COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Recommendation for a Council Decision authorising the opening of negotiations for a Free Trade Agreement with Australia
Date: 2017-09-13
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: Australia, European Commission, free-trade agreement, negotiation of an agreement (EU), powers of the institutions (EU), trade agreement (EU)

EUROPEAN 
COMMISSION 

Brussels, 13.9.2017  
SWD(2017) 293 final 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying the document 

Recommendation for a Council Decision 

authorising the opening of negotiations for a Free Trade Agreement with Australia 

{COM(2017) 472} 
{SWD(2017) 292} 

EN 

   EN 

 
 
 
 
  
 
 
 
TABLE OF CONTENTS 

INTRODUCTION ...................................................................................................................... 4 

1. WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? ............................................ 6 

1.1. What is the issue that may require an action, what is the size of the problem ................ 6 

1.2. What are the drivers of the problem? .............................................................................. 9 

1.3. Problem tree ................................................................................................................... 10 

1.4. How would the problem evolve, all things being equal? .............................................. 11 

1.5. Has any fitness check/retrospective evaluation been carried out of the existing policy 
framework? What was concluded from the evaluation / fitness check? ............................... 11 

2. WHY SHOULD THE EU ACT? ......................................................................................... 11 

3. WHAT SHOULD BE ACHIEVED? ................................................................................... 12 

3.1. General objectives ......................................................................................................... 12 

3.2. Specific objectives ......................................................................................................... 13 

3.3. Consistency of the objectives of this initiative with other EU policies ......................... 13 

4. WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES? ............... 14 

A) No EU policy change (baseline scenario) ....................................................................... 15 

B) Options of improving implementation and enforcement ................................................. 15 

C) Modern and comprehensive EU-Australia and EU-New Zealand free trade agreements 
scenario ................................................................................................................................. 16 

5. WHAT ARE THE IMPACTS OF THE DIFFERENT POLICY OPTIONS AND WHO 
WILL BE AFFECTED? ........................................................................................................... 18 

5.1. Model and assumptions ................................................................................................. 18 

5.2. Policy option A: the baseline scenario .......................................................................... 20 

5.3. Policy Option C: comprehensive FTAs with Australia and New Zealand, respectively – 
overall economic impact ....................................................................................................... 21 

5.4. Policy Option C: comprehensive FTAs with Australia and New Zealand, respectively – 
impact on sectoral competitiveness ...................................................................................... 22 

5.5. Impact on SMEs ............................................................................................................ 30 

5.6. Impact on Third Countries, in particular Least Developed Countries (LDCs) ............. 31 

5.7. Environmental impact .................................................................................................... 32 

5.8. Social impact ................................................................................................................. 34 

5.9. Impact on consumers ..................................................................................................... 37 
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5.10. Impact on human rights ............................................................................................... 38 

5.11. Governance impact ...................................................................................................... 43 

5.12. Administrative impact ................................................................................................. 44 

5.13. Assessment of administrative capacity of Australian and New Zealand customs to 
implement the agreement (notably on application of rules of origin) .................................. 44 

5.14. Impact on the budget of the European Union .............................................................. 45 

6. HOW DO THE OPTIONS COMPARE? ............................................................................. 45 

6.1. Positive and negative effects of the policy options ....................................................... 45 

6.2. Summary table of the effects of the different policy options ........................................ 46 

6.3. Identification of a preferred policy option ..................................................................... 47 

7. HOW WOULD ACTUAL IMPACTS BE MONITORED AND EVALUATED? ............. 48 

7.1. Operational objectives ................................................................................................... 48 

7.2. Future monitoring and evaluation .................................................................................. 49 

Annex 1 - Procedural information ............................................................................................ 52 

Annex 2 - Stakeholder consultations ........................................................................................ 55 

Annex 3 - Who is affected by the initiative and how? ............................................................. 68 

Annex 4 - Analytical models used in preparing the Impact Assessment ................................. 70 

Annex 5 - External study .......................................................................................................... 82 

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INTRODUCTION 

The  Commission  services  conducted  this  Impact  Assessment,  supported  by  an  external 
independent  study  carried  out  by  LSE  Enterprise  and  an  online  public  consultation,  in 
preparation  of  Commission  decisions  to  request  authorisations  from  the  Council  to  launch 
negotiations for free trade agreements (FTAs) with Australia and New Zealand, respectively. 

The aim of this Impact Assessment is to assess the EU-Australia and EU-New Zealand trade 
and  investment  relationship,  identify  problems  and  corresponding  options  on  the  further 
developments of these relations and assess the impact of these options.  

Once  the  negotiating  directives are  approved  by  the  Council  and  negotiations  are  underway 
more  detailed  analysis  will  be  undertaken  in  the  framework  of  Sustainability  Impact 
Assessments  (SIAs),  which  will  be  conducted  for  each  FTA.  SIAs,  using  quantitative  and 
qualitative  approaches  complement  the  Impact  Assessments  by  conducting  a  more  in-depth 
analysis  of  the  likely  impacts  of  the  future  agreement  on  the  three  pillars  of  sustainable 
development  and  on  human  rights.  They  also  include  wide-ranging,  continuous  stakeholder 
consultation. SIAs are carried out by external consultants. The findings of the SIAs will feed 
into the negotiation process to help steer the negotiations and provide recommendations and 
propose flanking measures to maximise the benefits of the agreement and prevent or minimise 
any potential negative impacts. 

Overview of the current EU-Australia and EU-New Zealand relations 

The  EU  has  very  good  political  relations  with  Australia  and  New  Zealand  based  on  shared 
values  of  democracy  and  human  rights.  The  EU  has  well-developed  trade  and  investment 
relations with Australia and New Zealand, sharing many view points on trade policy and the 
working  of  the  multilateral  trade  system.  However,  while  Australia  and  New  Zealand  have 
concluded  numerous  FTAs,  the  EU  does  not  have  preferential  bilateral  trade  arrangements 
with  either  of  them.  This  leaves  the  EU’s  economic  operators  with  comparably  less 
favourable conditions to access these markets. 

Australia and New Zealand are among the fastest-growing developed economies. According 
to World Bank data Australia's GDP in 2015 was US$1,340 billion, its GDP growth rate 2.3% 
and per capita GDP US$56,328; New Zealand's GDP in 2015 was US$174 billion, its growth 
rate 3.4% and per capita GDP US$37,808.  

EU-Australia bilateral trade and investment relations 

The  EU  is  one  of  Australia's  biggest  trade  and  investment  partners.  The  bilateral  trade  in 
goods was worth €45.5 billion (2016),  trade in services was worth €29.3 billion  (2015) and 
EU foreign direct investment (FDI) stock in Australia was worth €145.8 billion (2015), while 
Australian  FDI  stock  in  the  EU  was  worth  €25.1  billion  (2015).  Australia  is  the  EU’s  15th 
largest export market for goods while the EU is the largest foreign direct investor in Australia. 

EU-Australia trade relations are governed by the World Trade Organisation (WTO) rules. In 
addition, the EU and Australia have bilateral agreements on mutual recognition in relation to 
conformity assessment, certificates and markings as well as on trade in wine. 

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The Joint Statement of 22 April 20151 by the EU's High Representative for Foreign Affairs 
and  Security  Policy  and  Vice-President  of  the  Commission  and  the  Australian  Foreign 
Minister  highlighted  the  need  to  further  strengthen  the  bilateral  trade  and  investment 
relationship. This was followed by a Joint Statement of 15 November 20152 by the leaders of 
the EU and Australia, who agreed to commence work toward the launch of negotiations for an 
FTA.  

EU-New Zealand bilateral trade and investment relations 

The EU is one of New Zealand’s biggest trade partners and its second largest investor. The 
bilateral trade in goods was worth €8.1 billion (2016), trade in services was worth €4.3 billion 
(2015) and EU FDI stock in New Zealand was worth €9.8 billion (2015), while New Zealand 
FDI stock in the EU was worth €4.5 billion (2015).  

EU-New Zealand trade relations are governed by the World Trade Organisation (WTO) rules. 
In  addition,  the  EU  and  New  Zealand  have  bilateral  agreements  on  mutual  recognition  in 
relation to conformity assessment and on sanitary measures applicable to trade in live animals 
and animal products. 
In  a  joint  statement  of  25  March  2014,3  the  leaders  of  the  EU  and  New  Zealand  set  out 
objectives  for  deepening  the  partnership.  This  included  a  reflection  process  on  enhancing 
trade  and  investment  relations.  This  was  followed  up  by  another  Joint  Statement  of  29 
October 20154 in which the leaders of the EU and New Zealand committed to start the process 
for negotiating an FTA. 

Trade policy developments 

Both  Australia  and  New  Zealand  have  an  active  trade  agenda  and  concluded  FTAs  with 
several  partners  including  China,  South  Korea,  and  all  countries  from  the  Association  of 
Southeast Asian Nations (ASEAN). Both Australia and New Zealand participate in the Trans-
Pacific  Partnership  (TPP)  and  are  engaged  in  the  Regional  Comprehensive  Economic 
Partnership  (RCEP)  and  other  bilateral  negotiations  such  as  with  India.  These  agreements 
provide  preferential  access  for  goods,  services  and  investment  originating  from  these 
countries to Australia and New Zealand. From the Australian and New Zealand perspective, 
the  EU,  their  biggest  trade  and  investment  partner,  is  a  "missing  link",  as  there  is  no  FTA 
between both sides. 

Despite their specificities, Australia and New Zealand remain similar countries. Australia and 
New Zealand have a highly developed Trans-Tasman Single Market covering trade in goods, 
services,  government  procurement,  mutual  recognition  arrangements,  etc.  This  close 
cooperation  and  shared  cultural,  legal  and  political  heritage  results  in  similar  regulatory 
environments.  Patterns  of  EU  exports  to  Australia  and  New  Zealand  are  very  similar.  To  a 
large  extent,  so  are  the  problems  encountered  by  EU  stakeholders.  The  structures  of  EU 
imports  of  goods  from  Australia  and  New  Zealand  are  different  reflecting  the  predominant 
export  oriented  economic  activities  of  each  country:  mining,  natural  resources  for  Australia 
and agriculture (sheepmeat, and fruits and vegetables) for New Zealand. 

Bilateral political relations  

1 http://eeas.europa.eu/statements-eeas/2015/150422_04_en.htm 
2 http://europa.eu/rapid/press-release_STATEMENT-15-6088_en.htm 
3 http://europa.eu/rapid/press-release_STATEMENT-14-83_en.htm 
4 http://europa.eu/rapid/press-release_STATEMENT-15-5947_en.htm?locale=en 

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In  2015,  the  EU  concluded  negotiations  for  framework  agreements  with  Australia  and  New 
Zealand  respectively.  The  EU-New  Zealand  Partnership  Agreement  on  Relations  and 
Cooperation  (PARC)  was  signed  on  5  October  2016  and  the  process  for  signature  of  the 
Framework  Agreement  with  Australia  is  under  way.  These  political  agreements  provide  a 
comprehensive  policy framework of the bilateral relations with Australia and New Zealand, 
respectively.  They  also  contain  some  trade  and  investment  provisions,  which  are  of  a  non-
preferential  nature,  i.e.  they  do  not  contain  specific  (preferential)  market  access  provisions 
(such  as  elimination  or  lowering  of  import  tariffs  or  removal  on  non-tariff  barriers),  or 
specific trade rules or regulatory issues.  

While trade and investment remain one of the cornerstones of the EU's bilateral relations with 
Australia and New Zealand, the bilateral trade and investment frameworks with Australia and 
New Zealand are not as advanced as cooperation in the political and sectoral fields.  

Political level contacts with both countries made it apparent that it is politically not feasible to 
foresee negotiations for comprehensive trade and investment arrangements with one of them 
only.  The  Commission  took  the  political  decision  to  move  towards  launching  negotiations 
with  both  countries  in  parallel.  The  Commission  Communication  'Trade  for  All'  set  out  the 
intention  to  prepare  the  agreements  with  both  Australia  and  New  Zealand  in  parallel.  The 
Inception Impact Assessment5 (IIA) followed this approach, which was not questioned in the 
comments  received  on  the  IIA.  Taking  into  account  both,  the  similar  nature  of  the  two 
countries,  and  the  calendar  of  our  engagement  with  them,  the  Impact  Assessment  was 
conducted  together.  This  facilitated  and  created  synergies  during  the  public  consultation. 
Combining  the  two  countries  in  one  single  Impact  Assessment  also  allows  to  measure  the 
combined  impact  (e.g.  on  the  sensitive  beef  and  dairy  sectors)  with  a  view  to  taking  the 
appropriate decision. 

1. WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? 

1.1. What is the issue that may require an action, what is the size of the problem 

What are the general issues at stake? 
The  'Trade  for  All'6  Communication  of  the  Commission  has  three  key  general  policy 
messages  that  are  also  applicable  to  the  trade and  investment  relationships  the  EU  has  with 
Australia and New Zealand. EU trade policy needs to be:  

• 

• 

effective:  trade  needs  to  actually  deliver  on  its  promise  of  new  economic 
opportunities.  That  means  addressing  the  issues  that  affect  today's  economy.  It  also 
means  providing  the  means  and  information  necessary  to  ensure  SMEs,  consumers 
and  workers  can  take  full  advantage  of  -  and  adapt  to  -  more  open  markets.  It  also 
means improving implementation and enforcement of our trade rights. 

transparent: opening up negotiations to more public scrutiny by publishing negotiating 
directives and key negotiating texts from negotiations.  

