Hosuk Lee-Makiyama (European Centre for International Policy Economy)
The Asia-Pacific region is currently one of the most dynamically developing regions worldwide. Regional players are constantly reinforcing mutual economic ties and are also building new trade blocks. The European Union is, however, completely excluded from these talks, which is partly also its own fault as it mostly focuses on the biggest economic players. On the other hand, the local smaller markets are very well prepared and have achieved essential prerequisites for the establishment of closer cooperation. New Zealand represents one such unequivocal example.
The EU’s previous trade strategy, however, omitted not only New Zealand but also, for example, Australia, mainly because of major barriers in the access to their markets. On the other hand, the European market is the second most important for New Zealand. There are also secondary factors in favor of a new deal between the EU and New Zealand. In this region, New Zealand is a stable democracy and thus also a stable trade partner. Further deepening of the relations would also provide the EU with more access to the other markets in the region.
It is obvious from a more detailed analysis that an agreement would be straightforward in mechanical engineering and chemical production but agriculture will be the most problematic part. New Zealand is, just like the EU, a net exporter of agricultural products and is also dominating in the manufacturing sector, which would likely make it a direct competitor to its European counterparts. Moreover, New Zealand is the most vocal supporter of the liberalization of the international agricultural market.
Given these reasons, one should expect a major resistance by the stakeholders within the rigid European agricultural policy. The World Trade Organization, which is currently used as a platform for discussions, is involved in the negotiations. New Zealand is also benefitting from the fact that it is very fast at introducing important liberalization measures. These features could then be used as a basis for a more complex deal. Therefore, the EU is facing a major decision – whether to give up protectionism in the agricultural sector and start trading with New Zealand or, on the contrary, carry on with the current system settings, which would effectively mean closing its door to other markets where China would likely fill the void.
(The study can be downloaded here: http://www.ecipe.org/publications/new-zealand-eus-fta/)