18 Apr 2018

PM's Europe trip highlights delicate nature of trade agreement

12:28 pm on 18 April 2018

By Stephen Jacobi *

There was a time when New Zealand prime ministers made an annual pilgrimage to Europe, cap in hand, imploring incumbents of gilded palaces not to cut New Zealand's UK butter quota. Times have now changed - New Zealand is still talking trade but, judging by the enthusiasm of French President Emmanuel Macron and German Chancellor Angela Merkel, we seem to be pushing on an open door.

New Zealand's Prime Minister Jacinda Ardern (L) and French President Emmanuel Macron (R) meet at the Elysee Palace in Paris on April 16, 2018.  / AFP PHOTO / POOL / CHARLES PLATIAU

Photo: AFP

This willingness of both New Zealand and Europe to embrace each other is not new. We have been talking for a decade about a free trade agreement and have been steadily upgrading our relationship with the European Union (EU). Former prime ministers have made successful visits to European capitals. Chancellor Merkel visited New Zealand in 2014.

For some time there has been a sense among European Ambassadors in Wellington that New Zealand's long-standing relationship with Europe was being forgotten in the rush to engage with Asia. Perhaps our (equally long-standing) effort to diversify and focus closer to home became too successful. In fact, Europe has continued to matter a lot to New Zealand - in trade, investment and people to people linkages. Differences over issues like agricultural protection subsidies have at times tended to obscure a vibrant commercial relationship; we are like-minded on many issues.

Prime Minister Jacinda Ardern's visit provides an opportunity to engage with an important partner early in the term of her new government. She went to Paris with a strong commitment to tackling climate change and to adopting a more "progressive and inclusive" approach to trade. This resonated well with President Macron. In Berlin there was similar alignment on a range of global issues, stressing the importance of dialogue and diplomacy.

Why should the EU be interested at all in a free trade agreement (FTA) with New Zealand? At first blush there would seem to be more in it for New Zealand than Europe. It seems unlikely that European farmers will welcome more competition from New Zealand dairy and meat products. This is not new for us of course. Typically, the New Zealand approach is to find a "big idea" to overcome inevitable mercantilist reflexes.

One big idea is that an FTA with New Zealand offers a chance to fashion an agreement for the times, addressing a generation of issues (digital, environment, climate change) and appeals to those who have been marginalised in past processes (women, small business, indigenous).

Another idea is directly related to the success New Zealand had in opening markets in the Asia-Pacific. A well-constructed FTA can offer value to European business by encouraging investment in New Zealand, which, linked with our productive strengths, can develop new business ventures in Asia. Herein lies a problem. The government will have to find ways to encourage European investment at a time when it seems less willing than its predecessor to open the gates.

Politicians generally like to claim trade agreements will be straightforward to negotiate but experience tells us otherwise. They are complex and the New Zealand-European Union agreement will not be any different. Top marks to the Prime Minister for seizing the moment and moving on the agenda with Europe. It is long overdue.

*Stephen Jacobi is the executive director of the New Zealand China Council and the New Zealand International Business Forum. He is also managing director of Jacobi Consulting Ltd. He is a former diplomat.

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