Fast legislative footwork from the new government looks set to result in an early start to New Zealand’s free trade agreement with the European Union, generating tens of millions of dollars in additional tariff savings for exporters.
The European Parliament ratified the agreement in November last year but its entry into force was delayed while its NZ counterpart took a break prior to last year’s general election.
Tariff savings estimated to be worth $100 million to exporters in the agreement’s first year have been on hold while parliamentarians worked their way through enabling legislation, which had its first reading only at the end of January.
Now Trade Minister Todd McClay has reached a deal to curtail the normal legislative process by missing out the legislation’s second reading when it returns to the House this Wednesday.
McClay said he expects a third and final reading and vote on the legislation the next day
“so that the following Monday we can get it signed into law”.
“We will notify the EU that on May 1 the tariff savings kick in, which for kiwifruit and onion growers and a few others is important because their goods are on their way to that market right now.”
McClay said he had been advised the normally lengthier legislative process risked pushing the agreement’s start date, and the beginning of tariff savings for exporters, out to either August or September.
He said he consulted with all of the parties represented in Parliament except Te Pati Māori, which voted against the legislation at its first reading.
“All of the parties agreed with me that this was significant enough as far as the savings for NZ exporters were concerned to speed the process up,” McClay said.
Tariffs took $46m out of $1 billion of kiwifruit marketer Zespri’s sales to the EU last year. Those tariffs will drop from 8.8% currently to zero on implementation of the FTA.
Zespri’s chief executive, Daniel Mathieson, said 90% of its kiwifruit is due to cross the EU border after May 1, meaning most of this season’s EU-bound crop will benefit from the tariff being scrapped.
A September 1 start date, however, would have seen 80% already in the market, dramatically lowering the tariff savings available for this season’s crop.
“The early implementation of the agreement is really welcome news,” Mathieson said.
It was similar for onions, with 50% of exports to the EU due to arrive after May 1, when the current tariff of 9.6% is now due to be scrapped.
Waiting till August would have come too late for this season’s crop to benefit, Onions NZ chief executive James Kuperus said.
“None of our onions would have arrived after August,” he said.
Kuperus estimated early implementation is worth $3m to the industry this year, rising to $6.5m in 2025.
“It is going to put us on a level playing field with some of our southern hemisphere competitors like South Africa and ahead of our main competitor Australia, who continue to pay the 9.6% tariff.”
However, not everyone is happy with the government’s approach.
The Dairy Companies Association of NZ (DCANZ), already grumpy about the small market access gains for its members from the deal, said the shortened select committee scrutiny of the legislation skimmed over important details.
In particular it is concerned a new regime for policing the use of European cheese names like Feta and Parmesan unnecessarily replicates existing rules for trademarks and creates uncertainty for NZ producers.
DCANZ executive director Kimberly Crewther said select committee members appeared to overlook advice from officials that existing rules under the Fair Trading Act would be sufficient to police the new protections for EU names brought about by the trade deal and there had not been time to challenge them before the legislation came back to the House this week.
She said DCANZ will lobby for changes before the legislation is passed.