5 The IIA was posted on the Commission websites in February 2016. http://ec.europa.eu/smart-
regulation/roadmaps/docs/2015_trade_040_aus_nz_trade_agreement_en.pdf   
6 http://ec.europa.eu/trade/policy/in-focus/new-trade-strategy/  

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• 

based  on  values:  first  of  all,  this  means  safeguarding  the  European  social  and 
regulatory  model  at  home.  It  also  calls  for  using  trade  agreements  and  preference 
programmes as levers to promote, around the world, European values like sustainable 
development, human rights, fair and ethical trade and the fight against corruption. The 
EU  also  leads  a  reform  of  investment  policy  globally  which  is  taking  into  account 
these non-economic values of societies. 

As  highlighted  in  the  'Trade  for  All'  an  ambitious  programme  of  multilateral  and  bilateral 
negotiations is needed to deliver the full potential from trade. The initiative aiming at opening 
of  FTAs  negotiations  with  Australia  and  New  Zealand  is  anchored  among  the  concrete 
initiatives listed in 'Trade for All'. 

What are the specific problems? 

The cumulative impact of the FTAs concluded by Australia and New Zealand with other non-
EU  countries  means  that  EU  economic  operators  face  comparably  less  favourable 
conditions to access the Australian and New Zealand markets. Even though Australia and 
New  Zealand  have  a  low  level  of  applied  import  duties,  there  are  some  products  that  are 
subject to relatively high tariffs levied by either of the countries. The following concrete cases 
should be highlighted in particular: 

•  As a result of FTAs between Australia and in particular the US, Japan, South Korea 
and China, in practice it is only the EU that has to pay import duties to import its cars 
to  Australia.  The  situation  will  be  similar  in  New  Zealand's  case  when  the  TPP  or 
other  bilateral  FTAs  would  enter  into  force.  EU  automotive  exports  are  the  most 
significant  export  items;  EU  exports  of  automotive  products  including  cars  to 
Australia amounted to €5.7 billion (18% of total EU exports to Australia) and to New 
Zealand €0.4 billion (15% of total EU exports to New Zealand) 

•  There  are  relatively  high  tariffs  in  Australia  and  New  Zealand  for  processed 
agricultural and food products, which is an area where the EU is globally competitive. 
For  example  tariff  peaks  of  applied  most-favoured  nation  (MFN)  duties  that  are 
applicable to EU exports for certain dairy products reach 16% in Australia and 5% in 
New  Zealand.  Final  bound  duty  rates,  which  Australia  and  New  Zealand  could  use 
under WTO rules, are even higher. 

EU  companies  are  the  biggest  source  of  FDI  in  Australia  and  the  second  largest  in  New 
Zealand. Only five EU Member States7 have bilateral investment protection agreements with 
Australia, while no Member State has any similar agreement with New Zealand. EU investors 
are  subject  to  different  treatment  depending  on  which  Member  States  they  originate  in  in 
Australia.  EU  investors  are  in  a  less  favourable  position  compared  to  investors  from 
countries  which  Australia  and  New  Zealand  have  included  investment  protection  in  their 
FTAs  or  bilateral  investment  protection  agreements.  EU  investors  face  stricter  screening 
thresholds than investors from other countries (e.g. the US, China, Japan and Korea) that have 
already concluded FTAs with Australia or New Zealand. Furthermore, the existing BITs that 
EU  Member  States  have  with  Australia  include  outdated  investor-state  dispute  settlement 
mechanisms, that no longer are in line with the EU's new approach to investment policyes as 
set out in the 'Trade for All'.  

7 These EU Member States are: Czech Republic, Hungary, Lithuania, Poland, and Romania. All five BITs with 
Australia include an old-style investor-to-state dispute settlement mechanism. 

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The existing sectoral agreements address some limited sector-specific issues:  

•  conformity assessment for both Australia and New Zealand (these mutual recognition 

agreements(MRAs) cover a limited number of industrial sectors);  
trade in wine in the case of Australia; and 
trade in animal products in the case of New Zealand.  

• 
• 

The limited scope of the current agreements, which address non-tariff measures only within 
their respective scope, and the absence of tariff liberalisation as well as any further opening of 
service  and  public  procurement  markets  create  unnecessary  burdens  and  additional  costs 
for EU businesses, including small and medium sized enterprises (SMEs), and an unfulfilled 
potential for trade in goods and services.  

Non-tariff market access barriers EU business face in both markets include:  

•  Australian biosecurity measures impede exports of European products such as pork 
and  poultry  products  by  placing  onerous  or  costly  sanitary  and  phytosanitary  (SPS) 
requirements on exporters and exporting country authorities. New Zealand plant health 
measures impede some exports from the EU. 

•  Some  technical  regulations,  conformity  assessment  procedures  and  standards  in 
Australia and New Zealand result in an unnecessary burden and cost to EU businesses 
in cases where standards are not recognised or fully aligned (e.g. motor vehicles, olive 
oil). 

•  Some  impediments  remain  to  further  accessing  the  government  procurement 
markets as some local content requirement or price preference polices are in place in 
Australia.  Australia  is  in  the  process  of  joining  the  WTO  Government  Procurement 
Agreement  (GPA),  but  its  current  legislative  framework  does  not  cover  some  public 
utilities.  Large  infrastructural  developments  in  Australia  (such  as  those  linked  to 
mining and transport) and in New Zealand (such as those linked to the Christchurch 
earthquake  rebuilding)  would  provide  important  new  opportunities  for  European 
companies. New Zealand has joined the WTO GPA, but its market opening does not 
cover sub-central entities.  

•  There  is  insufficient  protection  or  enforcement  of  intellectual  property  rights 
(IPR),  such  as  copyrights,  trademarks  and  designs  (e.g.  inadequate  customs 
enforcement of IPR at the border, replica furniture in Australia, and a shorter period of 
copyright protection afforded to works in New Zealand than in the EU). There is also 
insufficient  protection  for  geographical  indications  (GIs)  in  particular  of  EU 
foodstuffs, such as cheeses in Australia and New Zealand. EU products with GIs are 
confronted with imitations and face unfair competition in Australia and New Zealand. 

The  limited  scope  of  existing  agreements  also  means  that  the  EU's  overarching  trade 
related objectives cannot be achieved with respect to Australia and New Zealand. This is 
due  to  the  lack  of  relevant  substantial  bilateral  enforceable  rules,  and  the  lack  of  general 
enforcement mechanism in the bilateral trade and investment frameworks. These overarching 
objectives  include  trade  and  sustainable  development  and  promotion  of  EU  values  and 
standards (such as labour rights and environmental, health, consumer protection, and business 
and human rights,) and facilitating trade and investment for SMEs. 

Stakeholders  in  general,  in  their  responses  to  the  public  consultation,  noted  the  existing 
market  access  obstacles  as  problems,  in  particular  existing  tariff  barriers,  sanitary  and 
phytosanitary  (SPS)  and  other  non-tariff  measures,  inadequate  protection  of  IPR  including 

8 

 
 
geographical indications, obstacles to government procurement, investment protection and the 
need  for  further  regulatory  cooperation.  The  non-profit  sector  stakeholders  in  addition 
highlighted the importance of further strengthening social, environmental and other standards, 
such as animal welfare standards, to bring these to the highest level. 

1.2. What are the drivers of the problem? 

Some  of  the  drivers  are  related  to  specific  problems  the  EU  faces  with  Australia  and  New 
Zealand, while others are more general in nature, but apply to the specific context of the EU 
trade and investment relations with Australia and New Zealand. 

Problem drivers relating to specific problems:  

•  While both Australia and New Zealand generally apply low import tariffs, there are 
tariff  peaks  in  particular  in  the  transport  equipment,  chemical,  electrical  machinery, 
textile  and  clothing,  and  food  sectors.  Furthermore,  both  countries  could  increase 
applied tariffs to their considerably higher bound levels under WTO rules. There are 
no bilateral agreements providing preferential (better than MFN) market access to EU 
goods. 

•  Due  to  Australia's  and  New  Zealand's  FTAs  with  other  partners,  goods  from  other 
countries such as the US, China, Japan, South Korea do not or will not face such 
tariffs. 

•  Bilateral  MRAs8  do  not  cover  all  key  sectors  or  need  complementary  measures  to 
reflect  the  latest  EU  regulatory  developments  to  bring  their  full  benefits  to  EU 
companies. 

•  Australia  has  a  strict  and  different  SPS  regime.  Australia  had  been  criticised  for 
being unduly stringent and protectionist on, for example, market access for pork.  

•  The EU-New Zealand Agreement on sanitary measures in live animals and animal 
products was updated in 20159 to boost existing trade relations in products of animal 
origin. However the agreement does not cover plant health issues therefore does not 
facilitate trade in products of plant origin. 

•  Different  approaches  to  the  protection  of  IPR,  in  particular  geographical 
indications in Australia and New Zealand compared to the EU leads to insufficient 
protection  of  EU  GIs,  including  in  particular  for  foodstuffs,  in  Australia  and  New 
Zealand 

•  The EU-Australia wine agreement,10 which protects wine GIs, recognition of wine-
making technologies and terms used on labels, does not yet include all wine GIs that 
the  EU  aims  to  protect.  Its  scope  is  also  limited  (i.e.  does  not  cover  spirits  or 
foodstuffs). 

8 covering, electromagnetic compatibility (EMC), low voltage equipment, machinery, medical devices, pressure 
equipment,  telecommunication  terminal  equipment  (TTE)  and  Good  Manufacturing  Practise  (GMP)  Inspection  and 
Batch  Certification  for  medicinal  products.  In  the  case  of  Australia,  the  MRA  also  covers  automotive  products. 
Further  information:  https://ec.europa.eu/growth/single-market/goods/international-aspects/mutual-recognition-
agreements_en  
9 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOL_2015_175_R_0009 
10 https://ec.europa.eu/agriculture/wine/third-countries_en#australia  

9 

 
 
 
                                                            
•  There are some remaining sectoral restrictions to accessing markets for services in 
Australia (e.g. postal and express delivery, distribution and professional services) and 
New Zealand (e.g. distribution services, telecommunication).  

•  New Zealand's membership of and Australia current application process to join the of 
the  Government  Procurement  Agreement  (GPA)  do  not  ensure  the  best  possible 
access  to  the  public  procurement  markets  in  Australia  and  New  Zealand  for  EU 
businesses.  

•  Due  to  higher  investment  screening  thresholds,  investors  from  other  countries  that 
have already concluded FTAs with Australia and New Zealand face fewer barriers to 
investment.  

•  There  is  no  modern,  investment  protection  for  all  EU  investors.  Only  five  EU 
Member States have bilateral investment treaties in place with Australia and there is 
none  between  any  EU  Member  State  and  New  Zealand.  Furthermore,  the  existing 
BITs  that  EU  Member  States  have  with  Australia  include  investor-state  dispute 
settlement mechanisms, which are not in line with current EU approach.  

Problem drivers relating to general issues:  

•  There  are  no  bilateral  binding  enforcement  mechanisms  to  address  effectively 

barriers to EU trade and investment in Australia and New Zealand. 

•  There is no mechanism to address new trade issues such as digital trade bilaterally.  

•  There  is  no  dedicated  binding  bilateral  mechanism  to  facilitate  trade  and 

investment for SMEs. 

•  The  political  framework  agreements  or  the  sectoral  agreements  provide  no  binding 

bilateral mechanisms for trade and sustainable development issues.  

The above list of problem drivers is derived from the stakeholders' responses to the public 
consultation  complemented by the expertise of the Commission through working on market 
access  issues  raised  by  EU  Member  States  and  businesses  relating  to  Australia  or  New 
Zealand, and the information gathered during the regular EU-Australia Trade Policy Dialogue 
and the EU-New Zealand Trade Talks and other similar fora. The business sector stakeholders 
pointed out the tariff and non-tariff measures, the gaps in the existing sectoral agreements and 
issues  related  to  services,  investment  and  public  procurement.  The  non-profit  sector 
stakeholders  noted,  in  particular,  the  current  lack  of  any  measures  to efficiently  address  the 
impact of trade on social and environmental aspects of sustainable development. 

1.3. Problem tree 

The  chart  on  the  following  page  highlights  the  problems  identified  to  the  principal  causes, 
groups them thematically and links them to the actual or potential consequences for the EU-
Australia and the EU-New Zealand relations respectively, in the form of a "problem tree". 

10 

 
 
 
 
1.4. How would the problem evolve, all things being equal? 

The  identified  problems  appear  to  persist  and  increase  as  Australia  and  New  Zealand 
progressively  implement  their  new  FTAs  with  other  partners.  If  no  policy  action  is  taken, 
European  manufacturers,  the  services  industry,  traders  and  their  workforce  as  well  as 
consumers and regulators would forgo potential additional benefits. 

For  example  the  current  relative  tariff  barriers  will  increase  as  Australia  and  New  Zealand 
implement  their  FTAs  and  progressively  phase  out  tariffs  for  non-EU  countries,  while  EU 
exports would continue to face full MFN tariffs. The problems, and possible loss of market 
and  income  associated  with  inadequate  protection  of  IPR  such  as  geographical  indications, 
would likely increase.  

1.5.  Has  any  fitness  check/retrospective  evaluation  been  carried  out  of  the 

existing policy framework? What was concluded from the evaluation / fitness check? 

