The government’s attempt to revive trade talks with the Gulf Cooperation Council has backfired with its six oil-rich member states withdrawing a previous offer to scrap tariffs on New Zealand’s major agricultural exports.
In March last year Trade Minister Damien O’Connor reached agreement with GCC secretary-general Nayef Al-Hajraf to re-start negotiations that had been all but concluded under the previous National-led government but never formally signed off.
Negotiators met in March and again in November, when the GCC resubmitted its market access offer while NZ tabled new demands relating to environmental and labour rights objectives.
It is understood the market access offer from the GCC was significantly inferior to its last offer, in 2009, and short of what NZ negotiators could accept.
“The GCC has asked to reconsider the goods offer, and NZ is seeking updates, including outcomes on labour and environment.
“This has significantly reset the negotiation process,” O’Connor said in a statement.
A dairy industry executive told Farmers Weekly negotiators gave a downbeat assessment on the talks when they last briefed industry representatives in November.
“Negotiations have run into difficulties and there are no signs of progress.
“The high-quality market access offer which had been the basis of discussion back when the deal was first being negotiated is no longer as good.”
At stake is an estimated $60m of annual tariff savings for NZ exporters.
Industry representatives said officials had offered little insight into why the GCC had withdrawn its previous market access offer.
Unlike NZ’s recent negotiations with the European Union, the lack of large-scale farming interests in the Gulf meant scrapping tariffs on meat and dairy hadn’t previously been a deal-breaker.
Tariffs of 5-10% for meat and dairy exports to the GCC are low compared to many Western countries.
“I won’t attempt to make sense of something that does not make a lot of sense,” one dairy industry lobbyist said.
“We wouldn’t consider dairy products to have become more sensitive for that region.”
An insider – and former negotiator – is blaming the impasse on environmental and labour demands not included in the negotiations last time around but belatedly introduced last year as part of the Labour-led government’s Trade for All agenda.
According to the Ministry of Foreign Affairs and Trade (MFAT) website, these include demands for the GCC to give unspecified undertakings on climate change and to “adopt and maintain laws which govern acceptable conditions of work with respect to minimum wages, hours of work and health and safety”.
GCC members include Saudi Arabia, the world’s largest oil producer, and Qatar, one of the world’s biggest exporters of LNG, and the scene of the deaths of thousands of immigrant construction workers ahead of last year’s football World Cup.
“All these issues are being plonked on the table by the NZ Government, naïvely or with intent I am not sure which.
“They are going to be very, very sensitive and impossible to deliver on,” the former negotiator said.
A dairy industry insider said he was unaware of any connection between the withdrawal of the GCC’s previous position and NZ’s latest demands.
“We all understand that trade and labour and trade and environment are important aspects of NZ trade policy but we have not been told anything about that.
“I am not saying these issues are unimportant but good-quality market access remains the first order of business for an exporter in trade agreements.”
The withdrawal of the GCC’s market access offer is just the latest twist in NZ’s pursuit of a trade deal with the Middle Eastern club.
The previous National-led government controversially paid $6m to a Saudi businessman to establish a sheep farm in the desert to win backing for the deal.
Former foreign minister Murray McCully claimed legal advice showed the government was potentially liable for losses suffered by Hamood Al Ali Khalaf, who owned a butchery chain and had close ties to the Saudi royal family.
McCully convinced cabinet colleagues to make payments to fend off a lawsuit and get the deal back on track.
The auditor-general in a 2016 report found shortcomings in the decisions leading up to the payments and MFAT later conceded no legal advice existed.
In recent years a rift between Qatar and other GCC members provided a further hurdle to completion of the deal.
However, these tensions eased after a peace deal reputedly brokered by former United States president Donald Trump’s son-in-law Jared Kushner in 2021.
O’Connor travelled to the Gulf a few months later to revive NZ’s trade deal.
In a statement O’Connor said he had no immediate plans to travel to the region to break the latest impasse.
“I will continue to engage with my counterparts on a multilateral and bilateral basis when useful,” he said.