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Australia and New Zealand edge closer to FTA launch amidst security rapprochement with EU

The EU and Oceania are edging towards an economic rapprochement.

 

Long-awaited free trade agreement talks between the EU and Australia and New Zealand are expected to receive the green light from member states next month. The move comes as the two Oceanian countries seek to diversify their security ties amid rising Chinese influence in their backyard.

 

On Friday, member state experts will sit together in Brussels to fine-tune the contours of a negotiating mandate for the European Commission regarding a free trade pact with Australia and New Zealand respectively. The mandate is expected to get the go-ahead from trade ministers during a Council meeting on 22 May.

 

The new Brussels move this week comes as prime ministers of the two Oceanian countries visit London, Berlin and Paris to discuss trade and security matters.

 

Malcolm Turnbull, Australia’s premier, and Jacinda Ardern, New Zealand’s new prime minister, are attending London’s Commonwealth summit this week. They took the opportunity to board a few further short flights to go and shake hands with Chancellor Angela Merkel in Berlin and President Emmanuel Macron in Paris.

 

Ardern, who visited the Elysee palace on Monday, secured an official statement by Macron in favour of the planned EU-New Zealand free trade agreement.

 

France had been relatively sceptical about the pact, as it dismissed the economic value of an FTA with a country as small as New Zealand – which has only 4.7 million people – and feared the consequences for its farm sector of greater imports of agriculture products from the nation known for growing kiwi fruit, exporting lamb meat and competing with French wines on global markets. Macron’s endorsement is likely to provide a boost to the pact’s prospects.

 

Germany’s Merkel was an early supporter of a free trade pact with New Zealand.

 

France was also initially relatively sceptical of the  trade negotiations with Australia. But Paris’s recent security rapprochement with Canberra and its energy and infrastructure companies’ recent investments ‘down under’ mean that Paris is looking at the country with new eyes. From Europe, one also tends to forget that Australia and France share a ‘sea’ border in the South Pacific.

 

France and Australia are deepening their security cooperation amidst rising Chinese influence in the region. France is taking an increasing strategic interest in the Asia-Pacific. This is partly because it controls far-flung territories such as Nouvelle Calédonie, Wallis and Futuna, and the islands of Polynesia. Concerns over maritime security, freedom of navigation, and over potential political interference by China in domestic politics in the region are starting to focus minds in Paris.

 

Last year, France’s overseas territories participated for the fist time as full members – not only observers as so far – in the Pacific Islands Forum. There is talk of these territories potentially joining the Commonwealth, originally a club of former British colonies, while still remaining part of France.

 

With uncertainty about the long-term security role of the United States in that region, Australia is also looking to forge new political partnerships with like-minded democratic countries. So is New Zealand.

 

For France and its powerful military-industrial sector, more security cooperation also means more business. Paris won a US $50 billion submarine contract in Australia in 2016. Germany is also benefiting from Australia’s security-equipment purchases.

 

Brexit rethink

 

Britain’s coming departure from the EU is obliging Australia and New Zealand to review their relationships with both the UK and various European countries.

 

New Zealand will open a new embassy in Dublin at the end of the year. So far it has managed its relationships with Ireland from London. New Zealand is also engaging more closely with Central and Eastern European countries and has relied on strong support from Spain and Portugal in securing an EU commitment to launch FTA talks. For Australia, Germany and France are clearly becoming a greater political priority.

 

Both countries with deep historical ties to the UK are trying to navigate each in their own way their three-way relationships with the EU and Britain in the Brexit context.

 

Canberra and Wellington have been among the most forthcoming capitals in signalling to the British government that their country will be among the first to sign a bilateral free trade agreement with the United Kingdom once it is outside the EU. However, both also clearly prioritise their FTA with the EU – be it only because of the relative size of both Britain in the big bloc next door.

 

Australia has used the opportunity of the Commonwealth summit in London this week to call on the UK to dedicate more resources to security and cooperation in the Pacific. The UK and New Zealand also leveraged this summit “to increase cooperation in the Pacific and on global challenges”.

 

Turnbull recently reiterated that Australia will be the first to sign a trade pact with Britain post-Brexit. In private, however, Australian officials have told Borderlex their priority is the trade deal with the EU and that some Australian businesses are looking to relocate some operations to the EU27.

 

A Kiwi official told Borderlex that while his country is engaging with Britain as part of a trade working group, “we are telling them that our priority is the agreement with the EU”. New Zealand’s short-term priorities with Britain on trade are, above all, to roll over a 2013 veterinary agreement with the EU and a series of mutual recognition agreements on conformity assessment certificates.

 

Clearing FTA mandate hurdles

 

Despite Macron’s endorsement, securing an EU mandate for the trade pact won’t be smooth sailing.

 

On Friday, member states will try to find compromise language on agriculture in the draft mandate. With New Zealand’s fruit and vegetable export prowess and Australia’s global beef and sugar trade might, there’s nervousness about the impact of such a trade pact on an agricultural sector in the EU that will also need to open up to more Latin American products as part of ongoing trade talks with Mexico and the Mercosur bloc.

 

France, supported by about 10 member states, is asking the EU to look at the issue in a global manner, allocating an overall quota to all imports of sensitive agricultural products – such as beef – and then distribute them among the various free trade agreements currently under negotiation.

 

That approach is not only likely to rile EU trading partners. It is also irritating other member states in the bloc, not least because some consider this will reduce Brussels’ negotiating leverage.

 

The launch of the Australia and New Zealand pacts were recently complicated by a French request to include the 2015 Paris Climate Agreement in the so-called ‘essential elements’ conditioning trade agreements. These are – mainly – human rights clauses on which the EU conditions the validity of the entire trade agreements.

 

Paris’ maximalist approach on climate isn’t a real problem for New Zealand – although it might be an issue for Australia, which has a vocal climate-sceptic political constituency. The Kiwis see issues such as rising sea levels as a more direct threat to their territory.

 

During a press conference with Jacinda Ardern on Monday, Emmanuel Macron said: “We realised we had an approach that is very similar in promoting [trade] agreements that are [compatible] with the implementation of the Paris agreement and that include high expectations in terms of social … responsibility.” Macron added that the planned accord with New Zealand could be “a model”.

 

Macron’s climate approach is raising eyebrows among its fellow EU member states, which see this is possibly a step too far. “That’s going to take time,” a diplomat from another member state told Borderlex.

 

Also, France is pushing hard for more enforceable trade and sustainable development provisions, which is causing more problems with fellow member states than with a partner like New Zealand.

 

The aim at this week’s technical trade meeting, is to find some compromise language on these issues by the May Council meeting so as to ensure the talks with Australia and New Zealand can at least begin as soon as possible.

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