More beef with the European Union

Dr Oliver Hartwich
3 April, 2024

New Zealand has finally achieved a free trade agreement with the EU. It was years in the making. Keep that in mind when you are looking for New Zealand Feta cheese or New Zealand Prosecco in the future because we can no longer use those now-protected names.

But setting aside such minor annoyances, the new agreement has major benefits. It allows some New Zealand businesses to export more to Europe.

Nice, of course. And a good trade opportunity, sure. But the devil is in the detail. What the EU grants with one hand, it threatens to take away with the other.

The agreement was a hard-fought process, the result of lengthy negotiations and a complex ratification process. Signed in July 2023 and coming into force on May 1 2024, the agreement promises significant benefits to some parts of New Zealand’s economy – and more modest gains in others.

For beef exporters, it increases the tariff-free quota from a lean 800 tonnes to 3,333 tonnes at the establishment date, which will increase to 10,000 tonnes over a 10-year period. This could generate over NZ$600 million in additional annual export revenue within seven years.

But before celebrating, consider that the new quota, once mature, will account for less than 2 percent of New Zealand’s beef exports and less than 0.2 percent of total EU beef consumption a year. To put this into context, that’s equivalent to European diners eating one additional steak a year.

But just as some New Zealand farmers were about to celebrate these modest but welcome gains from this access to the lucrative EU market, Brussels unveiled a new deforestation regulation that threatens to undermine the process. The regulation, driven by the noble goal of combating global deforestation, requires exporters to show their products are “deforestation-free”.

On the surface, this regulation seems a laudable initiative. However, its flawed execution risks unfairly disadvantaging New Zealand producers.

The regulation’s focus on historical deforestation and its complex compliance measures could unintentionally catch out New Zealand beef farmers. Much of the land used for grazing was cleared decades ago but might still fall foul of the EU’s broad definition of deforestation.

This is particularly ironic given New Zealand’s strong commitment to sustainable land management and ongoing afforestation efforts through carbon farming initiatives. While the EU regulation aims to protect rainforests in countries such as Brazil, it fails to recognise the nuances of different countries’ land-use histories or current environmental policies.

Moreover, the regulation imposes significant bureaucratic burdens and compliance costs on exporters. Farmers must provide detailed information about their products, including geo-location data for all production sites and evidence of legal production along the entire supply chain.

Of course, many farmers document all sorts of things already, but in the future, they will also need to document that none of their land had previously been a forest.

These requirements are onerous, especially for smaller producers, and could negate the trade agreement’s benefits by creating new non-tariff barriers to trade.

Inconsistencies in the EU’s approach become even more apparent when the case of Brazil is considered. Believe it or not, despite its history of significant Amazon deforestation linked to cattle ranching, Brazil may be better positioned to comply with the EU’s regulation. It already has schemes that trace supply chains and document certifications that New Zealand does not yet have.

By failing to account for the specific circumstances of different countries, the deforestation regulation risks penalising sustainable producers such as New Zealand while potentially giving a free pass to those with a more chequered environmental record.

To be clear, addressing global deforestation is important and deserves attention. Though the planet as a whole may have become greener in recent decades – as writers such as Matt Ridley repeatedly assert – there are certainly forests, particularly rainforests, that require protection.

The EU’s leadership in promoting sustainable trade practices is thus commendable in principle. Its efforts to tackle deforestation through supply chain regulations are well-intentioned. For a change, this regulation is not primarily aimed at blocking imports into the EU.

However, the EU’s current approach falls short of achieving its goals while risking significant unintended consequences for responsible trading partners such as New Zealand.

Rather than imposing blanket regulations that risk undermining our trade agreement, the EU should recognise New Zealand’s strong environmental record and ongoing afforestation efforts. It should work with New Zealand authorities to find practical ways of verifying the sustainability of beef production without imposing excessive compliance burdens.

In any case, it is particularly ironic when, in New Zealand, it is nowadays seen as a policy problem that paddocks are turning into forests.

To solve these problems, it would take goodwill on the part of the EU. Ultimately, it is in the EU’s interests to engage with its trade partners. It would leave a sour taste if the hard-fought benefits of trade agreements were to be immediately undone by unintended consequences of other regulations.

The EU must live up to the spirit of the trade agreement it has just signed with New Zealand and remove the hurdles to New Zealand farmers that will result from its ill-advised and poorly implemented deforestation rules.

The NZ-EU free trade agreement was a landmark achievement resulting from years of hard work and compromise on both sides. It would be a travesty if its benefits were undermined by a well-intentioned but flawed regulation that fails to account for the realities of sustainable producers such as New Zealand.

In a world fracturing in the face of geopolitical divisions, the European Union and New Zealand need mates. After the pettiness of banning New Zealand-made Feta and Prosecco, the imposition of an onerous certification regime is another irritation this relationship does not need.

We can only hope someone in Brussels listens to these concerns before they come into force at the end of the year.

Stay in the loop: Subscribe to updates