No  evaluation  been  carried  out  as  there  are  no  overarching  bilateral  preferential  trade  and 
investment frameworks with either Australia or New Zealand. 

2. WHY SHOULD THE EU ACT? 

The main objective of the policy intervention is twofold, to create more favourable conditions 
for  further  increasing  trade  and  investment  between  the  EU  and  Australia  and  the  EU  and 
New Zealand respectively, while implementing the general EU trade policy objectives as set 
out in the 'Trade for All' Communication.  

11 

 
 
 
 
 
 
This objective is in line with the Council conclusions on trade of 21 November 201411 which 
underlined that trade in goods, services and investment can make a significant contribution to 
achieve the aims at the core of the ‘Strategic Agenda for the Union in times of change’ and 
expressed  that  building  on  the  tangible  progress  made  in  the  EU's  bilateral  trade  agenda, 
efforts should be devoted to pursuing agreements with key partners. 

Similarly, this objective is also in line with the Council conclusion on trade and investment of 
27 November 201512 that supported the conclusion of ambitious, comprehensive and mutually 
beneficial bilateral trade and investment agreements and calls on the Commission to work to 
advance negotiations […] in the Asia-Pacific region.  

The  action  is  also  fully  in  line  with  the  Communication  ‘Trade  for  All  -  Towards  a  More 
Effective, Transparent and Responsible Trade and Investment Policy13’ which highlights that 
the EU needs to move forward bilateral relationships in order to deliver jobs and growth. This 
can be done by tackling trade and investment barriers in a comprehensive way while securing 
the  EU's  high  level  of  social  and  environmental  protection  and  contributing  to  other  policy 
objectives, such as sustainable development and the particular needs of SMEs.  

In particular the 'Trade for All' Communication highlighted that "Australia and New Zealand 
are Europe’s close partners, share Europe’s values and views on many issues,  and play  an 
important role in the Asia-Pacific region and in multilateral settings. Stronger economic ties 
with these countries will also provide a solid platform for deeper integration with wider Asia-
Pacific value chains. Strengthening these relationships should be a priority." 

According to Article 5(3) of the Treaty on European Union (TEU), the subsidiarity principle 
does not apply in areas of exclusive EU competence. The common commercial policy is listed 
among  the  areas  of  exclusive  competence  of  the  Union  in  Article  3  of  the  Treaty  on  the 
Functioning  of  the  European  Union  (TFEU).  This  policy  includes  the  negotiation  of  trade 
agreements under Article 207 TFEU. 

In line with the principle of proportionality, all reasonable policy options are presented below 
in order to assess the likely effectiveness of such policy action. 

3. WHAT SHOULD BE ACHIEVED? 

3.1. General objectives 

The EU’s general objective on economic and trade relations derives from the TFEU, which in 
Article  3(1)(3)  establishes  the  EU’s  exclusive  competence  for  the  common  commercial 
policy. Furthermore, Article 206 provides that the overall objective of EU policy on economic 
and trade relations is to ‘contribute, in the common interest, to the harmonious development of 
world  trade,  the  progressive  abolition  of  restrictions  on  international  trade  and  on  foreign 
direct investment, and the lowering of customs and other barriers’. 

As established  by Article 205 of the  TFEU, the common commercial policy also serves the 
more general objectives of the Union’s external action as described in Article 21 of the TEU. 

11 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/145908.pdf 
12 http://data.consilium.europa.eu/doc/document/ST-14708-2015-INIT/en/pdf 
13 http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf 

12 

 
 
 
 
                                                            
The  general  objectives  of  this  initiative  are  in  line  with  the  general  EU  trade  policy  and 
include concretely: 
•  promoting smart, sustainable and inclusive growth through the expansion of trade14 and 

investment and relevant rules; 

•  creating job opportunities and welfare gains15; 

• 

increasing consumer benefits (e.g. in terms of choice, availability, price and maintaining 
high standards);  

• 

improving Europe’s competitiveness in global markets; and 

•  Strengthening cooperation on trade-related issues with a like-minded partner. 

3.2. Specific objectives 

In  respect  of  future  EU-Australia  and  EU-New  Zealand  economic  and  trade  relations,  the 
general objectives set out above would translate into the following specific objectives: 

• 

reap the benefits of enhanced trade and investment flows between the EU and Australia 
and  between  the  EU  and  New  Zealand  respectively  by  reducing  barriers  for  trade  and 
investment,  taking  into  account  the  EU  agricultural  sensitivities,  and  by  exploring 
forward-looking  regulatory  cooperation  in  appropriately  selected  areas,  such  as  public 
procurement,  intellectual  property  investment  protection  and  to  increase  opportunities 
through specific mechanism and simplified procedures for SMEs; 

• 

level the playing field with other countries that already enjoy preferential treatment due to 
their FTAs with Australia and New Zealand; 

•  provide a new framework with comprehensive, progressive and up-to-date set of rules for 
the  EU-Australia  and  EU-New  Zealand  trade  and  investment  relationships  including  for 
the  promotion  of  sustainable  development  in  line  with  the  general  EU  trade  policy 
objectives.  This  is  also  to  be  seen  in  the  light  of  the  political  framework  agreements 
recently concluded with the two countries.  

Just over half of all stakeholders' who responded to the public consultation considered that 
the EU's current bilateral relationship with Australia and New Zealand is not satisfactory and 
should  be  improved,  while  about  one  fifth  were  satisfied.  The  priority  sectors  and  types  of 
objectives  identified  by  stakeholders  generally  fall  into  the  following  categories:  reducing 
existing  trade  and  investment  barriers,  providing  a  level  playing  field  with  non-EU 
competitors and creating a comprehensive and up-to-date framework to address broader issues 
related to sustainable development.  

3.3. Consistency of the objectives of this initiative with other EU policies 

The objectives described above are fully consistent with, and indeed stem from the principle 
that  the  EU  should  encourage  the  integration  of  all  countries  into  the  world  economy, 
including through the progressive abolition of restrictions on international trade16. 

14  COM(2010)  2020,  "Europe  2020:  A  strategy  for  smart,  sustainable  and  inclusive  growth",  March  2010. 
“Trade,  Growth  and  World  Affairs”.  Trade  Policy  as  a  Core  Component  of  the  EU’s  2020  Strategy”,  2010, 
available at: http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146955.pdf 
15 36 million jobs in the EU depend directly or indirectly on trade. 

13 

 
 
 
 
                                                            
The objectives are also in line with the Europe 2020 Communication which announced that 
the  European  Commission  would  draw  up  a  trade  strategy  in  2010  including  proposals  for 
high-level  strategic  dialogues  with  key  partners,  to  discuss  strategic  issues  ranging  from 
market access, regulatory framework, global imbalances, energy and climate change, access 
to raw materials, to global poverty, education and development. 

By contributing to the multilateral trading system, deep and comprehensive FTAs can usefully 
reinforce  the  possible  benefits  from  the  multilateral  process.  In  particular  they  improve 
trading conditions, not just for the partners who are parties to bilateral agreements but also by 
providing  benefits  via  MFN  treatment  to  other  WTO  members,  where  this  results  from  the 
agreement  in  question  (e.g.  through  the  reduction  of  NTBs  or  the  binding  services 
commitments). 

The  objectives  are  also  fully  consistent  with  the  objectives  set  out  by  the  European 
Commission's Communication ‘Small Business Act for Europe’ (2008) and ‘Small Business, 
Big World’ (2011). Supporting SME's activities outside the EU is also embedded in the EU's 
overall competitiveness strategy as outlined in the Europe 2020 Communication on Industrial 
Policy. 

The  objectives  also  comply  with  the  principles  established  in  the  TEU  stipulating  that  EU's 
policies and actions should aim to consolidate and support human rights17 and to help develop 
international  measures  to  preserve  and  improve  the  quality  of  the  environment  and  the 
sustainable management of global natural resources18 in the manner set out in Chapter 5 of 
this document. 

The  objectives  are  consistent  with  other  EU  policies  and  with  the  Charter  of  Fundamental 
Rights. 

Finally, the objectives are also fully consistent with the Juncker Commission’s top priority to 
get  Europe  growing  again,  to increase  the  number  of  jobs  without  creating  new  debt,19    the 
Investment Plan20 and the specific priorities set out by the Commission Work Programme for 
2017.21 

4. WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE 
OBJECTIVES? 

With  a  view  to  achieving  the  objectives  set  out  in  Chapter  3,  this  chapter  outlines  options 
which were considered in the course of the impact assessment. 

16 Article 21 (2) (e) TEU. 
17 Article 21  (2) (b) TEU. 
18 Article 21 (2) (f) TEU. 
19 http://ec.europa.eu/priorities/jobs-growth-investment/index_en.htm 
20 http://ec.europa.eu/priorities/jobs-growth-investment/plan/index_en.htm 
21 http://ec.europa.eu/atwork/key-documents/index_en.htm  in particular No12 in Annex 1 
http://ec.europa.eu/atwork/pdf/cwp_2017_annex_i_en.pdf  

14 

 
 
 
 
 
                                                                                                                                                                                          
A) No EU policy change (baseline scenario) 

The baseline scenario continues to operate under the framework already in place for bilateral 
relations  and  continue  to  use  existing  sectoral  bilateral  agreements  covering  only  a  very 
limited number of sectors. The existing sectoral agreements are by their nature limited in their 
scope to specific sectors covering some non-tariff barriers for industrial products (MRAs with 
both Australia and New Zealand), animal products (in the case of New Zealand) and trade in 
wine  (in  the  case  of  Australia).  The  economic  modelling  tool  (see  chapter  5  and  Annex  4) 
projects  this  baseline  scenario  into  the  long  term  for  it  to  be  comparable  with  the  policy 
scenarios. 

B) Options of improving implementation and enforcement  

B1) Improved implementation scenario 

This  option  would  be  the  baseline  scenario  and  improved  implementation  of  the  existing 
sectoral bilateral agreements. 

The current MRAs with Australia and New Zealand cover a number of sectors, and sectoral 
annexes (e.g. low voltage electric equipment (LVD), telecommunication terminal equipment 
(TTE)  of  Good  Manufacturing  Practices  (GMP)  for  pharmaceuticals)  that  could  be 
modernised within the current framework. However earlier analysis showed that these kind of 
agreements delivered relatively limited benefits22. Furthermore, this option would not address 
tariff  and  non-tariff  barriers  in  other  sectors  for  goods,  barriers  to  trade  in  services  and 
investment. In the case of the status quo (option A), it would also mean that important policy 
areas,  such  as  related  to  trade  and  sustainable  developments,  digital  trade  and  SMEs  would 
not  be  addressed.  This  option,  overall,  would  be  unsuited  to  address  the  EU  broader  trade 
policy objectives. 

B2) Sectoral agreements scenario  

This option would consider further sector-specific agreements in addition to and building on 
the currently existing bilateral sectoral agreements. 
Further  sector-specific  agreements23  (e.g.  wine  agreement  with  New  Zealand,  or  veterinary 
agreement  with  Australia)  would  likely  provide  additional  benefits  related  to  their  specific, 
limited  sectoral  scopes,  as  also  noted  by  some  of  the  stakeholders  active  in  the  sectors 
concerned. However, they would not be able to address or provide new, modern frameworks 
for  the  overall  bilateral  economic  relationship  with  Australia  and  New  Zealand.  Past 
experience  shows  that  such  sectoral  agreements  are  not  always  feasible  (e.g.  the  earlier 
negotiations  for  an  EU-New  Zealand  wine  agreement  were  abandoned)  as  no  sufficient 
mutual  interest  could  be  gathered  on  a  sectoral  basis.  The  administrative  burden  of 
participating  in  several  sectoral  agreements  needs  to  be  considered,  as  negotiating  and 
managing  these  in  parallel  will  involve  higher  administrative  burden  than  in  negotiating 

22 Commission Staff Working Paper SEC(2004)1072 Priorities for Bilateral/Regional trade related activities in 
the field of Mutual Recognition Agreements for industrial products and related technical dialogue 
http://ec.europa.eu/DocsRoom/documents/6802/attachments/1/translations/en/renditions/native  
23 Alternative policy instruments, such as non-regulatory alternatives, self- or co-regulation and market-based 
solutions would not be able to address tariff and non-tariff barriers for goods, barriers to trade in services and 
investment, as these must be subject to international agreements in line with World Trade Organisation (WTO) 
rules. 

15 

 
 
 
 
                                                            
comprehensive  bilateral  FTAs  with  Australia  and  New  Zealand.  Ensuring  policy  coherence 
among several parallel and potentially overlapping initiatives would present some challenges. 

Options  B1  and  B2  were  not  developed  further  during  the  impact  assessment  due  to  the 
above-mentioned  reasons  and  also  because  both  Australia  and  New  Zealand  only  aim  at 
comprehensive  bilateral  FTAs  with  the  EU.  Options  B1  and  B2  would  thus  fall  short  of 
expectation and would meet a refusal from Australia and New Zealand to engage. 

C)  Modern  and  comprehensive  EU-Australia  and  EU-New  Zealand  free  trade 
agreements scenario 

This  option  would  provide  for  two  modern  and  comprehensive  agreements  –  one  with 
Australia  and  another  with  New  Zealand.  These  FTAs  would  involve  a  major  effort  to 
eliminate  tariff  and  non-tariff  barriers,  liberalising  and  facilitating  services  and  investment, 
protection of investment, as well as further regulatory cooperation.  

