SUBMISSION TO THE MINISTRY OF FOREIGN AFFAIRS AND TRADE – APRIL 2024

NEW ZEALAND-UAE COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT NEGOTIATIONS

• This submission is made on behalf of the New Zealand International Business Forum (NZIBF), whose members are listed at Annex A[1].  NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global economy. 

• NZIBF welcomes and supports the proposal to negotiate a comprehensive economic partnership agreement (CEPA) with the United Arab Emirates (UAE).  The CEPA would provide an ideal platform to expand New Zealand’s at present modest economic relationship with the UAE. It could also act as a springboard to the wider goal of a comprehensive FTA with the members of the Gulf Co-operation Council (GCC).

• As a leadership body, NZIBF leaves to sectoral groups the task of identifying specific issues in the negotiation.  This submission therefore comments on cross-sectoral or wider issues arising in the CEPA. 

Summary

• Reducing trade barriers with the UAE through the proposed CEPA and increasing awareness of commercial opportunities will generate new business  both bilaterally and potentially into the wider GCC market, which is where a greater prize can be achieved.

• There is potential to grow New Zealand exports in the dairy, red meat, seafood, horticulture, high value foods and agritech sectors, and likewise create new opportunities for UAE goods, services and investment in our market. It will be essential to include comprehensive tariff elimination outcomes, including for key areas of importance to New Zealand like dairy, meat, seafood and horticulture.  

• NZIBF believes that the goal of the CEPA should be a high-quality, ambitious and comprehensive agreement with a commitment to eliminate all barriers in all goods and services sectors within an expeditious deadline.

• The negotiating agenda should encompass all issues of relevance to both sides, including market access for goods and services and related provisions, investment, digital and paperless trade, competition policy, intellectual property, government procurement, labour and environment issues and additional elements around ensuring that trade is both sustainable and inclusive.  The right of governments to regulate for legitimate public policy reasons, and the ability of the New Zealand Government to meet the Crown’s obligations to Māori, must be preserved.  

• NZIBF recommends that the New Zealand Government pursue a substantive and advantageous outcome to the negotiations as quickly as possible, aiming towards a prompt conclusion to the negotiating process.

About the New Zealand International Business Forum

• NZIBF provides a voice to articulate the needs and priorities of New Zealand’s international business community, and in particular the importance of open markets, to the New Zealand Government and public stakeholders.  The NZIBF Board brings together leaders from amongst New Zealand’s largest internationally oriented companies and peak business organisations.   (A list of Board members is in Annex A.)

• Incorporated in May 2007, NZIBF works with companies, business organizations and government agencies to implement projects in the international trade and economic sphere, including working to develop New Zealand’s key international business relationships.[2]   NZIBF receives no direct government funding for its operating budget but from time to time receives funding for jointly-funded projects.  Funding is also provided in respect to the policy advice and support NZIBF provides to the New Zealand members of the APEC Business Advisory Council (ABAC). 

The case for transforming our UAE trade and economic relationship

• The UAE is a small, vigorous economy, with a GDP which reached USD 507 billion in 2022. Economic growth has varied but averaged 3.1 percent a year over the last decade[3]. It is a country of 9.6 million consumers and the population is projected to continue to grow steadily until at least 2050.[4] The UAE is a cosmopolitan market of 200 nationalities earning a per capital income of US$ 53,750 in 2022.

• New Zealand’s trade and economic relationship with the UAE is currently a modest one. In 2023 the UAE ranked as our 19^th  largest export market and our 27^th largest trading partner overall. Along with Saudi Arabia, this represents our most important relationship within the wider Gulf Co-operation Council (GCC). Two-way trade in goods and services amounted to $1.2 billion in the year ended December 2023.[5] Investment is also important to economic ties.

• In an increasingly protectionist world, the UAE stands out as an economy committed to engaging with new partners. By February 2024 it had signed ten new CEPAs, including agreements with India and Israel, and it has announced it intends to conclude a total of 26 agreements.[6]

• NZIBF is aware of the protracted and increasingly complex negotiations on a free trade agreement with the Gulf Cooperation Council. At this point it appears securing a high quality modern agreement that meets the needs of strategic sectors and matches our values will be a challenge which will take time.

