After years of discussions, the European Union is officially launching trade deal negotiations with New Zealand. EU Trade Commissioner Cecilia Malmstrom is headed to New Zealand this week, and spoke to Sam Sachdeva ahead of her visit about what the EU will get out of the deal - as well as the shaky state of international trade.
With 28 member countries, each with their own agendas, no decision comes easily for the European Union.
It was October 2015 when the EU and New Zealand first started work on a possible FTA: now, nearly three years later, EU Trade Commissioner Cecilia Malmstrom is heading to New Zealand for the official launch of negotiations.
Speaking to Newsroom from Brussels ahead of her visit this week, Malmstrom admits it took longer than expected to receive a mandate from the EU Foreign Affairs Council, but says she is keen to make up for lost time.
While improved access to the 500 million people in the EU market holds an obvious appeal for New Zealand, what the EU nations get out of the deal is less obvious; the EU’s own assessment estimates a boost to New Zealand’s GDP of up to 0.5 percent, but just 0.02 percent for itself.
Malmstrom describes New Zealand as a “small but very powerful economy”, pointing to the ability to improve not only trade in goods and services, but public procurement and cooperation on standards.
“I read this morning in your [website] about this company who is doing skin replacements - I mean this is fantastic, and of course if we talk about standards when it comes to clinical trials and so on, these are the kinds of companies who could also sell to each other.”
EU, NZ 'like-minded' on trade
There’s also a symbolic element to a deal with New Zealand, who she describes as “a friend, an ally, a very like-minded partner” on trade issues.
Trade and Export Growth Minister David Parker has talked about the EU negotiations as a chance to set a “gold standard” for FTAs, and Malmstrom says the two parties are of a similar mind when it comes to labour standards and environmental protections.
“We have the same strategy, we have the Trade for All strategy which we launched in the European Union and which the New Zealand Government launched, which also contains more of the same, I would say, ideology on trade.”
The EU also shares the current Government’s concerns about the Investor State Dispute Settlement mechanism for foreign investors, which “clearly has a lot of loopholes”.
While investment will not be covered as part of a trade deal, Malmstrom says she is keen to gauge New Zealand’s interest in the EU proposal for a multilateral investment court.
“[We want to] make sure that we could have some sort of international system that would take over the existing thousands of bilateral investment treaties that exist and have it on an international basis with a clear code of conduct for the judges, transparency, appeals systems and so on, but this is work that is going on in parallel.”
“Agriculture of course is important for us, it’s also a very big part of the New Zealand economy, you’re really a superpower here, so that will be tricky."
That doesn’t mean there won’t be some areas of contention: Malmstrom acknowledges that Europe’s agriculture sector is “almost always the trickiest thing” during negotiations.
“Agriculture of course is important for us, it’s also a very big part of the New Zealand economy, you’re really a superpower here, so that will be tricky.
“Both of us will have to make concessions and compromises but we talk that through so we know where the sensitivities are - it will not be easy, but I’m sure we can find a way.”
Separate to trade negotiations, but likely to come up during her visit, is the issue of how tariff rate quotas will be split between the UK and the EU post-Brexit.
Malmstrom says Brexit is “complicating life for all of us”, but is confident a solution can be found through the WTO.
Shaky picture for global trade
While Malmstrom is positive about the New Zealand talks, the bigger picture is less certain when it comes to global trade.
Recently, her time has been consumed by the EU’s response to US President Donald Trump and his decision to impose trade tariffs on steel and aluminium; it has already lodged a case against the US at the World Trade Organisation (WTO).
“It is obviously very worrying what the US is doing,” she says, “because they are embarking in actions that we think are not compatible with the international trading system and the WTO rulebook…
“It’s not yet a trade war but it’s a situation that could escalate and it’s very worrying.”
“[The international trade system] has served us well, it has served the US well, and it's even more important that we defend it, because if we don’t and it falls apart, then we are totally lost, it will be the total Wild West.”
On the other hand, countries like New Zealand are stepping up their negotiations and “standing up for the multilateral system” at the WTO and through trade deals.
“That’s why it’s so important that we create these alliances right now and show the US that you can make good trade agreements, you can make win-win trade agreements, and if they are not participating in the system they will also lose out because their companies will not get the beneficial access that everyone else will get.”
But is the US likely to get that message? After all, the Trump administration hardly seems inclined towards the benefits of the rules-based international order.
“No, that’s correct, and that worries me of course, but that doesn’t mean that the rest of us can give up because we have created this international rules-based system together.
“It has served us well, it has served the US well, and it's even more important that we defend it, because if we don’t and it falls apart, then we are totally lost, it will be the total Wild West, and that is not beneficial for everybody.”