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Can EU trade commissioner Cecilia Malmström make the left love trade again?

Cecilia Malmström: centre stage in efforts to make the left love free trade. Photo/Getty Images

Hours after Europe hit a range of US products with retaliatory tariffs, Cecilia Malmström was selling the benefits of the free exchange of goods. 

Think “trade negotiations” and it’s a fair bet what comes to mind is not a Scandinavian woman in a funky dress and biker-chick boots joining in a guitar-backed waiata with a big smile on her face.

That, however, is the image that the European Union Trade Commissioner, Cecilia Malmström, presented during a whirlwind visit in June, when she was the centrepiece of Trade Minister David Parker’s strategy to make the left love free trade again.

Parker and Prime Minister Jacinda Ardern blindsided their support base by helping revive a revamped Trans-Pacific Partnership Agreement (TPPA) at the Apec meeting in Vietnam in November.

It was Ardern’s first outing on the global stage, and a sign that restoration of New Zealand’s traditionally bipartisan approach to so-called free-trade agreements (FTAs) would be a priority for the new coalition government.

They made clear, though, that any new FTAs would have to be done differently: out would go the secrecy of the TPPA negotiations; in would come the kind of transparent approach that the European Union has already adopted.

That strategy has coincided with Europe’s seeking new and improved relationships to shore up its interests in a world where old friends and allies the US and Britain, are withdrawing behind their own borders, while new economic and political forces – China in particular – are on the rise.

The message for a crowd gathered to hear Malmström in a lecture room 16 floors above Wakefield St on the AUT campus in central Auckland was that Europe is eager to talk trade and our Government is willing to bring critics to the table.

As if to emphasise that point, Council of Trade Unions kaumātua Robert Reid and former Green MP and trade-pact sceptic Barry Coates were among the first to pose questions.

Jacinda Ardern and David Parker at Apec. Photo/Getty Images

Reid was worried about whether an NZ-EU FTA would include investor-state dispute settlement (ISDS) provisions – a focus of TPPA opponents because they allow foreign companies to try to sue sovereign governments for FTA breaches – and on the effect of such a deal on the cost of European pharmaceuticals.

Coates fretted about the inevitable “deregulatory nature of the agreement” and whether “civil society” – that is, ordinary mortals – would get a word in edgeways before the die was cast.

On all points, the answers were soothing.

“There is already co-operation with consumer organisations and trade unions” in European trade policy-making, said Malmström, whose speech to the group emphasised the importance of the “common values” that drove New Zealand and European society.

Parker stressed he was not in favour of FTAs with “inappropriate clauses”.

Both argued that trade was good and that broader issues of social inequality and the downsides of globalisation were for governments, not trade deals, to manage.

“I also come from a small country,” said Malmström, a 50-year-old diplomat from Sweden, now based in Brussels. “We, too, are totally trade-dependent,” she said. Jobs in industries that produce exports or rely on imports are generally better-paid and higher-skilled, she argued.

Including labour and environmental standards, human rights, climate change and other broader issues in FTAs was part of the EU’s effort to “reform and strengthen our trade policy because trade is actually good”.

Jane Kelsey.

Not all sweetness and light

University of Auckland law professor and leading globalisation critic Jane Kelsey wasn’t present to scoff at the claims, but she had already rained on the free-trade parade the night before.

In a press statement that sank without trace – perhaps unsurprisingly, given that it was issued minutes after the Beehive announced the birth of the Prime Minister’s baby – Kelsey said Parker would “count his blessings that he can share the stage with the seemingly benign European Union”.

“Both sides will headline their commitment to ‘Trade for All’ – a slogan the Labour Government has borrowed from the Europeans to brand its purportedly new inclusive and progressive trade agenda.”

But very little has really changed, says Kelsey, who dismisses the human rights, labour and environmental initiatives as mere “clip-on chapters”.

“The trade rules that generate inequalities, favour the wealthiest transnational corporations, threaten jobs, consume fossil fuels and destroy the environment will remain unchanged.”

However, this will be a very different FTA from those negotiated by previous New Zealand governments in at least one key respect: the absence of ISDS clauses. The Government, fresh from its election win, withdrew its support for ISDS when it returned to the TPPA negotiating table in Vietnam.

The EU has no problem with that, having already abandoned ISDS after what Malmström describes as “an intense and emotional debate”. It favours establishing a permanent international court of arbitrators to settle trade disputes that fall outside the jurisdiction of the World Trade Organisation.

Speaking to the Listener, Malmström stressed an agenda beyond trade in pursuing an EU-NZ FTA, encompassing defence of “liberal, democratic values” and the “global order and the international institutions that we have built together since the [Second] World War, which have served us well”.