• There are therefore both strategic as well as economic reasons for expanding the relationship with the UAE.  At a time of geostrategic and global trade uncertainty, the proposed CEPA can be seen as a good stepping stone toward a regional-level agreement while  providing New Zealand business with further options for trade and cross-border partnerships. 

Market Opportunities

• Constrained by challenging agro-climatic conditions, the UAE currently imports 85 percent of its entire food requirements, which presents opportunities for New Zealand’s productive capabilities. Improving nutrition is a vital part of UAE’s National Food Security Strategy 2051. The country aims to triple its food output, focusing on innovative and efficient solutions, employing technologies such as hydroponics, robotics and automation. At the same time, the UAE’s critical food security objectives and the significant challenges in has in meeting these objectives through increased domestic output will mean it continues to be heavily reliant on imports of high-quality agricultural product to meet its food demands.

• According to NZTE, the UAE consumes 12 percent more food each year[7]. Despite strong income growth and an enthusiasm for premium food and beverage products, however, New Zealand’s exports to the UAE have been fairly static since 2015.

• NZIBF believes that there should be scope to build the relationship with the UAE in ways that reflect the complementarities of our two economies, including the shared view that food production can be innovative, high value and sustainable. The UAE has a strong interest in environmental sustainability, evidenced by its hosting of COP28 in 2023 and bilateral AIM4Climate programme with the United States. A New Zealand – UAE CEPA could explore areas for cooperation regarding environmental objectives, such as climate change, biodiversity, and water quality.

• New Zealand has strengths as a supplier of innovative, high-quality sustainably-produced food and agricultural products such as dairy, sheepmeat, beef, horticulture and seafood.  New Zealand also has high-value niche manufacturing and services sectors which could support the UAE’s priorities, including agritech[8], software and digital goods and services, education, transport, logistics, business and professional services and specialised skills in environmental and technical agricultural services.

• UAE investors may be interested in specific opportunities in New Zealand’s property and infrastructure sectors and indeed investment flows have already found their way to some of those areas[9].  Enhanced capital flows, fostered through the CEPA, could potentially enhance New Zealand productivity and competitiveness. 

• An additional important goal for the CEPA would be to help to ensure that New Zealand exporters remain competitive with other third-country exporters into the UAE market – and vice versa. As noted above, in recent years, the UAE has negotiated and concluded ten new CEPAs with India, Israel, Turkey and South Korea all featuring. It is crucial that New Zealand secure at least parity with those trading partners in the UAE market.

Free Trade Agreement Prospects

• NZIBF continues to argue the case for high quality free trade agreements that will create lower market barriers and better export prospects for New Zealand businesses. In a study commissioned by NZIBF and undertaken by economic consultancy Sense Partners in 2021[10], a large number of possible markets which are not currently covered by FTAs were assessed in a comprehensive review of where this country might most profitably focus attention.[11]

• While the UAE was not assessed at the time of the study because of its membership of the GCC, where negotiations were already underway, a brief review by NZIBF and Sense Partners in March 2024 sees the UAE rank third on the illustrative list of desirable FTA candidates. UAE tariffs on key products like meat and dairy are lower and export sales considerably higher than the report’s other top ten FTA prospects

Positive factors include:

• the UAE population of almost 10 million
• Strong GDP per capita
• Ease of contract enforcement
• Sound existing bilateral trade relationship
• International trade is a significant driver of the UAE’s economic growth
• Economic complementarity:  UAE doesn’t have a comparative advantage in products like dairy and beef.
• Other relevant issues include:
• Fairly low tariffs, especially outside of agriculture, meaning the immediate gains from an FTA in terms of  improved market access will be modest
• Inward FDI is a modest component of GDP because the UAE is not particularly open to investment.

Specific issues in the negotiation

• NZIBF believes that the CEPA should be of high quality, ambitious and comprehensive, and should conform fully to Article XXIV (8) (b) of the WTO’s General Agreement on Tariffs and Trade, which stipulates that FTAs should cover “substantially all trade” of the participating countries. 

