A proposed free trade agreement (FTA) between the EU and New Zealand is on the verge of becoming a reality after the final text was referred to the European Council for ratification. This marks one of the last steps in the passage of the deal before implementation, which means businesses across the continent and in the Asia-Pacific country could start to reap the benefits in a matter of months.
An agreement between the EU and New Zealand is a key part of the EU's strategy for boosting trade with the region, and will also reaffirm Brussels' commitment to its Green Deal Industrial Plan, which was announced by European Commision president Ursula von der Leyen at the start of February this year.
Key pillars of this plan, which include efforts to ensure trade is sustainable and equitable, are likely to be at the heart of all future EU FTA negotiations, so as well as improving bilateral trade, the EU-NZ deal is likely to be used as a basis for upcoming discussions with the EU's international partners.
So what does the newest proposed FTA contain and which sectors are most likely to benefit from the final agreement?
What are the key provisions of the FTA?
Among the headline measures of the deal include the complete removal of tariffs on all EU exports to New Zealand. This is estimated to save EU businesses up to €140 million
in duties per year, as well as helping increase bilateral trade between the parties by as much as 30 percent.
The FTA will also improve access for EU companies to New Zealand government procurement contracts for both goods and services, ensure EU investors in New Zealand and vice versa are treated equally to domestic businesses, and significantly reduce compliance requirements and procedures to allow for quicker flow of goods.
A dedicated chapter of the text aimed at small and medium-sized businesses should also help less-sizeable enterprises import and export goods between Europe and New Zealand.
On the New Zealand side, the EU is currently the country's fourth-largest trading partner, with total goods and services trade between the parties totalling NZ$17.5 billion (€10.2 billion in 2021. It is estimated that 91 percent of New Zealand’s current goods trade to the EU will become duty free from day one, rising to 97% after seven years. This will eventually lead to tariff savings of $110 million a year.
Ms Von Der Leyen commented: "This trade agreement will bring us even closer together. With today’s proposal, we have taken an important step in making this agreement a reality. This modern agreement brings major opportunities for our companies, our farmers and our consumers, on both sides."
Which sectors stand best-placed to benefits?
Among the areas that stand well-placed to benefit from reduced and eliminated tariffs are the New Zealand agricultural sector, with kiwifruit, apples, mānuka honey, onions, wine, fish, mussels and squid having duties removed from day one.
However, in order to protect EU agricultural interests, quotas will remain on key imports, including dairy products, beef and lamb, ethanol and sweetcorn.
When it comes to EU imports to New Zealand, products including apparel and footwear, plastics, forklifts and kitchen appliances - which are currently subject to tariffs ranging between five and ten per cent - will become duty-free, reducing the cost of these items for New Zealand consumers.
The FTA will also protect the full list of close to 2,000 EU wines and spirits, such as prosecco, Polish vodka, rioja and champagne, while 163 traditional EU products with Geographical Indications, including Asiago, Feta, Comté or Queso Manchego cheeses, Istarski pršut ham, Lübecker Marzipan and Elia Kalamatas olives will all be protected in New Zealand.
EU officials were also keen to highlight the sustainability commitments of the FTA, which were described by Valdis Dombrovskis, executive vice-president and commissioner for trade, as the "most ambitious" ever included in a trade agreement. It includes a dedicated sustainable food systems chapter, a specific trade and gender equality article and provisions on trade and fossil fuel subsidies reform.
The deal also liberalizes environmental goods and services, as well as including sections intended to increase opportunities and reduce barriers for Maori-owned businesses.
What can traders expect to see full implementation?
The next step will be for the European Council to give its approval to the final FTA, at which point it will be signed by representatives from both the EU and New Zealand. After this, the only step that remains is for parliaments in Brussels and Wellington to approve the text of the document. This could then see the provisions of the FTA implemented within months.