Option C includes ambitious objectives that are in line with best FTA practice for removing 
barriers  to  services  and  investment,  public  procurement,  and  for  providing  rules 
covering  IPR  including  geographical  indications,  competition  policy,  investment 
protection, SMEs, energy and raw materials, transparency, dispute settlement, customs 
and trade facilitation, and sustainable development. As part of the EU general policy more 
recent  EU  FTAs  include  an  ambitious  Trade  and  Sustainable  Development  chapter  with 
robust labour and environmental protection provisions, which refer to ILO Conventions, other 
ILO instruments and multilateral environmental agreements; specific provisions encouraging 
trade  practices  and  schemes  that  support  and  promote  sustainable  development  goals  (e.g. 
corporate  social  responsibility,  voluntary  sustainability  assurance  schemes  etc.);  a  dedicated 
institutional  set-up  combining  governmental  and  civil  society  involvement  so  as  to  foster 
transparency, accountability and dialogue; as well as a tailored mechanism to address disputes 
involving third party assessment. 

Option C would also need to take into account  existing sensitivities and exceptions, and  is 
further  divided  into  two  sub-options  depending  on  the  level  of  ambition  to  be  aimed  at 
regarding trade in goods: 

C1) Conservative, partial liberalisation scenario 

C2) Increased liberalisation scenario including full liberalisation of import tariffs for goods  

Both  of  these  sub-scenarios  provide  for  comprehensive  FTAs  as  described  above,  but  with 
different levels of ambition for liberalising trade in goods.  

• 

In terms of tariffs, option C1 includes full tariff elimination for industrial goods and an 
asymmetric tariff elimination for agricultural products, i.e. for EU agricultural exports 
to  Australia  and  New  Zealand  full  liberalisation,  while  EU  imports  of  agricultural 
goods from Australia and New Zealand are subject to substantial liberalisation while 
keeping  the  status  quo  (such  as  existing  treatment  of  tariff  rate  quotas  (TRQs)  or 
tariffs)  for  EU  sensitive  sectors  such  as  rice,  cereal,  sugar,  fruit  and  vegetables, 
ruminant  meat  (i.e.  beef  and  sheepmeat)  and  dairy.  Option  C2  includes  full  tariff 
elimination across the board. 

•  Option C1 does not assume any reduction of non-tariff barriers (NTBs), while option 
C2 includes their reduction for all non-agriculture goods sectors at a 10% rate (based 
on  ad-valorem  equivalent)  by  Australia  and  New  Zealand,  while.  The  effect  of 
reducing NTBs in the agricultural sector was not modelled due to the lack of reliable 

16 

 
 
 
datasets.  Therefore  it  was  not  possible  to  quantify  the  impact  of  the  expected 
reductions  of  agricultural  NTBs  that  make  up  a  significant  part  of  NTBs  flagged  by 
stakeholders or otherwise identified by the Commission and the external study. 

Overview of differentiated assumptions for trade in goods in options C1 and C2 

Option C1 

Option C2 

Tariff 

Non-
tariff 
barriers 

Full  liberalisation  by  the  EU  for  all 
industrial products and most agricultural 
products  apart  from  selected  sensitive 
products:  rice,  cereal,  sugar,  fruit  and 
vegetables, ruminant meat and dairy 

Full liberalisation by Australia and New 
Zealand for all products 

Full  liberalisation  by  the  EU  for  all 
products 

Full liberalisation by Australia and New 
Zealand for all products 

No change  

No change by the EU 

A  10%  cut  of  NTBs  by  Australia  and 
New  Zealand  modelled  for  industrial 
goods24 

The assumptions are asymmetric in the tariff and non-tariff barriers aspects. These reflect 
the  Commission's  expert  judgement  of  the  likely  negotiations  in  view  of  the  asymmetric 
situation  of  existing  tariff  structure  and  also  based  on  the  FTAs  the  EU,  Australia  or  New 
Zealand negotiated with other partners. These existing FTAs – to a variable degree – include 
long  phase  out  periods  for  tariffs,  partial  liberalisations  (TRQs  or  not  zero  final  duties)  or 
other specific treatment of sensitive products. The negotiations are not expected to impact on 
the EU regulatory framework that could be classified as a non-tariff barrier. On the other hand 
the  pull  of  the  EU's  large  market  could  reasonably  induce  some  changes  in  the  domestic 
regulatory framework of Australia and New Zealand.  

The stakeholders' responses to the public consultation in general suggest the need to address 
tariff and NTBs for goods in a differentiated manner. While the submissions in general call 
for  strong  ambition  in  addressing  existing  services  and  investment.  Stakeholders'  have 
different views on tariff liberalisation in the agricultural sub-sectors considered sensitive from 
the  perspective  of  EU  producers.  Some  European  stakeholders  called  for  existing  tariffs  or 
other  arrangements  (such  as  TRQ)  not  to  liberalised.  This  view  is  shown  in  the  different 
assumptions in options C1 and C2 in terms of the level of tariff liberalisation on the EU side. 
The  conservative  tariff  liberalisation  under  option  C1  would  result  in  a  lower  level  of 
ambition  overall  concerning  trade  in  goods  and  therefore  less  scope  for  achieving  EU 
objectives  for  reducing  NTBs.  This  borne  out  by  the  difference  in  the  assumed  NTB 
reductions  under  options  C1  and  C2.  However,  the  importance  of  trade  and  sustainable 
development does not depend on the  assumed level of liberalisation. Therefore there are no 
different assumptions on this under options C1 and C2.  

24 NTB reduction is modelled as a percentage cut of the ad valorem equivanlent of the NTBs Agricultural NTBs 
are not modelled due to methodological issues. See Annex 4 for more details on methodology. 

17 

 
 
 
 
 
 
                                                            
5. WHAT ARE THE IMPACTS OF THE DIFFERENT POLICY 
OPTIONS AND WHO WILL BE AFFECTED? 

This chapter analyses the impacts of the different policy options outlined in Chapter 4 on a 
number of different levels. It firstly examines the overall economic impacts resulting from the 
different policy options for strengthening EU-Australia and EU-New Zealand bilateral trade 
and  investment  relations.  Then  it  looks  at  impacts  on  specific  sectors,  SMEs  and  Least 
Developed  Countries  (LDCs),  and  covers  environmental,  social  and  human  rights  impacts. 
The  administrative  and  budgetary  impacts  are  also  assessed,  as  well  as  the  administrative 
capacity  of  Australia's  and  New  Zealand's  customs  authorities  to  implement  the  new 
agreements.  

The analysis focuses on the impacts for the EU, Australia and New Zealand, respectively. It 
does  not  present  detailed  results  at  EU  Member  States'  or  regional  level  which  could  be 
misleading for methodological reasons. Firstly, an assessment by Member State or by region 
would be difficult to conduct due to lack of data and it would not lead to further insights on 
the overall benefits of the trade agreement. For example, estimates of the level of NTBs for 
goods at Member State or regional level by sector are not available. Therefore the impact of 
reducing  sector-specific  NTBs  would  differ  across  depending  on  their  sector-specific  trade 
exposure and the specific products they have problems with in trading. Secondly, statistics on 
international trade in goods are accurate at EU level. At Member State level trade can be over-
estimated  or  underestimated  mainly  due  to  the  "Rotterdam-effect",  i.e.  a  Member  State 
receiving  a  good  from  a  non-EU  country  is  not  necessarily  the  Member  State  of  final 
destination  and  a  Member  State  sending  a  good  to  a  non-EU  country  is  not  necessarily  the 
Member State of origin of the good. Even if basic data on originating goods and NTBs were 
available, an attempt to assess the impact for sectors at the level of Member States or regions 
where the sectors are in particular concentrated could still result in misleading identifications 
given  the  widespread  intra-EU  supply  chains  and  different  value-added  elements  (including 
intermediate products, services, non-tangible elements such as IPR, etc.) from across the EU. 

The  analysis  in  this  chapter  is  based  on  the  economic  modelling  performed  by  the  Chief 
Economist Unit of DG TRADE, the study carried out by external consultants (a consortium 
led by LSE Enterprise) commissioned by the European Commission, and the assessment and 
information  available  to  the  Commission  including  the  stakeholders'  input  to  the  public 
consultation. 

5.1. Model and assumptions  

As regards assessing the economic impacts of the various scenarios throughout chapter 5, the 
quantitative analysis stems from the economic modelling carried out by the Chief Economist 
Unit  of  DG  TRADE,  in  some  areas  (e.g.  on  CO2  emissions)  complemented  by  the  external 
study.  For  the  simulations  made  in  the  quantitative  analysis,  the  global  quantitative  CGE 
(Computable General Equilibrium) model GTAP (Global Trade Analysis Project) and its most 
recent  database  V9,  with  a  base  year  of  2011  were  used.  The  projection  horizon  of  the 
economic modelling is 2030. 

The description of the analytical model used, including its limitations, can be found in Annex 
4.  However,  the  main  features  should  be  highlighted  at  this  stage  to  help  the  reader  better 
understand the results: 

18 

 
 
 
•  The  general  model  projects  trade  flows  in  the  longer  term,  factors  in  the  measures 
impacting on trade flows and calculates, using a series of assumptions, what the impact of 
reduced  bilateral  barriers  might  be  on  trade  flows.  FTAs  are  made  up  of  market-access 
liberalisation measures covering goods, services and investment, and there are rules-based 
provisions.  It  is  not  possible  to  model  rules,  such  as  intellectual  property  rights.  While 
rules included in FTAs would certainly increase the level of certainty and decrease risk for 
business,  it  is  very  difficult  to  capture  these  through  a  model.  The  modelling,  therefore, 
looks  at  tariff  liberalisations  that  would  happen  as  a  result  of  the  FTAs,  reductions  of 
NTBs and binding of market openings in services. 

•  The  CGE  model  and  the  underlying  GTAP  database  cannot  separate  in  smaller  parts 
(disaggregate)  the  ruminant  meat  sector  to  beef  and  sheepmeat.  This  methodological 
limitation therefore cannot fully model the complexity of the ruminant meat imports from 
Australia and New Zealand into the EU. Each sub-category, i.e. beef and sheepmeat has 
further special sub-groups (i.e. fresh or frozen, products, different cuts, grass or grain-fed 
beef, etc.). In addition Australia and New Zealand use various TRQ for their exports to the 
EU. 

•  To understand output results, it is necessary to consider the following model restriction. 
The  model  cannot  expand  the  factors  of  production (as might  be the case in reality) but 
instead pulls them across to the most efficient sector. This partially explains the decline in 
output  in  some  sectors  when  production  is  increasing  in  other  sectors  (hence  "general 
equilibrium").  

•  The  model  was  run  to  simulate  the  impact  of the two parallel FTAs one with Australia, 
and the other with New Zealand. While the figures on changes to bilateral trade flows (i.e. 
EU-Australia and EU-New Zealand) are separated, only the combined impact is measured 
for the EU output, reallocation of labour and consumer price index (CPI). 

•  The  model  works  with  what  is  called  a  ‘fixed  employment  closure’,  meaning  that  the 
overall number of jobs is not set to change, and that labour market adjustments take place 
through  wage  changes.  This  approach  is  commonly  used  for  this  type  of  analyses  since 
there is no established theoretical framework linking the functioning of labour markets to 
CGE models. However, the fixed employment closure approach provides information on 
shifts between sectors thus indicating in sectors in which employment is likely to increase 
and decrease as a result of the new agreement.   

•  The modelling provides figures for the impact of reduction of NTBs on trade in goods, in 
option C2. However, as robust estimates could not be established for reductions of NTBs 
for trade in agricultural products, a qualitative assessment of agricultural NTBs has been 
provided in the external study. This would mean that the likely impact of NTB reduction 
as modelled by the CGE simulation for EU exports is probably underestimated. 

•  For  cross-border  services,  the  assessment  of  likely  NTB  reduction  is  more  difficult  than 
for goods. This is  mainly due to the nature  of  service  trade  liberalisation, which  usually 
takes place through binding, i.e. a commitment by the negotiating partner not to raise the 
levels  of  existing  barriers,  thus  removing  uncertainty  in  terms  of  risks  for  economic 
operators.  The  impact  of  this  is  difficult  to  estimate  since  this  is  not  a  traditional  cut  in 
trade  barriers.  At  the  same  time,  it  is  acknowledged  that  removing  uncertainty  through 
binding  has  a  value.  Previous  empirical  work  in  this  area  has  found  that,  on  average, 
binding corresponds to a 3% reduction in trade costs. Australia, New Zealand and the EU 
are engaged in negotiations for the plurilateral Trade in Services Agreement (TiSA) that 
would also provide additional measures for facilitating trade in services. 

19 

 
 
•  The model does not contain data on the economic impacts of liberalisation in the areas of 
public  procurement  and  investment  or  on  the  impact  of  rules  regarding  investment 
protection,  or  protection  of  IPR  (e.g.  geographical  indications).  This  was  because  of  the 
difficulty  in  quantifying  these  impacts.  Hence  the  modelling  results  are  likely  to 
underestimate the benefits the FTAs can generate. 

All  the  limitations  duly  considered,  the  CGE  model  remains  the  best  tool  in  the 
methodological toolbox of economists to quantify the impact of trade agreements. In this 
context,  it  should  be  mentioned  that  administrations  around  the  world,  including  in  EU 
Member States, and also in Australia and New Zealand rely on CGE modelling to analyse the 
impact  of  trade  policies.  The  Chief  Economist  Unit  of  DG  Trade  actively  engages  in 
exchanges with the research community to stay at the forefront of methodological progress in 
trade policy analysis. Recently advanced approaches have not been able to offer convincing 
alternatives. Essentially all the limitations of the CGE model identified above are inherent to 
competing approaches, too. 

