Sustainable economic growth in EU external action: the EU – New Zealand Trade Agreement

Despite their geographical distance, the European Union (EU) and New Zealand, have a very close relationship, coupled with shared values and interests. They share a deep commitment to democracy, rule of law, respect for human rights and sustainable development. In fact, the EU has three main objectives to pursue in the Pacific region, which align with New Zealand’s own development work in the region, namely: support climate action, promote sustainable economic development and encourage fundamental values and good governance.

Last summer (30^th June 2022), the EU and New Zealand concluded negotiations for a trade agreement which, for the first time, other than strengthening trade relations, will include sustainability commitments, such as the respect of the Paris Climate Agreement. This commitment sets up a brand-new kind of trade agreement that makes the EU move closer towards the idea of sustainable economic growth, not only within the Union but also in its external action.

While both parties  concluded their four-year negotiations in June 2022, it is only in February 2023 that the EU-New Zealand Trade Agreement took a major step towards its ratification and entry into force, as the Commission sent it to the Council for approval. Following Council’s approval and upon the European Parliament’s consent, the deal will enter into force. In the same month, the EU and New Zealand reaffirmed their strong relationship at a meeting in Wellington under the Partnership Agreement on Relations and Cooperation (PARC) that was ratified last summer (July 2022). This agreement is intended to foster cooperation between the partners in many areas including sustainability and trade.

This event happens in a context in which the EU’s transition to a net-zero economy becomes of paramount importance, as President von der Leyen highlighted earlier this year in her speech at the World Economic Forum in Davos (January 2023) by announcing the European Green Deal Industrial Plan. In order to meet the climate targets set in 2019 with the presentation of the European Green Deal, the aforementioned plan relies on four pillars, one of which is an open trade for resilient supply chains. In this sense, the EU-NZ Trade Agreement is the first tangible result of this pillar, which has the aim of making trade work for the green transition through global cooperation.

On a related topic : Europe’s Green Deal : a dream or a goal ?

The Agreement also follows the Commission’s plan to further strengthen the implementation and enforcement of Trade and Sustainable Development (TSD) chapters of the EU’s trade agreements. To do so, the Commission proposes a new approach that includes the use of trade sanctions for breaches of core TSD provisions, as explained in the Communication on “The power of trade partnerships: together for green and just economic growth”.

The deal will allow bilateral trade to increase by up to 30% and EU investment into New Zealand to increase by up to 80%, due to the removal of duties on both goods and services. This will greatly benefit companies – including small and medium enterprises –, farmers, and consumers by creating new economic opportunities, along with guaranteeing core labour rights (International Labour Organisation fundamental labour principles). 

With the aim to be a trade deal for green and fair growth, the Agreement also includes chapters about sustainable food systems, animal welfare, as well as the protection of minorities, specifically Māori – the indigenous people of New Zealand who possess their own culture and language –, by contributing to advance Māori economic aspirations through the facilitation of cooperation on trade in Māori products, for example. 

The new approach of promoting green and just economic growth through economic partnerships is in line with the recommendations formulated through citizens’ panels in the context of the Conference on the Future of Europe. In particular, European citizens propose that the EU strengthens both the ethical and the environmental dimension of its trade and investment relations through a variety of measures such as ensuring work and sustainability standards within and outside the EU, while opening up new opportunities for European companies.

On a related topic : La Conférence sur l’avenir de l’Europe, l’heure du bilan

Among the key ambitions of the EU-New Zealand trade agreement one can highlight the intention for the EU to strengthen its ties with a like-minded ally in the prominent and dynamic Indo-Pacific region, not only in terms of economy and trade. In fact, as President von der Leyen stressed out in her joint announcement with the then New Zealand Prime Minister Jacinda Ardern, “this new agreement between the European Union and New Zealand comes at an important geopolitical moment”. In particular, the approval of the Strategic Compass – pushed by the return of war in Europe –, namely the plan of action for strengthening EU’s security and defence policy by 2030, hint at an increasing intention to shift the Union’s foreign policy towards a more strategic and less normative one, and perhaps at the rise of a more “Geopolitical Europe”. In the context of this strategic awakening, the Council adopted an EU Strategy for Cooperation in the Indo-Pacific, which highlights seven priority areas, among which we can find not only “sustainable and inclusive prosperity” and “green transition”, but also “security and defence” indeed. It is therefore of utmost importance for the EU to have like-minded partners – like New Zealand – in the region and to strengthen ties with them.

New Zealand and the EU still continue to deepen their cooperation on sustainability issues and climate change, including through a High-Level Dialogue on climate as well as an International Strategic Agriculture Dialogue both to be held later this year. 

The agreement makes the EU a pioneer in the promotion of sustainability through trade agreements, and as Commissioner for Trade Valdis Dombrovskis said: “this is a new generation of trade deal, with both sides set to make real economic and environmental gains”, proving that the EU’s trade agenda is dynamic and evolving.  However, the challenge still lies ahead, as the EU is negotiating trade deals with less like-minded partners who often present more sustainability concerns, such as Mercosur and India.

[This article was first published in the issue 38 of the magazine]