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Controversial free trade deal between EU and New Zealand comes into force this Wednesday

All the protesting voices will not have prevented Brussels and Wellington from coming closer together.

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Controversial free trade deal between EU and New Zealand comes into force this Wednesday

All the protesting voices will not have prevented Brussels and Wellington from coming closer together. The trade agreement with New Zealand, adopted last November by the European Union, takes effect this Wednesday, May 1. From now on, “EU businesses, producers and farmers can now benefit from a multitude of new export opportunities,” welcomes the EU in a press release. According to Brussels, this free trade agreement should greatly reduce taxes on European companies, increase trade between the two entities, and promote European exports and investments towards the country of the All Blacks.

The promises of this “historic” agreement are numerous, according to the European Union press release. The deal is expected to “reduce taxes on European businesses by 140 million euros”, grow trade “by up to 30% within a decade”, increase EU exports “by up to 4%, 5 billion euros per year” and European investments in New Zealand “up to 80%”. The agreement also includes “unprecedented commitments on sustainable development, including respect for the Paris Climate Agreement and fundamental labor rights,” the press release said.

For now, bilateral trade between the two parts of the world reached some 9.1 billion euros in 2022, according to the Commission. The Union is New Zealand's third largest trading partner. While Europe mainly imports agricultural products from Wellington, such as drinks, meats, fruits and vinegar, it sends manufactured products, such as machinery, chemicals and transport equipment.

In detail, this text cuts customs duties on EU exports and establishes “non-discriminatory treatment of EU investors in New Zealand”. The press release does not specify whether the converse is true. However, seven years after entry into force, the agreement provides that 98.5% of European customs duties on New Zealand imports will be removed. The complete list of European wines and spirits and 163 protected geographical indications are also protected. “At the same time, sensitive EU agricultural products, such as beef, sheepmeat and dairy products, are protected by carefully designed tariff quotas,” reassures the EU. In short, limit the quantities imported by establishing restrictive customs duties.

At the start of 2024, the text had also been the target of strong criticism from farmers. In particular, they feared seeing the European market flooded with New Zealand milk and meat. Last winter, the text also sparked an outcry from many organizations, offended by the consequences of this free trade agreement on the environment. And this, in a context where calls to relocate activities and production are increasing.

If the Union affirms that the consequences on the environment will be limited, the economist Maxime Combes is more doubtful. For him, this EU – New Zealand agreement should have an impact on climate change through “its impact on the volume of economic activity in the agricultural sector, in particular the meat and dairy sectors” which are highly generating methane and nitrous oxide, two of the most potent greenhouse gases, in New Zealand, as well as "anticipated additional trade flows between the EU and New Zealand which will lead to increased GHG emissions due to the transport of goods.

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