5.2. Policy option A: the baseline scenario 

On  the  one  hand,  Australia  and  New  Zealand  both  have  open,  liberal  and  rules-based 
economies, and possess highly developed regulatory systems. This creates environments that 
are open and which make foreign trade and investment easier. Australia and New Zealand are 
among the WTO members with the lowest bound and applied tariffs for goods and the lowest 
trade restrictiveness for services. In addition, both Australia and New Zealand, along with the 
EU are pursuing multi- and plurilateral trade liberalisation via various channels. They are all 
party to the updated Information Technology Agreement (ITA2), and are participating in the 
negotiations  for  the  Trade  in  Services  Agreement  (TiSA)  and  the  Environmental  Goods 
Agreement  (EGA).  New  Zealand  joined  the  WTO  Government  Procurement  Agreement 
(GPA)  in  2015,  while  Australia  is  in  negotiations  to  join  the  GPA.  These  multi-  and 
plurilateral  arrangements  could  bring  additional  benefits  to  the  EU-Australia  and  EU-New 
Zealand trade and investment relationship independent of the bilateral frameworks. 

On the other hand, it can be assumed that no further reduction of regulatory trade costs and no 
substantial further growth of bilateral trade and investment volumes should be expected from 
continuing  the  status  quo.  The  current  bilateral  frameworks,  notably  the  absence  of 
preferential arrangements for trade and investment, preclude further gains in overall welfare 
in either the EU or Australia and New Zealand. Under this scenario any changes in the EU-
Australia  and  EU-New  Zealand  trade  and  investment  relationships  would  therefore  be  only 
those  that  could  be  attributed  to  changes  in  the  respective  economies,  the  multilateral  trade 
system and in the world economy at large. In particular the status quo (the baseline scenario) 
would not address the comparative disadvantage of EU exports and investments in Australia 
and New Zealand resulting from preferential arrangements (i.e. FTAs) between Australia and 
New Zealand respectively and other non-EU countries. The status quo would also mean that 
important  policy  areas,  such  as  those  related  to  trade  and  sustainable  development,  digital 
trade and SMEs, would not be addressed. 

Overall  the  status  quo  would  result  in  a  comparatively  deteriorating  environment  for 
European  exports  and  investment,  compared  to  their  main  competitors  from  non-EU 
countries.  

20 

 
 
 
The  economic  modelling  tool,  within  its  limits,  projects  this  baseline  scenario  to  the 
stimulation  horizon  by  using  projections  e.g.  with  respect  to  GDP  growth25.  This  baseline 
scenario is compared with the policy scenarios options C1 and C2 that are based on the same 
long-term  projections  and  include  the  parameters  of  the  policy  choices  as  defined  in  the 
respective  scenarios.  So,  for  example,  the  EU  export  as  projected  by  the  model  in  the  long 
term in option A is compared to the relative change under options C1 and C2 in the equivalent 
projection  horizon.  The  figures  for  gains  in  trade  provided  for  option  C2  can,  thus  also  be 
interpreted as an estimate of untapped trade potential. 

5.3.  Policy  Option  C:  comprehensive  FTAs  with  Australia  and  New  Zealand, 

respectively – overall economic impact 

The comparison of option C represents the change between option A and option C using the 
long  term  projections  for  both.  Over  the  long  term,  the  EU-Australia  and  EU-New  Zealand 
FTAs  are  estimated  to  have  a  positive  impact  on  real  GDP  for  the  EU,  Australia  and  New 
Zealand. New Zealand will see a positive change in real GDP of 0.28% in the conservative 
scenario and of 0.52% in the increased liberalisation scenario. In absolute values the gains are 
between €0.7 billion and €1.3 billion. Similarly, the simulations indicate that Australian real 
GDP  will  increase  by  between  0.13%  (conservative  scenario)  and  0.20%  (increased 
liberalisation  scenario).  In  absolute  values  the  gains  correspond  to  between  €2.7  billion  and 
€4.2  billion  respectively.  The  gain  in  real  GDP  for  the  EU  is  estimated  to  range  between 
0.01%  (conservative  scenario)  and  0.02%  (increased  liberalisation  scenario),  i.e.  about  €2.1 
billion and €4.9 billion in absolute value in the two scenarios respectively.  

In terms of economic welfare (an economic indicator that compares the change in consumer 
utility), the impact on the EU, Australia and New Zealand is positive. In absolute values, the 
EU's  gains  in  the  long  term  vary  between  €2.6  billion  (conservative)  and  €4.8  billion 
(increased liberalisation). Australia's welfare gains in the long term vary between €0.9 billion 
(conservative scenario) and €1.8 billion (increased liberalisation). New Zealand's in the long 
term vary between €0.4 billion (conservative) and €0.6 billion (increased liberalisation).  

The EU would increase its exports to Australia and New Zealand more than the two countries 
would increase their exports to the EU. The EU increases its exports to Australia by 16.4% 
and 33.3% respectively in the conservative and increased liberalisation scenarios. Similarly, 
Australia increases its exports to the EU by 6.9% and 11.1% respectively in the two scenarios. 
EU  exports  to  New  Zealand  are  projected  to  increase  by  14.2%  and  32.4%  respectively. 
Similarly, New Zealand exports to the EU would increase by 10.5% and 22.2% respectively. 
(The  relative  higher  growth  of  exports  from  New  Zealand  compared  to  Australia  could  be 
explained by the higher ratio of New Zealand exports that have currently higher tariffs in the 
EU such as ruminant meat and dairy.) 

Main  impacts  of  the  options  C1  and  C2  -  GDP,  welfare,  and  bilateral  exports  in  the  two 
scenarios in the long term 

Variable 

GDP  
(% change) 

Scenario 

EU  Australia 

Conservative 

Increased 

0.01

0.02

0.13 

0.20 

New 
Zealand 

0.28 

0.52 

25 Cf. annex 4 for additional details and the sources of the projections used. 

21 

 
 
 
 
                                                            
GDP gain  
(€ billion*) 

Welfare gain  
(€ billion*)  

EU-Australia bilateral exports  
(% change) 

EU-New Zealand bilateral exports 
(% change) 

Increased 
liberalisation 
* US dollars were converted to euros at $1.1095 to €1 

liberalisation 

Conservative 

Increased 
liberalisation 

Conservative 

Increased 
liberalisation 

Conservative 

Increased 
liberalisation 

Conservative 

2.1 

2.7 

4.9 

2.6 

4.8 

16.4

33.3

14.2

32.4

4.2 

0.9 

1.8 

6.9 

11.1 

- 

- 

0.7 

1.3 

0.4 

0.6 

- 

- 

10.5 

22.2 

5.4.  Policy  Option  C:  comprehensive  FTAs  with  Australia  and  New  Zealand, 

respectively – impact on sectoral competitiveness 

Overview 

EU-Australia 

The CGE modelling indicates growth of exports for all sectors apart from minor decreases in 
EU exports of rice (on a very low basis).  

In terms of relative change of sectoral output in the long term the situation is mixed. Under 
option C1 the changes are insignificant for the EU and marginal for Australia apart from for 
meat, motor vehicles and machinery. Under option C2 the relative output changes for the EU 
are more pronounced and negative for ruminant meat, fruit and vegetables, sugar and electric 
equipment, while positive for motor equipment and machinery. For Australia relative output 
changes  are  particularly  positive  for  ruminant  meat,  sugar,  rice,  oil  seed,  beverages  and 
tobacco, and utilities and negative for machinery, motor vehicles, gas, and chemicals. 

This quantitative analysis indicates that the overall positive impact (based on export growth, 
sectoral output growth) in the EU would be on motor equipment, machinery, chemicals and 
services  sectors  under  both  options  C1  and  C2,  albeit  in  a  varying  degree,  while  the  main 
negative  impact  would  be  on  the  fruit  and  vegetables  sectors  under  option  C1  and  on  the 
ruminant and sugar sectors under option C2.  

EU-New Zealand 

The CGE modelling indicates growth of exports and imports for all sectors apart from minor 
decreases  of  EU  exports  of  some  agricultural  sub-sectors  (rice,  cereals  fruit  and  vegetables 
and fibres and other crops - all  of these have low base of trade volumes) and New  Zealand 
exports of energy (coal, oil, gas) and minerals to the EU.  

In terms of relative change of long term sectoral output the situation is mixed. In option C1 
the changes are insignificant for the EU while for New Zealand there is growth for fruit and 
vegetables, other animal products and beverage and tobacco, textiles, chemicals and services 
sectors and decrease for a number of agricultural sectors (cereals, sugar, ruminant and other 

22 

 
 
 
meat  and  dairy)  as  well  as  motor  vehicles  and  machinery.  In  option  C2  the  relative  output 
changes for the EU are combined and described above under the overview for EU-Australia. 
For New Zealand relative output changes are particularly positive for ruminant meat, fruit and 
vegetables, beverage and tobacco, while some other agricultural and industrial sectors (wood 
and  paper,  chemicals,  motor  vehicles  and  electrical  equipment)  would  experience  negative 
relative long term output changes. 

This quantitative analysis indicates that the overall positive impact (based on export growth, 
sectoral output growth) in the EU would be on motor equipment, machinery, chemicals and 
services  sectors  under  both  options  C1  and  C2,  albeit  in  a  varying  degree,  while  the  main 
negative  impact  would  be  on  the  fruit  and  vegetables  sectors  under  option  C1  and  on  the 
ruminant, dairy, and fruit and vegetables sectors under option C2. 

Industrial sectors 

Chemicals (including pharmaceuticals) 

EU-Australia  
EU exports of chemicals to Australia were 19% of total EU exports in 2015 (€6.1 billion26 out 
of  which  pharmaceuticals  were  €3.9  billion).  EU imports  of  chemicals  were  less  significant 
(€0.6  billion  of  which  about  half  was  pharmaceuticals).  The  bilateral  trade  in  chemical 
products, taking into account the large base, are projected to grow significantly: EU exports 
by 7 or 20% and Australian exports by 10 or 11% under options C1 and C2 respectively. This 
would  offer  sizeable  business  opportunities,  even  though  this  is  not  reflected  in  sectoral 
output changes in the EU due to the very large base of EU production.  

EU-New Zealand 

EU  exports  of  chemicals  to  New  Zealand  are  similarly  significant,  making  up  14%  of  EU's 
current  exports  (€0.6  billion,  out  of  which  pharmaceuticals  were  a  bit  less  than  half).  EU 
imports  of  chemicals  are  of  a  smaller  magnitude,  but  still  relatively  important  among  non-
agricultural  imports  from  New  Zealand  (7%  of  total,  €0.2  billion).  The  bilateral  trade  of 
chemical products are projected to grow significantly in both directions, up to 29% in the long 
term (EU exports by 9 and 27% in option C1 and C2 respectively and New Zealand exports 
by 29 % in both options. This makes the chemical sector a relatively significant source of new 
business opportunities.  

Transport equipment, including motor vehicles 

EU-Australia  

EU exports of transport equipment to Australia were 23% of total EU exports in 2015 (€7.1 
billion, of which automotive products were €5.7 billion). EU imports of transport equipment 
were  much  smaller  (€0.2  billion,  of  which  about  one  quarter  was  automotive  products). 
Bilateral  trade,  especially  EU  exports  of  motor  equipment  is  projected  to  grow  very 
significantly (EU exports by 38 or 52% and Australian exports by 14 or 16% under options 

26 The trade figures for current bilateral trade flows are from European Commission trade data as processed by 
DG TRADE and publicly available at: 
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113346.pdf and 
http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113425.pdf  

23 

 
 
 
 
                                                            
C1 and C2 respectively). Therefore this sector accounts for a very large overall gain in export 
value also considering the large existing trade.  

Australia maintains a 5% import duty for cars, which in effect is only applied to cars imported 
from the EU as Australia has dismantled tariffs for the EU's competitors. The elimination of 
this comparative disadvantage alongside the reduction of NTBs it would further contributes to 
the significant increase of projected EU exports in the long term. 

The relative sectoral output change for the EU is +0.2 for both options C1 and C2 due to the 
very large base of EU production. For Australia, in terms of sectoral outputs motor equipment 
is  the  most  negatively  affected  and  would  see  its  output  reduced  by  around  1.4%  in  the 
conservative scenario and by 1.7% in the increased liberalisation scenario. It is important to 
note  that  all  current  Australian  domestic  car  assembly  operations  will  cease  in  the  coming 
years.  Therefore  the  Australian  domestic  automotive  production  is  expected  to  contract 
significantly regardless of the impact of the EU-Australia FTA.  

EU-New Zealand 

The  most  important  sector  for  the  EU  in  its  trade  with  New  Zealand  concerned  is  transport 
equipment,  which  accounts  for  28%  of  EU's  current  exports  (€1.3  billion,  out  of  which 
automotive products made up about half). EU imports of transport equipment are of a smaller 
magnitude, accounting for 2% of total imports (€70 million, out of which automotive products 
made up only one tenth).  