“They’re not falling apart tomorrow,” she says. “But they are under stress.”

The US is blocking the appointment of judges to the WTO body that hears appeals on alleged trade breaches, while its imposition from June of tariffs on steel and aluminium from the EU is simply “illegal”, says Malmström, her sunny demeanour cracking briefly to express the depth of anger that European allies feel.

Just hours before, the EU had imposed retaliatory tariffs on a range of American goods, prompting another tit-for-tat response from Trump.

It’s not that countries can’t impose tariffs, says Malmström. “Countries do that from time to time. But they motivate this from an old section of the legislation from the Cold War, which relates to national security.” In effect, the US is saying that imports of steel and aluminium from friends such as Europe, Japan, Mexico and Canada are a threat to national security, she says. “That is a ridiculous claim.”

Although the EU agrees that China’s worst trade practices – dumping subsidised goods on export markets and stealing intellectual property, to name but two – call for a response, it should not be of the kind the US is pursuing. It is “deeply worrying” that the US is taking so much unilateral action, she says. “We could be really strong if we did this together.”

Instead, it has become necessary for former friends to work around the US. In the same way that Japan led the revival of the TPPA last year, so the EU is now pursuing FTAs where previously it might not have bothered.

Such names as mozzarella, brie & cheddar are safe from EU regulation. Photo/Getty

Time to talk turkey

Malmström announced FTA negotiations with both Australia and New Zealand on her swing down under. “Frankly, it’s a bit strange that we don’t have a free-trade agreement with you. We should have had that a long time ago.”

The reason it’s never happened, however, is simple: New Zealand’s biggest exports are agricultural products, and European farmers have always fought hard to protect their home markets.

Although Malmström dismisses the inevitable tussle over market access for agricultural products as “nothing compared to what we have done before” in other FTA negotiations, the reality is that there has been no prospect of a great payback from a deal with New Zealand for the EU until now.

Two-way trade between New Zealand and EU countries ran to nearly $16 billion in the past year, and was weighted heavily in Europe’s favour at $10.7 billion.

However, it’s clear that before FTA negotiations conclude, New Zealand and the EU will need to work out a new carve-up of the long-standing quotas that govern how much dairy produce and sheep meat can go into the EU before tariffs are applied.

Those quotas date back to the 1970s, when Britain entered the EU’s precursor, the European Economic Community. Now that Britain is backing out, those deals have to be renegotiated for a post-Brexit world.

The EU is proposing it take 80% of the goods covered by the tariff rate quota system, leaving the UK to pick up the remaining 20%, but New Zealand has rejected that as against the country’s interests.

The ensuing arm-wrestle is typical of the unproductive downside of the Brexit decision, so does Brexit ever strike Malmström as a colossal waste of time?

“Maybe not the words ‘waste of time’,” she says. “But I think it is really sad. First of all because they are leaving us. But second, yes, it has turned out to be extremely complicated to negotiate the divorce.”

Although Europe must respect the outcome of the Brexit referendum, “it has become clear they [the UK] were not fully prepared for the Brexit vote to win. So it’s taking a lot of time.”

Of the EU’s decision to press ahead on an FTA with New Zealand, Malmström acknowledges a few of the 28 European countries worried it was a bridge too far. “There were some hesitations. Not against New Zealand per se, but because of these agricultural sensitivities.” That’s especially so because of other negotiations under way with major agricultural producers including “the superpowers of beef production” in Latin America.

All 28 EU member states are now committed to the FTA process, although whatever emerges will still require ratification by every country’s Parliament, including New Zealand’s.

Both sides know where the pitfalls are. For New Zealand, the protection of state-funded medicines supplier Pharmac will be a major issue, as it was in the TPPA saga. The two sides are some distance apart on how long patents should run before cheap generic drugs are allowed on the market.

However, Malmström says Europeans agree their citizens should have access to affordable medicines. There should be no replay of the ideological bust-up during TPPA negotiations, when US pharmaceutical companies insisted no ground should be given on the issue, a key sticking point in the lead-up to the US decison to abandon the deal.

Another bone of contention may be the European need to protect the names for foods they regard as brands but which New Zealanders see as merely descriptive. “Cheeses are usually the most complicated,” Malmström says.

However, fear not. Most of the names we’re used to will be untouched: mozzarella, brie, cheddar and other common cheese types are safe from EU regulation. The concern relates only to specific products linked to particular regions or methods of production – roquefort, for example.

“For most of the products we would want to have protected, I don’t think there will be a problem.”

If the big cheese of European trade says it’s so, then perhaps it’s safe to relax.

This article was first published in the July 7, 2018 issue of the New Zealand Listener.