EU and New Zealand's New FTA Is Literally Too Cheesy

The EU-New Zealand Free Trade Agreement (FTA) came into enforcement on May 1, 2024, nearly 10 months after its signing last year. It signifies a major progress in economic collaboration between both regions. This deal will create a trade environment that is more open and dynamic by getting rid of or lowering tariffs on goods.

This free trade agreement offers a wonderful chance for companies of varying sizes, including experienced exporters wanting to grow and smaller businesses looking into different markets. Consumers can also anticipate advantages from the FTA, including accessing a wider selection of products at lower prices, especially cheese, which both the regions are famous for.

Businesses should utilize the FTA to seize potential growth opportunities and increase earnings by implementing cost-saving strategies and expanding their target market. A global trade content platform is easy way to find and utilize FTA and the respective tariffs involved.

The Historical Trade Connection

The EU-NZ FTA originated from decades of trade ties that have existed between the two regions. New Zealand's third largest trade partner is the European Union. It represents over 10% of New Zealand's total trade, after China and Australia which have bigger trade respectively.

The international trade in goods and commodities between the EU and New Zealand has increased in recent years, surpassing €8 billion in 2021. Similarly , the trade in services between the two economic partners amounted to €3.5 billion. In 2022, the EU and New Zealand's bilateral goods trade reached €9.1 billion, a growth of over 12% compared to the prior year.

Affected Product Categories

The EU and New Zealand have generally prioritized specific areas in the FTA. According to data from the European Union, machinery and transportation equipment are the top exports from the EU to New Zealand. This includes a wide range of items, ranging from cars and construction equipment to very precise gear. However, the EU has been the primary recipient of New Zealand's exports in the "Food and live animals" category.

This includes a wide variety of top-quality farming goods, such as dairy, meat (especially lamb), and wine. The EU-NZ FTA is set to enhance trade in existing areas and create new possibilities in different sectors.

New Zealand has removed high duties from products, such as:

1. Cars and motor vehicle parts (tariffs up to 10%)
2. Clothing, Shoes, Textiles (tariffs up to 10%)
3. Machinery (current tariffs up to 5%)
4. Pharmaceuticals, Chemicals (current tariffs up to 5%)

European Union has also eliminated tariffs from food and drinks, which were previously taxed at 5%:

1. Swine meat
2. Wine and sparkling wine
3. Chocolate, sugar confectionery and biscuits
4. Pet food
5. Cheese

The Benefits of the EU-NZ FTA

The Europe-Zealand FTA offers numerous benefits for businesses and consumers in both the participating regions. The following are some of the main benefits highlighted:

1. Reduced tariffs

The primary benefit of this FTA is the elimination or reduction of tariffs on a variety of goods between the European Union and New Zealand. After it's implementation, 91% of New Zealand's exports to the EU have been tariff-free, with expectations for this number to rise to 97% within the following seven years.

This tariff elimination or reduction will have a significant price reduction for European markets of dairy products, meat, and wine from the islands, some of the finest in the world. Likewise, New Zealand companies will benefit from decreased or eliminated tariffs on their imports from the EU, such as high-quality machinery, vehicles, and pharmaceuticals.

2. Enhanced Market Access

In addition to cutting tariffs, the EU-NZ FTA simplifies customs procedures, making it easier to transport goods between the two areas. This results in quicker processing times and less paperwork for businesses. By utilizing advanced methods, companies can concentrate on their core strengths in marketing and delivering products and services, which helps them better reach customers.

3. Boost for Specific Industries

Certain sectors will experience significant advantages from the EU-NZ FTA. The farming industry in New Zealand, renowned for producing top-notch goods, will enjoy increased entry into the vast EU market. This could result in more chances for exporting and economic expansion for agricultural companies in New Zealand.

Other on other end, European companies in the machinery, vehicle, and pharmaceutical industries may have more chances to compete in New Zealand's market, which could lead to growth in their market share and profits.

4. Wider Variety and Competitive Prices for Consumers

The EU-NZ FTA also results in consumers enjoying a greater range of products and better prices. Consumers in both regions can expect a wider selection of products available at more competitive prices. Reduced tariffs may result in companies bringing in a more diverse range of goods, offering consumers greater choices and potentially increasing demand.

One potential outcome is that Europeans may have increased access to high-quality New Zealand lamb and seafood, while New Zealanders could benefit from a wider selection of European cars and stylish clothing at reduced prices.

5. Economic Growth

Chapter 21 in the agreement dedicated to economic growth supports small and medium-sized businesses in exporting their products, helping them to enter and compete in the New Zealand market. The agreement is also expected to boost trade volumes significantly, with projections indicating a 30% increase in overall trade, a 47% rise in trade in goods, and a 14% growth in services trade.

6. Reduced Compliance

Significantly reduced compliance requirements and streamlined procedures lower administrative burdens and costs for traders. Easier navigation of trade processes leads to quicker and more efficient transactions.

Key Considerations for Businesses Navigating the Opportunities

Just like other free trade agreements, even this one has certain requirements that need to be met.

Rules of Origin

These are guidelines for determining if a product is eligible for tariff benefits under the EU-NZ FTA. An item marked as "Made in New Zealand" could be ineligible if it includes a substantial portion of materials sourced from other countries.

Businesses must ensure adherence to the particular rules of origin for their products in order to guarantee they can take advantage of the tariff cuts. Official government websites and trade associations provide various resources to assist businesses in understanding and following the rules of origin.

Compliance Requirements

Regulatory and certification requirements may be implemented for certain products under the EU-NZ FTA. To prevent customs delays, businesses need to stay updated on any new compliance requirements. For instance, businesses may have to follow fresh labelling regulations or adhere to updated product safety standards.

Various government websites and organisations focused on business development provide advice on meeting compliance regulations and can help companies ensure their products adhere to the required criteria.

Finding Opportunities

It is essential to identify potential trading partners and explore new opportunities with a larger accessible market. A variety of tools are available to assist companies in navigating this procedure. Government websites frequently offer details on potential trade partners in different regions. Business development organizations can provide important support in connecting businesses with potential partners and recognizing market opportunities.

Impact of EU-NZ FTA on Global Trade

The EU-NZ FTA is not just a simple agreement between two parties; just like other FTAs have impacts, it has the power to influence trade patterns on a global scale. The effective execution of this agreement establishes a robust example for upcoming trade agreements between advanced and emerging economies. Focusing on removing tariffs and simplifying procedures can be a good example for other regions aiming to strengthen economic connections and enhance trade.

This agreement also marks the increasing significance of regional trade agreements (RTAs). As international commerce becomes increasingly intricate and intertwined, RTAs can provide a route to economic expansion and steadiness for countries involved. RTAs can enhance economic cooperation within a certain region to establish a more stable trading environment for businesses. The EU-NZ FTA's positive outcomes may inspire other areas to consider comparable agreements, improving the efficiency of the global trade network.

The EU-NZ Free Trade Agreement will significantly impact businesses and consumers in both Europe and New Zealand. Due to lower tariffs, improved market entry, and a greater range of products, the deal offers promising chances for expansion and success. If you're an experienced importer/exporter or a small business owner wanting to grow, it's worth exploring the EU-NZ FTA.

Reserve some time to comprehend the terms of the agreement, pinpoint potential chances in your sector, and capitalize on the resources at hand to guide you through the procedure. You can read the 4000 page document here to get a detailed overview.

If you need an easier way to find what trade tariffs and duties apply to all your product categories, you can check out Trademo's global trade content tool, which helps find duties, tariffs, controls, and FTAs in one place.