For  bilateral  trade  in  motor  equipment,  EU  exports  especially  are  projected  to  grow 
significantly in the long term (EU exports up by 23 or 44% and New Zealand exports up by 
13 or 14% under options C1 and C2 respectively). Therefore this sector become a significant 
source  for  new  EU  export  opportunities  even  though  this  is  not  reflected  in  sectoral  output 
changes  in  the  EU  due  to  the  very  large  base  of  EU  production.  New  Zealand  would 
experience  a  rather  large  negative  change  in  output  (1.4%  2.7%  under  options  C1  and  C2 
respectively). However, this change would come on a relatively small base as New Zealand 
does not have a major automotive industry. 

Machinery and electric equipment 

EU-Australia  

EU exports of machinery (including electric equipment but not including transport equipment) 
to Australia were 24% of total EU exports in 2015 (€7.5 billion). EU imports of machinery 
were  much  smaller  (€0.7  billion).  EU  exports  are  projected  to  grow  very  significantly  (EU 
exports  up  by  21  or  61%  and  Australian  exports  up  by  9  or  10%  under  options  C1  and  C2 
respectively). Therefore this sector accounts for a very large overall gain in export value, also 
considering the large existing trade. However, the relative sectoral output change for the EU 
is  only  +0.2%  for  machinery  (in  option  C2)  and  -0.1%  for  electric  equipment  and  other 
manufactured products. For Australia, in terms of sectoral outputs the machinery sector would 
be one of the most negatively affected and would see its output reduced by around 2.0% in the 
increased  liberalisation  scenario,  while  the  electric  equipment  and  other  manufactured 
products would experience an increase of 0.2%. 

EU-New Zealand 

24 

 
 
 
 
EU exports of machinery (including electric equipment but not including transport equipment) 
to  New  Zealand  were  26.1%  of  total  EU  exports  in  2015  (€1.2  billion).  EU  imports  of 
machinery  were  much  smaller  (€0.2  billion).  EU  exports  are  projected  to  grow  very 
significantly  (EU  exports  up  by  19  or  62%  under  options  C1  and  C2  respectively  and  New 
Zealand's exports up by 9% in both options). Therefore this sector accounts for a very large 
overall  gain  in  export  value  also  considering  the  large  existing  trade.  However,  the  relative 
sectoral  output  change  for  the  EU  is  small,  as  shown  in  the  section  above  (+0.1%  for 
machinery  and  -0.1%  for  electric  equipment  and  other  manufactured  products).  For  New 
Zealand,  in  terms  of  sectoral  outputs  the  machinery  sector  would  be  the  most  negatively 
affected  and  would  see  its  output  reduced  by  around  2.9%  in  the  increased  liberalisation 
scenario,  while  the  electric  equipment  and  other  manufactured  products  would  experience  a 
decrease of 0.1%. 

Agriculture 

EU-Australia 
EU-Australia  trade  value2728  in  agriculture  products  were  €4.8  billion  in  2015  (EU  exports 
€2.8 billion, 9% of total, EU imports €2 billion, 21% of total). The share of agricultural goods 
in  total  EU  exports  to  Australia  (8.8%)  is  higher  than  that  in  the  overall  EU  trade  in 
agricultural  goods  (7.2%).  Australia  was  the  13th  largest  export  market  for  EU  agricultural 
exports while Australia was the 19th largest source of EU imports. The top five exported EU 
agricultural  products  were:  chocolate  and  confectionary,  spirits  and  liqueurs,  pasta  and 
biscuits,  pork  and  wine.  The  top  five  imported  agricultural  products  were:  oilseed  (canola, 
mostly used for bio-diesel production in the EU), wine, tropical fruits and nuts, bovine meat 
and animal fibre (including wool).  

The CGE modelling shows that in the long term, as the result of an EU-Australia FTA, EU 
exports of dairy and, to a lesser extent, fruit and vegetables, other food and beverages would 
increase.  Among  the  EU  imports  there  would  be  significant  relative  (in  percentage  terms) 
increases would occur for ruminant meat, beverages, dairy, sugar, cereals and rice under both 
options C1 and C2.  

The  relative  changes  in  the  long  term  EU  sectoral  output  would  generally  be  marginally 
negative results in the increased liberalisation scenario with the exception of ruminant meat, 
which  would  experience  the  biggest  decrease.  Australia  would  experience  sectoral  output 
growth  for  ruminant  meat,  sugar,  rice,  oilseeds  and,  to  a  lesser  extent,  cereals,  fruit  and 
vegetables and dairy.  

EU-New Zealand 
EU-New Zealand agricultural trade is asymmetric, reflecting the underlying historical29 trade 
relationship.  The  bilateral  trade  in  agriculture  products  was  €2.9  billion  (EU  exports  €0.4 
billion,  10%  of  total,  EU  imports  €2.5  billion,  71%  of  total)  in  2015.  The  share  of  EU 
agricultural exports to New Zealand (9.6%) is higher than that of the overall extra-EU trade 
(7.2%). New Zealand is not a major export market for the EU though, whereas it was the 11th 

27 The statistics for agricultural trade in 2015 is from European Commission trade data as processed by DG 
AGRI and publicly available at http://ec.europa.eu/agriculture/trade-analysis/statistics/index_en.htm  
28 The categories for the statistics of the current trade and the aggregations for the CGE modelling are not 
necessary compatible, therefore the current trade figures given are only indicative. 
29see in particular: Protocol No 18 on the import of New Zealand butter and cheese  of the accession treaty of the United 
Kingdom and other countries: OJ L 73, 27.3.1972. 

25 

 
 
 
                                                            
largest source of EU imports. The top five exported EU agricultural products were: pork, milk 
powder and whey, food preparations, wine and preparations of vegetables, fruit or nuts. The 
top five imported agricultural products were: sheep meat, wine, fruit, animal fibre (wool) and 
casein. 

The  CGE  modelling  shows  that  the  EU-New  Zealand  FTA  would  result  in  a  long-term 
increase of EU exports of other meat (e.g. pork), dairy and, to a lesser extent, other food and 
beverages.  Among  New  Zealand's  exports,  significant  relative  increases  would  occur  for 
dairy, ruminant meat, fruit and vegetables and other food. While the percentage increases for 
imports of sugar and rice are significant, the underlying actual trade flows are negligible.  

As also noted above, the relative changes in the long term EU sectoral output would generally 
be  marginally  negative,  with  the  exception  of  ruminant  meat,  which,  in  the  increased 
liberalisation  scenario,  would  experience  the  biggest  decreases.  New  Zealand  would 
experience sectoral output growth for ruminant meat, fruit and vegetables and - to a smaller 
extent - dairy, and a decrease for most other sectors.  

Sugar  

EU-Australia 

While Australia is a significant global sugar exporter, the EU-Australia sugar trade fluctuates 
depending  on  price  levels.  In  general  it  is  limited  (EU  exports  €11  million;  EU  imports  €7 
million  in  2015).  This  is  largely  due  to  the  current  EU  import  tariff  and  the  limited  TRQ 
available  to  Australia.  The  CGE  modelling  shows  significant  growth  in  Australian  sugar 
exports to the EU (in percentage terms) in the increased liberalisation scenario (124% under 
option C2, no change under option C1). Given the low volume of current imports the actual 
projected increased trade would not be significant. It is worth noting that stakeholder input to 
the public consolation showed major differences on the desirability of liberalising cane sugar 
imports  into  the  EU.  In  addition  a  stakeholder  pointed  out  that  sensitivity  of  the  EU's 
Outermost Regions over special sugar30 should also be taken into account. 

EU-New Zealand 

Between EU and New Zealand the underlying actual trade flows of sugar are not significant 
(EU  exports  €11  million,  EU  imports  €2  million  in  2015).  New  Zealand  is  not  a  major 
producer or exporter of sugar, so no major sugar exports to the EU are expected.  

Fruit and vegetables 

EU-Australia  

EU-Australia  bilateral  trade  in  fruit  and  vegetables  (EU  exports:  €31  million,  EU  imports: 
€261 million in 2015) mostly consists of imports of Australian nuts (€219 million). The effect 
modelled on exports by the CGE analysis shows a small change of magnitude in current EU 
exports (8% and 9% increase under options C1 and C2 respectively) and a somewhat bigger 
increase of Australian exports (20% under both options C1 and C2).  

Australia currently maintains some measures that negatively impact on EU exports (e.g. anti-
dumping measures on canned tomatoes, SPS measures on certain vegetable seeds). However 

30 E.g. unrefined cane sugar. 

26 

 
 
 
 
                                                            
the  FTA  is  expected  to  provide  the  necessary  frameworks  to  address  such  issues  more 
effectively. 

EU-New Zealand 

EU-New Zealand bilateral trade in fruit and vegetables (EU exports €9 million, EU imports 
€394  million  in  2015)  mostly  consist  of  imports  of  apples,  kiwifruit  and  onions  from  New 
Zealand.  The  effect  modelled  on  exports  by  the  CGE  analysis  shows  no  change  in  the 
magnitude of EU exports (2% and 3% increase under options C1 and C2 respectively), while 
there  is  a  sizeable  increase  of  imports  from  New  Zealand  (39%  and  38%  under  options  C1 
and C2 respectively).  

When  assessing  the  impact  of  these  increased  imports  it  is  worth  noting  the  counter-
seasonality31 of most fruit and vegetables imports. This means that a certain amount of New 
Zealand's  produce  is  not  directly  competing  with  EU  domestic  production,  but  rather  with 
produce from other Southern hemisphere producer countries (i.e. kiwifruit).  

The existing commercial cooperation and mutual investment is also significant in this sector. 
For example, EU and New Zealand investors own fruit orchards in each other's territory, or 
engage in further cooperation, such as New Zealand imports kiwifruit from the EU in the off-
season.  New  Zealand  maintains  some  measures  that  negatively  impact  on  EU  exports  (e.g. 
anti-dumping measures on preserved peaches, SPS measures on plant breeding material). The 
FTA is expected to provide the necessary frameworks to address such issues more effectively. 
Overall the increase of fruit and vegetable imports is not expected to have a major impact on 
EU production (the sectoral output change according to the CGE modelling would be -0.2% 
in the long term). 

Dairy 

EU-Australia 

EU exports of dairy products (€203 million in 2015) mostly include cheese, milk powder and 
whey.  Australia  has  already  some  preferential  access  to  the  EU  market  through  TRQs  for 
some types of cheese but EU imports remain small (€1 million in 2015). The CGE analysis 
shows  a  significant  increase  of  EU  exports  (48%  and  49%  under  options  C1  and  C2 
respectively).  The  import  growth  (1%  and  87%  under  options  C1  and  C2  respectively)  is 
limited in value, due to the small base of current Australian dairy exports to the EU.  

Australia  currently  maintains  some  measures  that  negatively  impact  on  EU  exports  (e.g. 
biosecurity  related  measures  on  certain  cheeses,  insufficient  protection  of  geographical 
indications). The FTA is expected to provide the necessary frameworks to address such issues 
more effectively, although this effect is not modelled, as explained earlier. Overall the FTA 
would provide sizeable new export opportunities for the EU producers.  

EU-New Zealand 

New Zealand is the world's largest dairy exporter accounting for one third of global trade in 
dairy products. New Zealand's dairy production is extensive; it relies largely on pasturage and 
its  expansion  is  limited  by  resource  constraints  (i.e.  availability  of  suitable  land  and  water) 
and  competition  for  the  same  resources  from  other  domestic  sectors  such  as  ruminant  meat 
production.  

31 Some fruits and vegetable imports do not occur in the season in which they are grown in the country of 
destination. 

27 

 
 
 
                                                            
EU trade with New Zealand in dairy products is moderate, especially in light of the amount of 
these  products  traded  by  the  EU  and  New  Zealand  with  other  partners  (EU  exports:  €51 
million, EU imports: €100 million in 2015). EU-New Zealand dairy trade consists mostly of 
EU exports of milk powder and whey and EU imports of butter and cheese. New Zealand has 
significant  preferential  access  to  the  EU  through  TRQs  for  butter  and,  to  a  lesser  extent, 
cheese though these are not fully used presently because of the in-quota tariff rates are high.  

The CGE analysis shows a significant increase of EU exports (27% and 29% under options 
C1 and C2 respectively), and imports (0% and 134% under options C1 and C2 respectively). 
However, these relative changes would mean limited negative change for overall EU domestic 
production and consumption.  

There are also increasing sectoral cooperation and investments by New Zealand's dairy sector 
in  Europe.  This  cooperation  makes  it  easier  to  supply  other,  Asian  markets,  thereby  taking 
advantage  of  the  seasonal  nature  of  milk  production  and,  more  importantly,  specialisation 
(such as EU-produced whey and its derived products).  

New Zealand currently does not provide sufficient protection of geographical indications for 
EU dairy products. The FTA is expected to provide the necessary frameworks to address such 
issues more effectively. However, this effect is not taken into account in the CGE modelling. 

Ruminant meat (beef and sheepmeat) 

EU-Australia 

The EU-Australia bilateral trade in meat is important (EU exports: €258 million – essentially 
all  pork;  EU  imports:  €338  million  –  out  of  which  €211  million  is  bovine  meat  and  €102 
million is sheepmeat). EU exports of meat products (beef, pork and poultry) face various SPS 
barriers in Australia.  

Australia is a leading world exporter of beef and sheepmeat exporting large quantities to Asia 
and  the  US.  Australia  has  preferential  access  to  the  EU  through  various  TRQs  for  beef  and 
sheepmeat.  The  CGE  modelling  projects  no  change  essentially  in  EU  exports  of  meat 
products (1% and 2% in options C1 and C2 respectively). However, this modelling does not 
take into account a possible reduction of NTBs such as SPS measures. The FTA is expected to 
provide the necessary frameworks to address such issues more effectively.  

