to clinch a worthwhile deal the source said matching up NZ farming’s record with the EU’s sustainability agenda would be vital.

The EU had come in for criticism for signing agreements with trade partners with low sustainability credentials. such as the South American trading bloc Mercosur.

That was not the case with NZ farmers who could be credited with higher environmental standards and efforts to account for carbon emissions from livestock.

“The Europeans are really keen to use trade as one lever in moving towards global sustainability.

“If you accept that NZ has equivalent standards and has the same values if you can’t do a deal with NZ how can you do a deal with anyone?”

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