Russia willing to re-start NZ free-trade talks frozen over Crimea conflict

Wednesday 29th March 2017

Russia is willing to restart free trade talks with New Zealand that were halted after the annexation of the Crimean peninsula, but Trade Minister Todd McClay says it is too soon to resume negotiations with the world's 12th-biggest economy.

Last week Prime Minister Bill English released New Zealand's refreshed trade strategy, which seeks to have 90 percent of goods exports covered by a free trade agreement within 13 years, and cited potentially concluding free trade talks with Russia and its Customs Union partners among initiatives to meet that target.

In 2014, New Zealand suspended free trade negotiations with Russia and its customs union partners Belarus and Kazakhstan over the conflict in the Crimean peninsula, having almost finalised a free trade agreement after four years of talks. Former Prime Minister John Key last year told Russian president Vladimir Putin at the Apec meeting in Lima, Peru that New Zealand was willing to resume trade talks, but only on a timetable allowed by European nations' attitude to the Ukraine conflict.

"The reference to Russia as a 'potential agreement' under the ‘existing agenda of FTA negotiations to complete’ reflects the fact FTA negotiations with Russia and its customs union partners have been suspended since 2014," McClay said in an emailed statement. "Any future decision to re-open negotiations would have to take account of a range of factors."

He later told TVNZ's Q&A programme that New Zealand wouldn't pursue a deal while US and European Union sanctions remain in place, especially given Europe's uneasiness about Russia's expansionist foreign policy. But he hinted at a thaw at some stage, saying "we keep in touch with the Russian government".

Russian Embassy press secretary Artur Zakaev said while there hasn't been any official re-engagement on FTA talks, Russia is ready to address the "few details that remained unsolved".

"In case the approach of the New Zealand authorities to FTA changes, Russia along with the Eurasian Economic Union will be ready to renew the negotiations," Zakaev said. "But for this moment, unfortunately, we have not received any official signals on possible revision by Wellington of its decision in this regard."

Two-way trade between New Zealand and Russia dropped sharply in the wake of international sanctions and FTA talks stalled. In the June 2014 year, New Zealand exports to Russia were worth $235.4 million while imports from Russia were $848.4 million. Two years later exports had slumped to $133.6 million and imports had dropped to $280.2 million.

New Zealand exports butter and dairy spreads, mutton and lamb, and malt extract to Russia, and imports crude oil, potassium fertilisers and copper.

Two-way investment has also shrunk over that period. In the March 2014 year, New Zealand's total investment into Russia was $117 million and Russia's into New Zealand was $44 million. By 2016 that had dropped to $58 million from New Zealand and nothing from Russia.

Reserve Bank and Treasury officials have become increasingly wary of the growing tide of trade protectionism, especially from Western developed economies, and RBNZ governor Graeme Wheeler sees the threat of a trade war between the US and China as the biggest unknown for the economy.

While that goes on in the West, China has adopted a more forthright approach in supporting trade, most recently during Premier Li Keqiang's tour of Australia and New Zealand, and Treasury secretary Gabriel Makhlouf has urged policymakers to latch on to the growing appetite for free trade across Asia.

Comments from our readers

No comments yet