Australian exports of beef and sheepmeat to the EU are currently limited by the size of TRQs 
and  high  out–of-quota  tariffs.  Under  option  C2,  Australian  exports  of  ruminant  meat  are 
projected to grow more than fivefold (539%) there is no substantial change under option C1. 
The  CGE  modelling,  due  to  its  limitations,  cannot  divide  the  ruminant  sector  into  beef  and 
sheepmeat,  and  cannot  fully  simulate  the  complexity  of  trade  of  the  different  product 
categories of ruminant meat. Nevertheless this finding is in line with another relevant study32 
undertaken by the Commission. 

EU-New Zealand 

New Zealand is also a leading exporter of beef and especially sheepmeat. EU-New Zealand 
bilateral trade in meat is very significant (EU exports: €70 million – essentially all pork; EU 
imports: €1,142 million –of which €943 million for sheepmeat and €80 million for beef). EU 
exports  of  some  meat  (poultry)  products  still  face  SPS  measures  in  New  Zealand.  However 

32 Cumulative economic impact of future trade agreements on EU agriculture  
http://ec.europa.eu/agriculture/trade-analysis/impact-assessment_en  

28 

 
 
 
                                                            
the modelling does not account for a possible reduction of NTBs such as SPS measures. The 
FTA is expected to provide the necessary frameworks to address such issues more effectively. 

Due to historical connections, New Zealand exports a very large proportion of sheepmeat to 
the  EU.  It  is  free  from  duties  under  a  very  large  TRQ.  New  Zealand  also  benefits  from 
preferential  access  for  beef,  although  for  a  much  smaller  quantity.  In  practice  New  Zealand 
does not fill its large sheepmeat TRQ and could, under the current circumstances, increase its 
duty  free  exports  by  about  40%.  The  reason  that  New  Zealand  exporters  do  not  use  this 
opportunity is that they pursue other lucrative export opportunities in Asia and elsewhere.  

New Zealand exports of ruminant meat are projected to grow by 25% under option C2 (there 
is no substantial change under options C1). This is very significant due to the large base of 
mostly  sheepmeat  exports  to  the  EU.  As  noted  above,  CGE  modelling  does  not  allow  for 
disaggregation of beef and sheepmeat. While the CGE modelling shows that ruminant import 
from New Zealand would grow significantly the currently unfilled sheepmeat quota suggests 
that expansion of such magnitude is unlikely to happen. New Zealand accounts for about 85% 
of the total EU imports of sheepmeat (in addition Australia accounts for about 10%).  

The  sheepmeat  market  is  affected  by  seasonality,  which  is  linked  to  the  counter-seasonal 
lambing  season  in  the  Southern  hemisphere,  as  a  significant  part  of  EU  imports  from  New 
Zealand (and Australia) are chilled (fresh) lamb. While there is an overlap, the impact on EU 
domestic  producers  is  less  significant  than  the  overhead  trade  figures  would  suggest,  while 
EU consumers benefit from the year-around supply of chilled lamb. New Zealand exports of 
beef are currently limited by the size of current TRQs and high out-of-quota tariffs (i.e. the 
MFN tariffs that imports pay outside of the TRQ).  

Overall  

The  full  removal  of  the  current  tariff  barriers  and  TRQ  limitations  (primarily  for  beef  and 
Australian  sheepmeat)  would  negatively  impact  EU  production  and  producers  under  option 
C2.  The  CGE  modelling  projects  a  1.2%  decrease  of  sectoral  output  for  the  EU  ruminant 
sector due to the combined impact of the FTAs with Australia and New Zealand. This figure, 
however, needs to be viewed in the light of the above analysis, especially the very significant 
EU imports of sheepmeat (€1,045 million from Australia and New Zealand), compared to EU 
imports  of  beef  (€291  million  from  Australia  and  New  Zealand).  The  results  from  the 
modelling  are  likely  overestimate  the  actual  impact  in  the  case  of  New  Zealand  due  to  the 
specific circumstances of sheepmeat trade (in particular the unfilled TRQ).  

Alcoholic beverages 

EU-Australia 

EU-Australia bilateral trade in alcoholic beverages (wines, spirits and beer) was sizeable (EU 
export: €559 million, mainly spirits and wine; EU imports: €485 million, almost exclusively 
wine).  The  EU  and  Australia  have  a  wine  agreement  that  provides  for  recognition  of  wine-
making practices and protection of geographical indications, but no tariff liberalisation.  

EU-New Zealand 

EU-New Zealand bilateral trade in alcoholic beverages (wines, spirits and beer) was sizeable 
(EU  exports:  €60  million,  mainly  spirits  and  wine;  EU  imports:  €369  million,  almost 
exclusively wine). 

29 

 
 
 
Overall the CGE modelling looks at a larger sectoral aggregation for beverages and tobacco, 
but alcoholic beverages is the largest sub-group in this category. The CGE modelling projects 
a  moderate  increase  of  trade  both  ways  for  beverages  and  tobacco.  However,  the  increase 
would appear to have no impact on the sectoral output in the EU. 

Services 

EU-Australia 

EU services exports to Australia were worth €18.6 billion, while imports were €7.8 billion in 
2014. EU exports services sectors would make modest gains in bilateral exports of about 7%, 
while imports would be at 9%. For the EU there is no measurable impact on sectoral output 
for  services.  For  Australia  (in  both  the  conservative  and  the  increased  liberalisation 
scenarios), most of the gains lie in the transport services and communication services sectors. 

EU-New Zealand 

EU services exports to New Zealand were worth €2.2 billion, while imports were €1.3 billion 
in 2014. In the conservative and increased liberalisation scenarios EU services' sectors would 
make  modest  gains  in  bilateral  exports  of  about  7%  and  8%  respectively,  while  imports 
increase by 9 and 8%,. As noted above, there is no measurable impact on sectoral output for 
services in the EU. For New Zealand most of the relative output change occurs in the utilities 
and communications sectors.  

It  is  important  to  point  out  that  the  relatively  modest  gains  for  projected  bilateral  services 
trade  with  Australia  and  New  Zealand  are  partly  due  to  the  constraints  in  the  modelling:  as 
stated in point 5.1 above, fixed labour closure is applied, meaning that any change in demand 
would  impact  on  the  prices  rather  than  on  the  volumes.  This  leads  to  gains  in  the  services' 
sectors  being  underestimated.  Furthermore,  the  quantitative  analysis  does  not  contain 
estimates  on  the  positive  effects  of  liberalisation  in  public  procurement,  in  view  of  the 
difficulty in quantifying such provisions. 

5.5. Impact on SMEs 

The external study showed that in addition to tariff barriers regulatory trade barriers including 
regulatory  heterogeneity  (i.e.  the  existence  of  different  regulatory  frameworks  in  different 
countries)  may  have  a  greater  impact  on  SMEs  than  on  larger  companies.  SMEs  generally 
have  more  limited  financial  resources  and  lower  human  resource  capacities  than  larger 
companies. Therefore they are less equipped to handle differing regulatory frameworks, deal 
with  diverse  national  regulatory  bodies  and  absorb  risks.  This  is  especially  the  case  when 
operating in diversely regulated, intensely competitive markets, particularly those dominated 
by large and long-established companies.  

As  a  consequence  of  heterogeneous  non-tariff  trade  barriers,  many  SMEs  are  effectively 
prevented  from  engaging  in  international  trade.  This  has  adverse  consequences  for  intra-
industry  competition,  cross-country  innovation  spill-overs,  and  economic  convergence.  It  is 
very important for SMEs to have provisions that speed up and simplify customs procedures 
and paperwork. This would mean less costs and red tape, which can disproportionately impact 
small  exporters.  Specific  provisions  under  the  comprehensive  FTAs  on  SMEs  and  bilateral 
cooperation would contribute to improving such transparency for SMEs. 

30 

 
 
 
 
Statistics available show that EU SME exporters are prevalent in “wholesale, retail trade and 
technical  activities”, 
repair”  services,  “manufacturing”,  “professional,  scientific  and 
“transportation  and  storage”  services,  “construction”  services,  “accommodation  and  food” 
services,  “information  and  communication”  services,  “administrative  and  support”  services, 
and “agriculture, forestry and fishing” sectors. 

Options  C1  and  C2  have  similar  general  implications  for  SMEs.  Option  C1  features  a 
conservative  scenario  that  would  provide  comparatively  less  benefits  for  enterprises, 
including SMEs, due to no reduction of NTBs in Australia and New Zealand. Option C2, by 
contrast,  would  provide  more  benefits  in  terms  of  more  ambitious  provisions  for  NTB 
reduction and rules that would be able to reduce trade costs also for SMEs.  

As concerns the quantitative impact of FTAs with Australia and New Zealand on EU SMEs, 
both  changes  in  sectoral  output  and  in  sectoral  exports  as  projected  by  the  CGE  model  are 
marginal  under  option  C1.  SMEs  producing  dairy  products,  wood  and  paper  products,  food 
products,  textiles  products  are  likely  to  benefit  more.  SME  service  providers  in  transport, 
communications and business services are also likely to see rising exports as the result of the 
FTAs. 

Under option C2 sectoral changes in bilateral exports are significant for a number of sectors in 
which EU SMEs are strong exporters. Accordingly, EU SMEs active in the manufacturing of 
wood  and  paper  products,  textiles,  chemicals  products,  metal  products,  non-metal  products, 
motor  equipment,  machinery  and  electrical/electronic  components  are  likely  to  benefit  most 
from liberalisation measures that go beyond tariff eliminations and effectively aim to reduce 
regulatory differences. The size and direction of the estimates matches the literature on non-
tariff trade barriers and how NTBs particularly hinder the internationalisation of SMEs.  

5.6. Impact on Third Countries, in particular Least Developed Countries (LDCs) 

Based  on  the  summary  of  CGE  modelling  results,  LDCs  in  general  will  not  experience  a 
change  in  their  GDP  due  to  the  EU-Australia  and  EU-New  Zealand  FTAs,  while  they  will 
increase total trade. This is due to a large increase in trade with the EU that compensates for a 
decline in trade with Australia, New Zealand and other partners. On the other hand, a small 
sub-set of Pacific countries would encounter a small (0.2%) decline in their total exports in 
the  long  term  under  option  C2,  due  to  a  reduction  in  their  trade  with  Australia  and  New 
Zealand.  This  result  is  partly  due  to  CGE  modelling  limitations,  and  is  not  supported  by 
further qualitative analysis. Exports from Pacific island countries to the EU are not in direct 
competition with the exports of Australia and New Zealand. Pacific island countries continue 
to benefit from the existing Pacific Economic Partnership Agreement and current preferential 
arrangements under the EU's General Scheme of Preferences (GSP), including for LDCs the 
"Everything  but  Arms"  (EBA)  arrangement,  as  well  as  Australia's  and  New  Zealand's  GSP 
schemes.  Pacific  island  countries  could  benefit  separately  from  further  improved  access  to 
Australia  and  New  Zealand  under  the  PACER  Plus  agreement.  This  is  a  regional  trade 
agreement including Australia, New Zealand and most of the Pacific Island countries that is 
currently being negotiated.  

Percentage change of total exports under the two scenarios, (long term) 

31 

 
 
 
5.7. Environmental impact 

As  noted  above  (chapter  4,  point  C)  sustainable  development  is  an  overarching  policy 
objective  of  the  EU.  Trade  policy  also  has  its  role  to  play.  The  inclusion  of  Trade  and 
sustainable development (TSD) provisions in EU FTAs is a key tool in this regard. The aim of 
TSD provisions is to maximise the potential of increased trade and investment, among others 
to  environmental  protection,  including  the  fight  against  climate  change,  and  to  engage  with 
partner countries in a process  which includes and enhances dialogue, transparency and civil 
society  involvement.  Provisions  also  allow  for  independent  and  impartial  review.  Such 
engagement  will  allow  to  raise  awareness  of  these  policy  objectives  and  to  draw  more 
attention  to  ratification  of  the  relevant  conventions  and  to  enhance  the  quality  of  their 
implementation. In addition, it will allow an exchange of best practice in dialogues, leading to 
timely mitigation.  
The  results  of  the  Environmental  Performance  Index  (EPI33)  assessed  the  overall 
environmental  performance  of  Australia  and  New  Zealand  on  six  main  aspects:  water 
resources, fisheries, biodiversity, forest, climate and energy. Australia ranked 13th worldwide, 
while New Zealand ranked 11th, and both countries ranked above the EU average. 

Australia  performs  better  than  the  EU  averages  on  air  quality  and  health  impact,  while  it 
scores  much  lower  on  fisheries  and  climate  and  energy,  which  is  its  worst  performing 
category, due to its trend in carbon emissions for electricity generation. Minor differences are 
observed for water and sanitation and water resources, where Australia tops the ranking. 

New  Zealand  performs  better  than  EU  averages  in  terms  of  air  quality  and  health  impact. 
However, it lags behind on agriculture and scores very low in nitrogen balance sub-category, 
ranking  141st,  as  well  as  on  forestry  and  fisheries.  The  EU  and  New  Zealand  show  very 
similar scores for climate and energy and water resources. 

