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Trade Negotiations Update

The prospect of a negotiation is looking promising.  Both sides have released a summary of the joint scoping study agreed a few months ago.  This is a good sign that we can look forward to a more transparent approach to this and other future negotiations. 

There are two hurdles in the way of formally launching negotiations.  One is the German election, the other is the New Zealand election.  Both events are delaying finalisation of negotiating mandates.  If all goes well and the New Zealand Government post-election still wants to negotiate a FTA with the EU we anticipate a visit to New Zealand by Cecilia Malmstrom, the EU Commissioner for Trade, in November (she is due to visit Canberra at the same time).  The announcement of the commencement of negotiations can be expected during this trip.

A low-level dialogue continues but the UK is not legally allowed to begin negotiations with New Zealand or anyone else until it has left the EU Customs Union. The weaker position for the UK Government post-election and open talk by some senior Tory politicians about a “soft Brexit” must put a big question mark about this FTA possibility.  “Soft Brexit” for some means remaining part of the Customs Union.  This would mean that the UK cannot negotiate its own free trade agreements.

The counterfactual is the announcement that the UK has appointed former New Zealand Deputy Secretary Trade and WTO Ambassador Crawford Falconer as its Chief Trade Negotiations Advisor on a five-year contract.  His job description would suggest that the current UK Prime Minister is envisaging a Brexit at the harder end of the spectrum.  A “softer Brexit” would still give Crawford some work as the UK would probably still need to develop a WTO persona separate to the EU, but it would not be able to enter FTAs independent of the EU. 

TPP 11
The idea of implementing TPP without the United States remains alive and will be the subject of dialogue between senior officials in July.

The importance of achieving agreement on TPP 11 has increased with news that the EU and Japan are close to finalizing a FTA.  The EU achieving better access to Japan than New Zealand would be concerning in several agricultural and services areas (a read of leaked text for the negotiation would suggest that there is still considerable work needed to finalise this negotiation).

Pacific Alliance (Mexico, Colombia, Peru, Chile)
Foreign Minister Brownlee and Trade Minister Todd McClay attended the Pacific Alliance Summit in Colombia last week.  It was agreed that New Zealand (along with some others including Australia) would begin negotiations on a FTA link with the Alliance (Mexico, Colombia, Peru and Chile). This is good news and represents a good outcome from a process started three or four years ago by former Trade Minister Tim Groser.

The current breakdown in relations between Qatar and the rest of the GCC membership has very negative implications for the unblocking of the GCC-New Zealand FTA.

RCEP (India, ASEAN, China, Korea, Japan, Australia and New Zealand) 
There is zero chance of agreement to anything close to an acceptable standard by the end of the year.  Negotiations are continuing but progress is slow.

Pacer Plus
Agreement has been reached but three of the larger Pacific markets (PNG, Vanuatu and Fiji) have decided to stay outside the agreement at this point in time.

The New Zealand Russia FTA remains in the freezer.  There is no point thawing it out until Russia improves its behavior in Ukraine, EU attitudes change, or President Putin is overthrown.

China FTA Upgrade
This process is gaining momentum but it is unclear whether progress is going to be possible.  China seems to be asking for concessions on people movement and investment.  Neither are possible given the state of New Zealand domestic politics, and China seems disinterested in New Zealand’s desire to see a change to the dairy safeguards regime – fortunately this expires in a few years regardless of this negotiation.



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