Robert MacCulloch
Robert MacCulloch is a native of New Zealand and worked at the Reserve Bank of NZ before travelling to the UK to complete a PhD in Economics at Oxford University.
Former Trade Minister David Parker and Prime Minister Ardern signed a free trade agreement with the European Union (EU), which they touted as an amazing victory. How good a deal actually was it? Since tariffs are in the world news now, lets take a quick look at that deal.
The EU saved itself $280 million per annum in tariff payments to the NZ government. The Euros couldn’t believe their luck. Dunedin could’ve renovated its hospital by now and a ton more infrastructure projects been underway had NZ’s government not lost those revenues. But, you may argue, the deal must’ve been reciprocal, so Kiwi tariff payments to the EU fell by the same amount, right?
It turns out, in exchange for EU firms paying the NZ government $280 million less, the EU only lowered tariffs on NZ firms by 1/3 as much, so just saved us 100 million dollars. That amounts to a net loss to NZ of $180 million per annum.
Why was the deal so biased? Aside from Ardern and Parker being unable to strike a good deal, the EU exports three times more to us than we do to them. To quote the European Commission, “The EU exports to NZ goods worth €5.5 billion a year and imports NZ products of €2.3 billion”, so NZ has a trade deficit with the EU of around € three billion (or $NZ six billion).
Why does NZ have such a huge trade deficit with the EU? Because the EU strictly limits access of our biggest export: agricultural products. Although I’ve only had a quick look, it seems to me the Europeans couldn’t believe what suckers the Kiwis were to sign a “free trade agreement” with them, since it was not a free trade agreement.
The EU said at the start there was no way it’d budge from its strict entry controls and quotas on NZ agricultural products. The European Parliament stated, in relation to its trade deal with NZ, “The EU committed to taking European agricultural sensitivities fully into consideration in its negotiating strategy.”
On the other hand, former PM Ardern and Trade Minister Parker sold us out. They opened free, non-tariffed access to NZ for European agriculture, but went along with Europe keeping its door slammed shut to our agricultural exports (apart from limited quotas). Below is a European Parliament graph celebrating its booming unrestricted exports to NZ (light blue line) compared to our small exports to them (dark blue line). NZ’s deficit with the EU is rising as we speak. Our PM should stay calm before hysterically embracing the EU as a bastion of free trade. Before he makes fun of America, he should look at the stupid “free trade” deals that NZ has made with the world that aren’t about free trade at all.
This article was originally published by Down to Earth Kiwi.
