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About free trade agreements
A free trade agreement (FTA) between two countries or a group of countries can be used to set the rules for how countries treat each other when it comes to doing business together.
While we look to pursue New Zealand’s trade goals through the World Trade Organization (the WTO), involving over 160 economies, the WTO’s consensus decision-making process means that progress can be slow, and agreements may not address the specific interests and issues of individual countries. FTAs offer an additional avenue to advance our trade interests.
The focus of an FTA is primarily on economic benefits and encouraging trade between the countries by making it more efficient and profitable. Agreements usually remove tariffs on goods, simplify customs procedures, remove unjustified restrictions on what can or can’t be traded, and make it easier for business people to travel or live in each other’s country. But FTAs may also have political, strategic, or aid benefits.
FTAs are legally binding, so they provide certainty and security for exporters, importers and investors. They help businesses to become, and remain, competitive in those markets.
What’s covered in an FTA?
New Zealand’s overall objective in any FTA negotiation is the establishment of a modern, high-quality, comprehensive, forward-looking, and commercially-meaningful agreement that facilitates the growth and development of our trade and investment relationship with our trading partner(s). We therefore typically cover a range of trade-related issues in the negotiations - including those listed below.
Trade in goods
New Zealand seeks elimination of tariffs on all goods within commercially meaningful timeframes. This is supported by transparent, liberal and flexible rules of origin to ensure it is simple to decide where a product is “from” and whether it is eligible to benefit from the FTA.
New Zealand seeks to ensure that rules of origin are neutral, meaning that they do not favour the producers of inputs over the producers of final goods, or favour one industry sector over another. We prefer self-declaration of origin as the basis for evidencing origin in the first instance under the FTA. New Zealand also seeks FTA provisions that enhance the speed and transparency of import, export, transit, and transhipment related customs procedures, including through the adoption of automated systems to the maximum extent practicable. An FTA can help both sides to manage risks associated with imported products more effectively and efficiently as well as promote cooperation and collaboration to build strong institutional relationships to resolve specific trade concerns.
New Zealand seeks to include mechanisms to improve communications and consultation to resolve trade access issues in an objective and scientific manner that allows us to take the measures necessary to protect the life or health of our people, animals, and plants, provided such measures are not inconsistent with the WTO Agreement on the Application of Sanitary and Phytosanitary Measures.
Similarly, FTA outcomes further the implementation of, and can build on, the WTO Technical Barriers to Trade Agreement by aiming to facilitate the acceptance of conformity assessment results on both sides, promote self-certification, and support unilateral recognition where appropriate.
Services and investment
Through an FTA, countries may agree not to discriminate against services providers or investors from other countries, and not to put certain barriers in place that restrict trade and investment. This can provide new opportunities for New Zealand exporters in areas such as private education, ICT services, professional services and transport services, and provides increased certainty and transparency for New Zealand services suppliers and investors.
A fundamental principle for New Zealand is that any outcome on services and investment must safeguard the right of our government to regulate for legitimate public policy purposes. FTAs can facilitate visa access for business people from New Zealand and our trading partners that supports the development of our trade and economic relationship.
FTAs can also address digital economy issues. New Zealand seeks outcomes that realise the opportunities presented by e-commerce while managing the risks that arise, in particular by retaining necessary public policy safeguards to address issues such as consumer protection and the protection of personal information in the digital environment.
Countries make commitments which smooth the way for businesses to compete for government tenders for goods and services on a non-discriminatory basis in each other’s markets.
Intellectual property (IP)
Countries commit to how intellectual property from each party with be protected in each other’s market. New Zealand consistently rank amongst the top countries for IP protection with modern and highly regarded IP system that allows IP owners to efficiently and effectively protect and enforce their IP.
So we generally seek IP outcomes that sit within current domestic policies and legislative settings, taking into account the need to retain appropriate flexibility to ensure these settings are, and over time remain, appropriately calibrated for a small net importer of intellectual property seeking to incentivise innovation and creativity.
Trade and competition
FTAs can reiterate the importance of maintaining and enforcing competition law, transparency and due process with provisions on competition policy cooperation and consultation/notification, particularly where anti-competitive behaviour may have affected trade and investment between the countries. For example, New Zealand often seeks to incorporate rules to restrict and discipline certain categories of subsidies of particular concern, including those that damage our export markets or harm the environment such as subsidies that promote the use of fossil fuels or unsustainable fishing practices.
Trade and sustainable development (including environment and labour)
New Zealand seeks provisions in FTAs that give effect to the key principles set out in the 2001 Framework for Integrating Environment Objectives in Trade Agreements, including commitments that labour and environment laws, policies, regulations and practices will not be used for trade protectionist purposes, or be weakened to encourage trade or investment. This can establish opportunities for cooperation on trade related labour and environment issues of mutual interest and a robust consultation and disputes mechanism to resolve issues or disputes arising between the Parties. The strongest outcomes on environment and labour of any of New Zealand’s trade agreements to date are contained in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).