Goods

• Our main tariff-related concern is for the removed of the 5% tariff applied on New Zealand’s key food export items, which include dairy products, frozen sheepmeat and frozen beef, seafood, fruit and processed vegetables. The UAE is an important market for the red meat sector, ranking second in the region after Saudi Arabia and is a significant buyer of high value chilled beef.

• New Zealand’s food production standards and the nutritional value of our products in all these categories is world class. The fact that we are a counter-seasonal supplier to northern hemisphere sellers, and produce complementary agricultural products, supports both the UAE’s National Nutrition Strategy 2030 and also its National Food Security Strategy 2051. NZIBF notes that there are potential complementarities in working together to offer year-round supply, to grow brands and consumption, and to develop innovative and complementary approaches. New Zealand provides supply chain risk mitigation should northern hemisphere producers suffer from reduced stock numbers or crop yields due to climate variation. Furthermore New Zealand’s halal regulatory system is monitored to exacting standards by MPI, ensuring meat and meat products comply with the UAE’s strict requirements.

• NZIBF recommends that the negotiations should aim for the complete elimination of tariffs between the UAE and New Zealand, and complementary disciplines intended to ensure that only robust and at most minimally trade-restrictive non-tariff measures, designed to meet legitimate policy objectives, remain in place. 

• NZIBF supports the inclusion of ambitious trade-facilitating provisions associated with goods trade, including around rules of origin, regulatory coherence including mutual recognition of goods standards and conformity assessment.  

Services

• Seeking to lock in and liberalise commitments on services trade, via a “negative list” approach, has the potential to grow that important sector in key areas of interest to New Zealand exporters, including in global value chains, and to deepen regulatory coherence and cooperation on behind-the-border issues of concern to business.   In particular, reforming rules around skilled labour mobility/limitations on the temporary movement of business people, visa requirements, commercial presence, the recognition of qualifications and other complex regulatory requirements would enhance New Zealand services exports to the UAE.

 Digital and paperless trade

• NZIBF also encourages New Zealand to seek to negotiate a forward-looking, ambitious digital trade-friendly outcome in the FTA, including a high-quality outcome on electronic commerce, recognising the transformative power of the digital economy.  Such an outcome should include free cross-border data flows for business, subject to appropriate provisions to protect consumer privacy, enhance trust and promote cyber security, in such a way that those protections do not act as a disguised barrier to trade.

• NZIBF supports the adoption of high quality provisions aimed at delivering end-to-end, secure and trusted paperless trade.  Ideally these provisions should go beyond the language of exhortation, to deliver actual improvements in paperless trade practices, recognising equivalence between paper and data-driven systems and backed up by pilot projects aimed at proof of concept.   NZIBF recognises the complexity of such undertakings, including in our own domestic environment. NZIBF is making other representations to the New Zealand Government on this matter.

• Neither New Zealand nor UAE have adopted relevant provisions in the Model Law on Electronic Transferable Records (MLETR). A recent NZIBF discussion with the UN Commission on International Trade Law (UNCITRAL) leads us to understand that the UAE’s position is evolving . In the meantime NZIBF members report that UAE Customs continues to require paper documents and “wet signatures”. This is because Customs procedures are not managed at the federal level but by each of the seven individual UAE states.    

• The Abu Dhabi Global Market (ADGM) financial free zone enacted MLETR in 2021. Dubai International Financial Centre (DIFC), the other main free zone in the UAE passed a Digital Assets Law in late February 2024 that purports to enable the use of electronic transferable records. A recent pilot has seen  Abu Dhabi Customs starting to get electronic declarations generated from the information in the waybill.

Investment

• NZIBF is a longstanding strong supporter of foreign investment in New Zealand and of provisions in our trade agreements which provide appropriate protection for foreign investment (inward and outward), while also recognising the Government’s continuing right to regulate in the public interest.

• NZIBF recognises that the New Zealand Government opposes the inclusion of Investor-State Dispute Settlement (ISDS) in FTAs but continues to see value in these protections.

