NZ trade deal an international breakthrough

In a major international breakthrough, New Zealand has negotiated a free trade agreement with Saudi Arabia and other Arabian Peninsula countries, which includes a provision requiring them to uphold the UN Convention on the Elimination of Discrimination Against Women.

Trade Minister Todd McClay signed the agreement with the Gulf Co-operation Council in Doha overnight.

The Gulf Co-Operation Council  (GCC) comprises (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates)

New Zealand and GCC trade is worth over $3 billion annually, with New Zealand exporting $2.6 billion in the year to June 2024. This includes $1.8 billion in dairy, $260 million in red meat, $72 million in horticulture and $70 million in travel and tourism services. 

Not only did the agreement make the discrimination breakthrough, but McClay told POLITIK that it did not mention live sheep exports.

“There is no mention, no commitment, nothing at all about live sheep exports,” he told POLITIK yesterday.

“Zero has gone off the table, wasn’t raised, hasn’t been included, and is not part of it. And so that part of our history is now behind us.”

The shipments were banned by the Clark Labour Government in 2010, but in 2018, the then National Foreign Affairs Minister, Murray McCully, proposed reinstating shipments of sheep being bred by a Saudi Arabian investor in the Hawke’s Bay to set up a New Zealand-owned sheep farm in the desert kingdom.

The investor, Hmood Khalaf, was paid $4 million in a move that the Auditor General heavily criticised for the lack of paperwork around it.

There is a commitment in both the NZ First and ACT coalition agreements to reinstate the live shipments, but where that now stands is uncertain, given that the main market for the shipments has been the Gulf States.

Overall, the agreement provides that 99 per cent of New Zealand’s exports to the Gulf States will be tariff-free within 10 years. When combined with the recently concluded free trade agreement with the United Arab Emirates, 51 per cent of New Zealand’s exports to the region will be tariff-free from day one.  

There are high hopes for the development of sheep meat exports.

McClay believes the advantage of last night’s agreement will be less the lowering of tariffs on our current sheep meat exports to the region than the potential for growth the agreement could inspire.

“I think this deal should be seen as much as about what more we get to sell them as the tariffs we’re saving now because it’s a very, very big market,” he said.

“The lamb market coming straight on the back of the UAE one is really good news for our sheep farmers.

“And dairy is also right now; some of that’s liberalised over a period of time.

“The thing is, you think about the China deal; it was more than 20 years before we got full liberalisation.”

Although the European Free Trade Agreement members have a free trade agreement with the Gulf States, New Zealand is the first major agricultural products exporter to complete an agreement.

The Gulf States is one of the most food-import-reliant geographic regions in the world.

They only fulfil 15% of their food demand from local production.

This means that food security cannot be achieved through growing more food.

For the Gulf States food security is about getting food imports to where they are needed.

New Zealand’s biggest export to the GCC states is dairy products, where we have 27% of the market, exceeded only by the European Union, which has 45%.

However, according to an Agri-Canada study of the GCC’s meat imports in 2022, New Zealand is currently only a medium-sized meat exporter to the region.

But New Zealand has scored its biggest wins in the non-tariff sections of the agreement.

The big breakthrough has been in a section on the rights of women.

A British Parliamentary Committee examining the possibility of Britain negotiating a trade agreement with the GCC in April last year called for regular monitoring of gender equality and LBQT rights in the states, but the Conservative Government rejected negotiating any reference in any FTAs it might negotiate.

The GCC has only two current FTAs with non-Middle Eastern advanced economies, including the European Free Trade Association countries (Iceland, Liechtenstein, Norway, and Switzerland) and Singapore.

Neither of those agreements has any provisions for gender equality.

New Zealand has not made any breakthrough on LBQT rights, but it has succeeded in gaining a concession on gender equality, which is particularly significant given that Saudi Arabia is one of the largest economies making up the GCC.

And those are accompanied by a recognition of worker rights.

“It includes recognition and commitment to International Labour Organisation standards,” McClay said.

“And for the first time for the GCC, we have they’ve agreed so that we now have a section on women’s economic empowerment where we commit to all sides and an international agreement against all forms of discrimination against women.

“It’s not something they’ve ever done before, but we were able to negotiate and get that in.

“As far as New Zealanders were concerned, this was an important concern for us.”

There are also chapters on environmental standards and, as is becoming the practice in New Zealand trade agreements, a carve-out for the Treaty of Waitangi, allowing New Zealand to legislate to comply with that even where doing so might clash with the Free Trade Agreement.

New Zealand started negotiating a free trade agreement with the GCC 17 years ago.

After the controversy over McCully’s proposed Saudi Arabian sheep farm, negotiations more or less stopped.

But earlier this year McClay met his Saudi Arabian counterpart in Abu Dhabi at the World Trade Organisation Ministerial Forum.

It turned out they had known each other when McClay was Trade Minister in the Key-English government.

McClay suggested to him they either get on and settle the agreement or end the negotiations.

At the end of April shortly after the Abu Dhabi meeting, McClay went to Saudi Arabia in the course of a trip to Dubai to negotiate the trade agreement with the United Arab Emirates.

Negotiations then started again between officials online and face-to-face, and then, without any public notice, McClay made a second trip to Saudi Arabia a month ago to negotiate the final obstacles to completing the agreement.

The agreement must rank with the UK and EU  Free Trade Agreements in terms of its importance to the New Zealand economy.

But MFAT Deputy Secretary and Chief Trade Negotiator Vangelis Vitalis has been saying for some time that the golden age of free trade agreements is ending.

So despite the Prime Minister’s hopes for a Free Trade Agreement with India, this might also be one of the last of the “old standard” free trade agreements.

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