Trade Minister Damien O’Connor’s visit to Saudi Arabia last month was the first by a NZ minister since former Prime Minister John Key’s unsuccessful attempt to revive the FTA in 2015.
The stalled free trade agreement (FTA) which led to the Saudi sheep farm scandal is back on the Government’s agenda.
New Zealand and the six oil-rich states of the Gulf States Cooperation Council (GCC) have agreed to resume negotiations following Trade Minister Damien O’Connor’s visit to the region last month.
A deal to scrap $60m paid annually in tariffs on NZ’s exports to the Middle Eastern states was largely agreed in 2009, but never completed because key member Saudi Arabia refused to back the agreement.
The previous National-led government controversially paid $6m towards a “demonstration farm” owned by Saudi businessman Hamood Al Ali Khalaf, whose connections to the Saudi royal family were understood to be pivotal to the kingdom’s blocking of the GCC’s signing off on the final agreement.
Khalaf owned a butchery chain in Saudi Arabia and invested millions of dollars in farms in the Hawke’s Bay in the 2000s on the understanding that the Government of then Prime Minister Helen Clark would allow the resumption of large-scale live sheep exports to the kingdom.
The National-led government found itself embroiled in controversy when having paid over the money and partially relaxed the ban on live shipments to allow animals to be shipped to Khalaf’s farm for breeding purposes, it still couldn’t get Saudi Arabia to support a final deal.
Then Foreign Minister Murray McCully claimed legal advice showed the Government was potentially liable for losses suffered by Khalif and convinced Cabinet colleagues to make payments to the Saudi businessman to fend off a lawsuit and get the trade deal back on track.
A 2016 report by the Auditor-General found shortcomings in the decisions leading up to the payments and MFAT later conceded no legal advice existed.
Since then a rift between Qatar and its GCC neighbours provided a further hurdle to completion of NZ’s FTA.
But a meeting between O’Connor and GCC secretary-general Nayef Al-Hajraf last month resulted in agreement by both sides to “re-engage” in negotiations.
“These discussions will be based on text agreed in 2009, with a focus on goods markets access and labour and environment outcomes,” a statement on the Ministry of Foreign Affairs and Trade’s (MFAT) website said.
O’Connor’s visit to Saudi Arabia on the way back from Brussels and London last month was the first by a NZ minister since former Prime Minister John Key’s unsuccessful attempt to revive the FTA in 2015.
“Discussion will be held to explore what adjustment may be required to update and modernise the agreement in line with NZ’s Trade for All Agenda,” a spokesperson for O’Connor said.
The absence of large domestic farming industries meant tariffs of 5% on meat and dairy exports to the GCC are low compared to many Western countries.
It is understood the 2009 agreement would have largely scrapped these.
Meat Industry Association trade policy manager Esther Guy-Meakin said trade agreements had moved on since then.
As well as targeting tariffs, exporting countries like NZ increasingly sought to reduce non-tariff barriers to trade in their agreements.
Guy-Meakin said NZ meat companies for example encountered problems with recognition of halal slaughter methods.
It was hoped having their practises recognised as equivalent to those used in GCC countries could be achieved in an updated FTA.
A diplomatic source said the Labour-led government’s Trade for All Agenda included other new demands not included in the negotiations the first time around.
“There will need to be chapters on some subjects that some in the GCC will not have had much experience in delivering,” they said.
“For example on gender and indigenous peoples.”
“All up there will be plenty of work left to bring this to the line.”