It’s been a long time coming! In July, New Zealand signed a free trade agreement (FTA) with the European Union.
Good news for manufacturers too.
New Zealand’s exports of goods to its fourth largest trading partner were worth NZD4.68b in 2022. These goods included many manufactured products – machinery, medical appliances, food products, plastics, aluminium and others.
More than 91% of New Zealand’s trade into the EU will enter duty-free when the FTA comes into force (expected to be in the first half of 2024). Many goods, including some manufactured products, will have no tariffs at all from this date.
This means many millions of dollars of tariff savings each year on exports to the EU. After seven years, when the agreement is fully in place, 97% of current trade will enter the EU duty-free.
How the new FTA promotes sustainability
The FTA will make trade more sustainable and create opportunities for businesses that deliver more sustainable products.
The agreement is the first FTA built around the EU’s ’Together for Green and Just Growth’ approach to trade and sustainable development. It contains ambitious sustainable trade outcomes in many areas.
Environmental outcomes include addressing climate change and subsidies on fossil fuel. Social outcomes include promoting labour rights and women’s economic empowerment.
The upside for manufacturers – and some warnings
The FTA will have a big impact on trade between New Zealand and the EU. The potential upside for local manufacturers is significant: easier access to one of the world’s most lucrative trading blocs; lower costs for materials imported from the EU.
However, the FTA comes with warnings too. Firstly, local manufacturers will be competing with EU manufacturers who may have been making their products more sustainable for some years.
As customers here and in the EU prioritise ‘responsible purchasing’, make sure you’re prioritising ‘responsible manufacturing’. Ask yourself these questions. Are we sourcing our materials, and designing, making and transporting our products with people and the planet front-of-mind? Do our customers use our products and dispose of them in socially and environmentally sustainable ways?
Secondly, the agreement includes commitments to sustainability and sanctions to enforce them. It’s too early to say what these sanctions will look like, but let’s see how the FTA promotes sustainability and how businesses can prepare.
Provisions relevant to manufacturers
The agreement promotes sustainability by:
- making climate commitments and labour standards enforceable
- fostering gender equality
- progressively reducing fossil fuel subsidies in line with the EU’s Green Deal
- introducing zero tariffs on environmental goods and services, such as energy-efficient products
- promoting biodiversity, sustainable forestry and sustainable fishing
- supporting a circular economy that uses resources efficiently and supply chains that avoid deforestation.
You need to prepare your business
If you have a sustainability programme in place, press on (and speed up!) If you’ve not yet started, here are three areas to focus on.
- Measure and reduce your carbon emissions
Both parties to the FTA agreed to ‘refrain from any action that materially defeats the object and purpose of the Paris Agreement’.
To meet this goal, CO2 emissions must fall by 50% by 2030 (from 2010 levels) and reach net zero by 2050. To stay competitive, you need to measure your greenhouse gas emissions and follow a plan to cut them. Our articles in September and October will help you do this.
To prove you’re on the right track, consider setting a science-based target that will reduce your emissions to net zero by 2050 and/or join other New Zealand businesses in the Climate Leaders Coalition.
- Procure responsibly
Review your supply chain and identify any risks of modern slavery. The government plans to introduce legislation that will require large organisations (over $20 million in revenue) to be open about their supply chains in a public register.
If your revenue is below this threshold, publishing a modern slavery statement is still a good idea. EU and other customers are likely to ask you for it.
- Investigate circular economy
A circular economy reduces waste and consumes fewer non-renewable resources. It promotes economic growth by designing and manufacturing long-lasting products that customers can reuse, repurpose, remanufacture, recycle or reintroduce to the environment.
Consider the design of your product. Are we keeping materials in use? Is our product made to last? Is it easy for customers to reuse our product or get it fixed? Keep the EU’s possible ‘right to repair’ consumer legislation in mind.
Think about your packaging too. Can our customers (or someone else) reuse it or recycle it? How much recycled content does it contain?
Calculate your ‘circularity’ with the Ellen MacArthur Foundation’s Material Circularity Indicator (MCI) or the Circular Transition Indicator tool (CTI). They’ll help you understand where you can improve and communicate what you’re doing to become more circular.
Trade’s going more sustainable. Don’t miss the boat!