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Trade agreements between two or more countries can be known as either a Free Trade Agreement (FTA), Closer Economic Partnership (CEP), or Strategic Economic Partnership (SEP). The names reflect the preferred terminology of different countries.
Trade agreements make international trade easier and more efficient by improving access for exporters and investors to other countries’ markets, reducing any barriers to trade, and ensuring existing access is maintained.
Trade agreements establish a set of rules. They make participating countries’ regulators and officials work more closely together to create a secure trading relationship.
The negotiating process itself brings trading relationships into sharper focus, boosting the visibility and desirability of a market to partner countries’ businesses and investors.
Trade is critical for New Zealand’s economic well-being and growth prospects. Only by selling goods and services to other countries can New Zealand pay for the goods and services it imports from overseas. International trade accounts for around two-thirds of New Zealand’s total economic activity. In 2009, New Zealand’s merchandise exports totalled $43 billion, while service exports totalled $12.4 billion.
New Zealand has an open economy that places few barriers in the way of foreign services providers or importers. But our exporters often encounter barriers overseas, which is why New Zealand pursues an active trade agenda. To advance and safeguard New Zealand’s interests, we need to establish and maintain our exporters’ access to markets that matter.
Since 2000, trade agreements have proliferated worldwide. As our global competitors develop new networks of trade agreements, we need to match their progress or risk our exporters being disadvantaged.
Free trade does not just benefit our exporters. New Zealand importers and consumers enjoy wider and cheaper access to many countries’ goods and services.
The pursuit of trade agreements complements New Zealand's participation in multilateral and regional fora such as:
Negotiating a successful trade agreement can take years. The first step typically involves a joint study to determine potential economic benefits. If the study finds demonstrable benefits for all participating countries, Ministers may decide to launch negotiations.
The negotiations themselves involve officials from each countries’ relevant government agencies. These officials meet periodically for a series of negotiating rounds. In New Zealand, MFAT coordinates trade negotiations, with negotiators drawn from the Ministry of Economic Development, the Ministry of Agriculture and Forestry, Treasury, Customs, the Department of Labour, the Ministry for the Environment, and the Ministry of Culture and Heritage among others.
New Zealand believes in negotiating high quality and comprehensive agreements covering a range of trade-related issues. As well as chapters on institutional and legal matters, trade agreements often cover:
Public submissions are called for at the start of negotiations as well as during the negotiation process. . Feedback from stakeholders helps determine New Zealand’s offensive interests and sensitive concerns in relation to a particular partner. It is vital that exporters tell negotiators about any problems they are facing and opportunities they see in the future, so that these issues become part of the negotiation. Negotiators from each partner country bring ideas to the table. Through a process of requests and offers, these are translated into specific text that specifies particular market access commitments, such as tariff cuts.
After negotiations are concluded, the final, legally verified text goes through a Parliamentary treaty examination process before it is ratified by New Zealand. Members of Parliament examine the trade agreement text and accompanying National Interest Analysis, which sets out the advantages and disadvantages to New Zealand becoming a party. At this point, the text becomes publicly available and, depending on the report from Parliament’s Foreign Affairs, Defence and Trade Select Committee, there may also be a debate on the trade agreement in the House and a further call for public submissions. Once any enabling legislation required has entered into force, New Zealand may become a party to the trade agreement so the benefits can begin to flow.
Institutions or periodic meetings are usually established to oversee the trade agreement’s implementation. These ensure experts from both countries meet regularly to discuss concerns or opportunities for cooperation. Some benefits flow immediately from up-front commitments to remove or limit various restrictions. Other benefits are delivered more slowly. For example, tariffs on a product may reduce to zero over a period of time to allow the local industry to adjust to increased competition.
For more information contact eco@mfat.govt.nz
