EU and New Zealand seal trade deal with tougher new green rules

The EU on Thursday sealed a new trade deal with New Zealand. Brussels hopes the deal, though small in absolute terms, will give momentum to its other free-trade talks while taking a greener turn in future agreements.

“This is a historic moment in our cooperation.” European Commission President Ursula von der Leyen said at a press conference. “It is a solid and a modern trade agreement.”

New Zealand Prime Minister Jacinda Ardern, who stood next to von der Leyen, said the deal was a “high-quality, inclusive free trade agreement.”

Trade in goods between the EU and New Zealand was worth €7.8 billion last year — making up just 0.2 percent of the bloc’s total trade. New Zealand is the EU’s 50th-largest trading partner in goods.

Nevertheless, New Zealand has punched above its weight in the trade negotiations. Brussels and Wellington were haggling over agricultural access for beef and dairy products until right before the deal was announced. But with New Zealand Prime Minister Jacinda Ardern visiting Brussels, negotiators were under pressure to announce a political agreement Thursday.

The deal is the first to include the EU’s greener ambitions on trade, which it announced last week. After this pact, if the EU’s partners fail to respect labor or sustainability standards enshrined in the bloc’s trade agreements, they could get punished with sanctions.

The deal, signed the last day of the French presidency of the Council of the EU, is also a win for Paris, which wanted the New Zealand accord to usher in a new “gold standard” for sustainability, as French trade minister Franck Riester told reporters last year.

It’s also a boost to the EU’s self-confidence in signing free trade deals. The current European Commission has been struggling to conclude and ratify trade agreements, especially under the protectionist French presidency of the Council of the EU. Now that the Czech Republic and Sweden, two of the bloc’s biggest supporters of free trade, are taking over the presidency, the EU is keen to get its free-trade engine running again. 

Russia’s invasion of Ukraine has also fueled calls to open up more commerce with the rest of the world to diversify sources of supply, especially with politically friendly countries — including in the Indo-Pacific region as tensions also run high with Beijing.

Next up: Canberra

At the same time, a deal with New Zealand is low-hanging fruit. Climate ambitions were never an issue for Wellington, which actually pushed Brussels to go further on green measures last year, at a time when the EU was still resisting a sanctions-based sustainable development chapter.

The EU’s deal with New Zealand now ups the pressure on Brussels to strike an agreement with Australia as well. Negotiations with New Zealand and Australia had advanced more or less in parallel until France furiously hit the brakes on talks with Canberra for a few months after losing a multibillion-dollar submarine agreement.  

Australia is an agricultural powerhouse, which makes the talks with Canberra more sensitive since European farmers are wary of food imports. The EU might also hit a wall with its climate demands, although Australia’s new left-wing Prime Minister Anthony Albanese played down that fear earlier this week. Albanese, who’s in Europe this week because of the NATO summit, said he hoped for an “acceleration” of the EU-Australia talks in the coming months.