The EU has given its approval to a new free trade agreement (FTA) with New Zealand that should eliminate tariffs on a wide variety of imports and exports between the two territories and boost overall GDP on both sides.

Approval was given to the deal by the Council of Europe on Tuesday June 27th, marking another key milestone on the road to final ratification, which is expected to allow the FTA to come into force later this year.

Proponents of the agreement have hailed it as a landmark deal that should set the tone for the EU's future priorities when negotiating trade. It contains specific social and climate commitments, making it the first agreement to fully integrate the EU's new approach to trade and sustainable development, which was approved by the Council in October 2022.

What are the key provisions of the FTA?

Among the headline provisions of the FTA are the removal of all tariffs on a range of key EU exports to New Zealand. This includes pork products, wine, chocolate and other confectionery.

It will also ensure protection for key European trademarks and geographical origin indicators. This includes 163 of the EU's most noted products such as Feta, Comté and Queso Manchego cheeses, Istarski pršut ham, Lübecker Marzipan and Elia Kalamata olives. 

More than 2,000 wine and spirits products, including Champagne, Processo and Polish Vodka, will also be protected under the terms of the deal.

For goods moving from New Zealand to the EU, 91 percent of current exports will become duty free from day one of the FTA, with this rising to 97 percent after three years. It will also see increased quota allowances for a range of the country's key exports, including beef and dairy products.

Johan Forssell, Swedish minister for international development cooperation and foreign trade, said the deal is an essential part of the EU's Indo-Pacific trade strategy, which has been of increasing importance in the current geopolitical environment.

He added: "The FTA represents major opportunities for our companies, our farmers and our consumers, as well as for the New Zealand counterparts."

How is the new deal set to impact trade?

While New Zealand is a relatively minor destination for EU goods, the 27-member bloc is Wellington's third-largest trading partner, behind China and Australia. Bilateral goods trade between the two partners has been rising steadily in recent years, reaching almost €9.1 billion in 2022.

The implementation of the new FTA is expected to increase this by around 30 percent, with Brussels estimating that EU exports could potentially grow by up to €4.5 billion. Meanwhile, the New Zealand government estimated that exports in the country stand to save up to NZ$100 million from day one due to eliminated tariffs, with this rising to NZ$110 million after three years of operation.

For EU members, the agreement is expected to cut some €140 million a year in duties from the first year of application.

Other provisions of the deal that aim to encourage trade growth between the parties include reduced compliance requirements and procedures, which should cut red tape and allow for the quicker flow of goods, while there is also a dedicated chapter to help small and medium-sized enterprises export their products.

The final remaining steps are for the European Parliament to give its consent and for New Zealand to ratify the deal. Once this has been completed, the FTA will come into force two months after all legal requirements and procedures are agreed.