The EU’s trade talks with Australia and New Zealand will prove to be complex as the future trading relationship between the bloc and the UK – which considers the two countries as high priorities for its own commerce deals – remains unclear. Furthermore, some “subplots” underlie the trade technicalities.
Negotiations for trade agreements between the EU, Australia and New Zealand will have barely begun by the time the UK leaves the EU in March.
Britain has identified Australia and New Zealand as high priorities for negotiating its own post-Brexit trade deals. Canberra and Wellington will find themselves pursuing simultaneous, but separate, talks with both Brussels and London. Add in the uncertainty about the future relationship between the EU and the UK – which will be highly relevant to both processes – and one of the more complex trade negotiating processes of recent times appears to be ahead.
Moreover, some highly resonant political “subplots” underlie the trade technicalities.
Some have even suggested that the EU’s high-profile focus on Australia and New Zealand has been motivated by a desire to “queer the pitch” for the UK and steal a march on its soon-to-be-former member state by starting its own discussions before the UK can legally begin its own negotiations with its Commonwealth partners.
But this perspective ignores the clear strategic imperative for the EU to strike deals with Australia and New Zealand, quite independent of any Brexit-related considerations.
The two countries are now the only developed states with which the bloc has no trade deal either in place or under negotiation, and two of only six World Trade Organization members in that position. Moreover, the imminent entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will give Pacific Rim trade partners a foothold in Australian and New Zealand markets that the EU would be foolish to ignore.
The UK’s departure from the EU means that these will be trade negotiations like no others. For one thing, about half of Australia’s goods exports to the EU go to the UK, while 14.5% of its imports are sourced from there. For New Zealand, the relevant figures are 33% and 16%, respectively. From the Antipodean point of view, this means EU trade deals are more than a little devalued, in the UK’s absence.
The separate negotiations that Britain plans to start with the two countries after Brexit are thus significant economically, as well as being of totemic political importance. But this is where the clarity ends, as far as the process and the politics are concerned.
Now and later
The UK will play a full role in preparing for the Australia and New Zealand talks for as long as it remains a member of the Council of Ministers. Indeed, London has gone out of its way to back the EU’s trade ambitions.
“The UK remains one of the most vocal supporters of free trade between the EU and its trading partners around the globe,” a Department of International Trade official told Borderlex. “We fully support the proposal for trade deals between the EU and Australia and New Zealand.”
But after the UK’s exit, the government can begin formal negotiations with non-EU countries, provided these are not concluded until after the post-Brexit transition phase that is expected end in December 2020.
The DIT has already had informal contacts with both Australia and New Zealand. These talks are being handled separately from the EU’s negotiations, and the UK has stressed that, in line with its duty of “sincere cooperation”, it will keep the European Commission informed when any such discussions take place.
The UK has no ‘negotiating mandate’ in the EU sense – i.e. agreed objectives in terms of what it will seek to gain from future trade deals. The official DIT line is that this is because the country cannot yet negotiate in its own right. But it also underlines the lack of any explicit public debate in the UK about the political trade-offs that such deals will inevitably necessitate.
TRQs muddle negotiating package
By way of illustration, the EU’s mandate for the Australia and New Zealand talks clearly states that its agricultural markets will not be fully liberalised and that tariff rate quotas will continue to protect sensitive farm sectors. Whether the UK would seek to do the same – or to ‘outbid’ the EU-27 by offering full access to its own agri-food markets – remains uncertain.
And TRQs represent yet a further complication in the negotiating package, with a process already under way in Geneva to determine how, or whether, the EU-28’s existing TRQs should be split between the UK and the EU-27 post-Brexit. Australia and New Zealand have a very active interest in several of the most economically and political significant TRQs, for meat and dairy products in particular.
“WTO matters continue to be discussed substantively in Geneva,” the DIT official said. “However, we would fully expect to discuss bilateral market access in the context of any future trade deals with partners.”
The EU-27 and the UK insist that existing TRQs should be divided between the two sides based on recent historical trade flows. But Australia and New Zealand are now pushing to preserve the TRQs and make them ‘joint’ quotas, administered via a common EU-UK mechanism and applied on an ‘either/or’ basis.
“New Zealand is not in favour of splitting the quota,” explained Ben O’Brien, Brussels-based regional manager for lobby group Beef + Lamb New Zealand. “We want to retain a quota for the whole of the EU-28. Then we could export flexibly to either market depending on where there was under- or oversupply.”
Having a single TRQ applying to, and administered jointly by, two different customs authorities would be a novelty – and one that could avert possible complications for Australian and New Zealand exporters arising from future EU-UK border arrangements. But the EU still insists that it wants a clean TRQ split post-Brexit.
Future negotiations will also inevitably touch on geographic indications – a key offensive interest for Europe and a sore point for Antipodean producers that have inherited much of Europe’s food heritage and terminology.
Despite speculation that the UK may be prepared to ease up on EU restrictions on the use of terms like ‘Parmesan’ and ‘feta’ to facilitate future trade deals, the DIT official said that “Australia and New Zealand have not asked us to remove protection for any UK geographical indication, and nor do we intend to do so”.
Brexit and bilateral agreements
The Brexit dimension will also have to be considered when it comes to bilateral accords such as the EU-Australia Mutual Recognition Agreement (covering technical standards for industrial products) and the EU-New Zealand Veterinary Agreement, which was last updated in 2015. There has been little focus on these agreements in London, although O’Brien said he believed the veterinary pact would continue to apply for future trade between the UK and New Zealand in livestock products.
In the meantime, the UK’s future trade ambitions remain hostage, to some extent, to the outcome of Brexit negotiations.
Any deal to extend the post-Brexit transition period beyond December 2020 – such as via the ‘backstop’ plan to keep the UK effectively part of the customs union for a possibly indefinite period of time – would delay the date on which any new trade accords could come into force.
In the longer term, participation in some form of customs union with the EU would lock Britain into the bloc’s external trade framework. That would make it impossible for the UK to do any trade deals of its own with Australia, New Zealand – or any other third country.