• In the context of a successful overall outcome for the CEPA, NZIBF would support the increase in investment screening thresholds for the UAE along the lines granted to other FTA partners.

Other issues

• NZIBF believes that the CEPA include provisions such as exist in other FTAs  to address good regulatory practice and regulatory coherence, competition policy, intellectual property protection, government procurement, trade remedies, labour and environmental issues.  The New Zealand Government should seek to ensure that the agreement does not impair the ability of the Crown to honour its obligations to Māori under the Treaty of Waitangi.  The general protections for governments to act to make and implement legitimate public policy should also be included.

• An appropriate focus should also be given to ensuring that trade is both inclusive and sustainable.  NZIBF believes that provisions should be included in the CEPA that would ensure that all can benefit from the gains from trade, including helping small and medium-sized enterprises, women, Māori and disadvantaged regions to participate more successfully in trade and global value chains; and that trade is environmentally and developmentally sustainable.

• The proposed CEPA could provide a useful opportunity to develop sustainability principles that do not impede trade. For instance, recognition that domestic production systems can vary and lead to sustainable outcomes without overly prescriptive approaches would set an important precedent for future trade agreements.

Priority issues for the UAE

• NZIBF recognises that issues of particular concern or priority for the UAE will be included in the negotiating agenda. 

Transparency  

• NZIBF supports an inclusive and consultative negotiating process and one which allows all stakeholders the opportunity to have their voices heard.  The negotiating process should be as transparent and maximally inclusive as the negotiation’s parameters and sensitivities of the negotiating partners allow.   

Recommendations to the Ministry of Foreign Affairs and Trade

• NZIBF recommends that the Ministry:

1. note the NZIBF’s support for the negotiation of a high-quality, ambitious and comprehensive CEPA between New Zealand and the UAE;
2. agree that the goal of the CEPA should be the comprehensive and expeditious elimination of all trade barriers in all goods and services sectors;
3. agree that the negotiating agenda should encompass all issues of relevance to both sides including market access for goods and services, non-tariff barriers to trade, investment, competition policy, intellectual property, electronic commerce, digital and paperless trade, government procurement, labour, environment and “inclusive trade” issues
4. continue to consult widely with stakeholders through an active communications and outreach programme aimed at deepening New Zealand business’ understanding of the opportunities presented by the CEPA negotiation; and
5. agree to seek to conclude these negotiations as soon as a substantive and mutually advantageous outcome is concluded

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[1] The views in this submission are those of NZIBF as a whole.  Individual members may have different views on specific issues covered in this submission.

[2] NZIBF is a successor organisation to the NZ Trade Liberalisation Network Inc which was established in 2001.

[3] World Bank data 2022

[4] World Bank data, 2022

[5] https://statisticsnz.shinyapps.io/trade_dashboard/

[6] https://www.thenationalnews.com/business/comment/2024/02/26/uaes-cepa-deals-at-odds-with-global-shift-towards-protectionism/

[7]https://assets.ctfassets.net/on0b3359khf9/6eImyVeXFHmpXPEs4vdOow/de59837c84ca0ddaca3c8accf71d55cf/Webinar_presentation_-_Agritech_in_the_UAE.pdf

[8]https://assets.ctfassets.net/on0b3359khf9/6eImyVeXFHmpXPEs4vdOow/de59837c84ca0ddaca3c8accf71d55cf/Webinar_presentation_-_Agritech_in_the_UAE.pdf

[9] https://www.nzherald.co.nz/business/abu-dhabi-wealth-fund-selling-out-of-precinct-properties-for-261m/6GLCJWUJSNGQLIDQ3ZD63NGHSM/

https://www.stuff.co.nz/business/133003895/spike-in-interest-in-kiwi-homes-from-united-arab-emirates–nz-sothebys

[10] WANTED! New Free Trade Agrement Partners, Sense Partners, 2021: https://www.tradeworks.org.nz/wanted-new-free-trade-agreement-partners/

[11] Neither the United States nor India were included in this exercise.