33 The index is provided by Yale Centre for Environmental Law & Policy (YCELP) and the Centre for International 
Earth Science Information Network (CIESIN) at Columbia University 

32 

 
 
 
 
                                                            
Quantitative analysis: 

CO2 emissions  

CO2 emissions will increase in all three trading partners in both C1 and C2 scenarios. New 
Zealand increases its CO2 emissions the most, ranging between 0.29% and 0.64% respectively 
in the conservative and increased liberalisation scenarios. The figures for Australia are 0.12% 
and 0.38% in the two scenarios, while in the EU the increases in CO2 emissions are negligible 
and 0.03% and 0.04% in the conservative and increased liberalisation scenarios respectively.  

Percentage change in CO2 emissions in options C1 and C2 

Conservative (C1) 

Increased liberalisation (C2)

EU 

Australia 

New Zealand 

0.03 

0.12 

0.29 

0.04 

0.38 

0.64 

In parallel to the marginal increase of CO2 emissions in the EU, Australia and New Zealand, 
the CGE modelling simulation projects decreases in almost all other countries. This suggests 
that overall; the FTAs are expected to have only a negligible, though negative, impact on CO2 
emissions globally over the long term. 

Qualitative analysis: 

Air pollution 

While the CGE model does not provide estimates on the impact of air pollution, some insight 
can be gained by exploring air pollution (sulphur oxides (SOX) and nitrogen oxides (NOX)) by 
sectors.  In  the  EU  and  New  Zealand  the  major  sources  of  NOX  are  transport,  while  in 
Australia,  the  largest  source  of  NOX  is  industrial  combustion.  Although  the  sectors  that  are 
expected to benefit most from the FTAs in the EU involve combustion processes, the impact 
is very small and therefore does not pose particular concern.  

Biodiversity 

The  expansion  of  the  agricultural  sector  in  Australia  (to  a  small  extent  the  rice,  sugar  and 
cereals sectors) and  New  Zealand  (in the animal and the fruit and vegetables sectors) could 
pose some potential threat to biodiversity. The long term increase in land use and intensity in 
New Zealand and the inefficient use of nitrogen fertilisers pose some limited concerns about 
the potential negative implications for ecosystems. 

Land use change 
The  external  study  also  provides  additional  quantitative  analysis  for  land  use  intensity34 
change  calculated  on  the  basis  of  the  CGE  simulation  results.  Land  intensity  is  expected  to 
experience  a  negligible  increase  (0.55%)  in  the  EU.  This  is  largely  due  to  the  expected 
increase  in  some  agricultural  sectors  such  as  animal  farming.  Australia  is  expected  to 
experience a moderate increase (0.98%) on land use intensity most likely due the expansion of 
the  ruminant  meat  and  some  agricultural  sectors.  A  similar  moderate  increase  (0.99%)  is, 

34 Land use intensity is measured by total land used over output. An increase in land use intensity can result from 
an expansion of or a shift towards more land intensive sectors. 

33 

 
 
 
 
                                                            
expected  in  New  Zealand,  most  likely  due  the  expansion  of  the  ruminant  meat  and  the 
vegetable and fruit sectors. This suggests that land use would increase by about 1%. 

Overall,  the  findings  of  the  analysis  point  to  a  minor  impact  of  both  FTAs  on  the 
environment. The expected impact on global emissions is negligible as it is mitigated by the 
fact that the FTA favours relatively less energy- and emission-intensive sectors, leading to a 
reallocation  of  production  towards  cleaner  sectors  in  the  EU.  Although  some  of  the  sectors 
that  could  benefit  most  from  the  FTA  in  Australia  and  New  Zealand  are  environmentally 
sensitive,  such  as  oil  and  coal  and  some  agricultural  production,  the  long-term  impact 
predicted by the CGE modelling is limited, even in the increased liberalisation scenario. The 
only area of limited concern is a potential pressure on biodiversity by the expected expansion 
of some of the agricultural sub-sectors in New Zealand and Australia. In the EU there could 
be  potential  negative  impact  on  biodiversity  in  the  case  of  reduction  of  sheep  farming,  as  a 
part of such farming takes place in high nature value land.  

The policy to include ambitious trade and sustainable development provisions in EU FTAs is 
expected to have a positive environmental impact overall in both Australia and New Zealand. 
The aim of these provisions is to maximise the potential contribution of increased trade and 
investment for environmental protection. This would include, among others, the fight against 
climate  change,  and  threats  to  biodiversity  and  promotion  of  sustainable  management  of 
natural resources, such as forestry and fisheries, through the improved engagement with the 
partner  countries  based  on  international  rules  and  agreements  and  through  a  process  with 
dialogues, transparency and civil society involvement.  

Stakeholders  from  the  non-profit  sector  and  as  the  business  sector  noted  the  importance  of 
enforcing  environmental  rules  and  not  lowering  standards.  Non-profit  sector  stakeholders 
noted  specific  issues  such  as  maintaining  high  biosecurity  standards  (to  mitigate  risk  to 
biodiversity) and addressing harmful fishery subsidies. 

5.8. Social impact 

Similarly  to  the  environmental  aspects  the  overarching  sustainable  development  policy 
objective  also  applies  to  labour  and  social  aspects.  The  aim  of  trade  and  sustainable 
development  (TSD)  provisions  in  EU  FTAs  is  to  maximise  the  potential  of  increased  trade 
and investment to the decent work agenda and to engage with partner countries in a process 
which includes and enhances dialogue, transparency and civil society involvement. Provisions 
also  allow  for  independent  and  impartial  review.  Such  engagement  will  allow  to  raise 
awareness  of  these  policy  objectives  and  to  draw  more  attention  to  the  ratification  of  the 
relevant  conventions  and  to  enhance  the  quality  of  their  implementation.  In  addition,  it  will 
allow  for  an  exchange  of  best  practice  in  dialogues,  leading  to  timely  mitigation.  The  TSD 
provisions  contain  commitments  on  adherence  to  core  ILO  standards  and  conventions  and 
effective  implementation  in  law  and  in  practice,  the  pursuance  of  high  levels  of  labour 
protection, and the effective enforcement of and non-derogation from domestic laws in these 
areas,  in  order  to  prevent  a  ‘race  to  the  bottom’.  Specific  provisions  encouraging  trade 
practices  and  schemes  that  support  and  promote  sustainable  development  goals,  such  as 
Corporate Social Responsibility, are also included in the TSD provisions.  

Quantitative analysis 

34 

 
 
 
 
Wages35 

In the long term real wages will increase for all trade partners under the two scenarios with 
the largest increases in New Zealand. For New Zealand, real wages will increase around 0.3% 
in  the  conservative  scenario  for  both  unskilled  and  skilled  labour.  In  the  increased 
liberalisation  scenario,  real  wages  of  unskilled  labour  and  skilled  labour  will  increase  by 
around 0.8% and 0.6% respectively.  

For  Australia  the  figures  are  0.2%  (both  unskilled  and  skilled)  in  the  conservative  scenario 
and around 0.3% (both unskilled and skilled) in the increased liberalisation scenario.  

Given  the  difference  in  respect  of  the  size  of  the  economy  and  the  labour  markets,  the  EU 
would experience a negligible increase in real wages in both the conservative and increased 
liberalisation scenarios. Both unskilled and skilled real wages would increase between 0.02% 
and 0.05% in both scenarios. 

Reallocation of jobs  

The modelling suggests a reallocation of EU labour primarily  towards  the motor equipment 
sector  (0.22  and  0.28%  in  options  C1  and  C2  respectively  for  both  skilled  and  unskilled 
labour), which is in line with the increase in output of motor equipment seen above. On the 
other hand, the fruit and vegetables sector would experience the largest decline in labour in 
the  conservative  scenario  (-0.19%)  while  the  ruminant  meat  sector  would  experience  the 
largest  decline  in  labour  in  the  increased  liberalisation  scenario  (-1.21%),  followed  by  the 
sugar sector (-0.23%). As above, this seems to reflect increases in exports from Australia and 
New  Zealand  in  these  sectors.  The  reallocation  of  labour  in  other  sectors  is  marginal  or 
negligible in the long term. 

The  impact  of  the  EU-Australia  FTA  on  reallocating  labour  from  one  sector  to  another  in 
Australia  is  mixed.  In  general  agricultural  and  food-related  sectors  are  allocated  labour  (the 
highest gains are for oil seed sector under option C1 and the ruminant meat sector under the 
options  C2),  while  other  sectors  see  mostly  negative  changes  (e.g.  the  automotive  and 
machinery sectors). 

The  pattern  for  New  Zealand  is  different.  This  is  because  most  sectors  are  impacted 
negatively  as  labour  is  mostly  reallocated  to  ruminant  meat  (only  under  option  C2)  and  the 
fruit and vegetable sectors (under both options C1 and C2)  

Qualitative analysis 

All  EU  Member  States  ratified 
the  core  International  Labour  Organisation  (ILO) 
conventions36.  Australia  and  New  Zealand  have  ratified  most  of  these,  except  the  minimum 

35 Other indicators, i.e. consumer prices and welfare are analysed under the next chapter 5.10 dealing with 
consumer impacts. 
36 In its 1998 Declaration on Fundamental Principles and Rights at Work, the International Labour Organisation 
(ILO) established four core labour standards that are deemed universal and have since served as a benchmark 
for the protection of workers’ rights: 1) freedom of association and the effective recognition of the right to 
collective bargaining; 2) the elimination of all forms of forced or compulsory labour; 3) the effective abolition of 
child labour; 4) the elimination of discrimination in respect of employment and occupation. These four core 
labour standards are protected by the following eight fundamental conventions:  
1. 
2. 
3. 
4. 

Freedom of Association and Protection of the Right to Organise, 1948 (Convention 87)   
Right to Organise and Collective Bargaining, 1949 (Convention 98)  
Forced Labour, 1930 (Convention 29)  
Abolition of Forced Labour, 1957 (Convention 105)  

35 

 
 
 
                                                            
age core convention (ILO 138). In addition, New Zealand has not ratified the convention on 
freedom  of  association  (ILO  87).  Nevertheless  Australia  and  New  Zealand,  in  practice 
provide sufficient protections for workers’ rights. However, even some core labour standards 
remain subject to individual cases before the ILO. 

Freedom of association and right to collective bargaining 

Cases relating to freedom of association and the effective recognition of the right to collective 
bargaining are among the most common those reviewed by the ILO.37 Analysis of the external 
study reveals several cases across the EU and in New Zealand where freedom of association 
and  the  right  to  collective  bargaining  are  being  infringed  upon.  This  comes  in  a  general 
context of declining trade union membership. 

Child labour 

The  fact  that  Australia  and  New  Zealand  have  not  ratified  ILO  Convention  138  concerning 
Minimum Age for Admission to Employment does not mean that child labour is necessarily 
more  common  than  in  the  EU.  Australia  has  the  legislative  and  institutional  frameworks  in 
place to address the requirements of Convention 138, and previously conducted a compliance 
assessment on in 2012/2013; Australian law and practice was found to be compliant with the 
Convention.  However  a  timeframe  for  ratification  has  not  yet  been  set.  Such  labour  is  also 
regulated  under  domestic  laws  and  other  ILO  conventions  ratified  by  Australia  and  New 
Zealand  in  different  sectors  (Conventions  10,  58,  59).  However,  the  ILO  has  recently 
highlighted  inadequate  monitoring  of  preventing  children  from  doing  hazardous  work, 
especially in the construction, agriculture and hospitality industries. This issue has also been 
raised in a recent study by the New Zealand Work and Labour Market Institute at Auckland 
University of Technology.   

Work done by children under the age of 15 is generally concentrated in services (restaurants, 
supermarkets, petrol stations) or family work (cleaning, household assistance), which do not 
have a direct impact on international trade flows. In addition, work done by children exists in 
agriculture, and mostly consists of working on family farms. The prospect of increased trade 
and investment opportunities - as the result of the EU-Australia and EU-New Zealand FTAs – 
are not expected to negatively impact on the current child labour practices. 

Elimination of discrimination in respect of employment and occupation 

Despite  ratifying  and  applying  ILO  Convention  100  concerning  equal  remuneration  and 
Convention  111  on  discrimination  in  respect  of  employment  and  occupation,  the  external 
study  highlights  the  existing  gender-,  race-  and  disability-based  discrimination  in  Australia 
and  New  Zealand,  in  particular  the  enduring  gender  pay  gap.  The  records  of  Australia  and 
New Zealand in this regard are comparable with that of EU Member States. The EU-Australia 
and  EU-New  Zealand  FTAs  may  positively  impact  the  gender  pay  gap  through  direct  or 
indirect trade effects. For example salaries in exporting sectors are on average higher than in 
other sectors. Conversely, the impact of an EU-Australia and EU-New Zealand FTAs on the 
gender pay gap is likely to be uneven across sectors, reflecting the sectoral effects described 
above. 

Minimum Age, 1973 (Convention 138)   
Worst Forms of Child Labour, 1999 (Convention 182)   
Equal Remuneration, 1951 (Convention 100)  
Discrimination (Employment and Occupation), 1958 (Convention 111)   

5. 
6. 
7. 
8. 
37 International Labour Organisation (ILO) Committee of Experts on the Application of Conventions and 
Recommendations (CEACR) 

36 

 
 
                                                                                                                                                                                          
Cooperation activities 

The  external  study  has  highlighted  cases  where  cooperative  mechanisms  could  be  most 
effective,  such  as  the  participation  of  unions,  labour  and  human  rights  organisations  in  the 
monitoring of the FTAs’ labour provisions.  

The  policy  to  include  ambitious  trade  and  sustainable  development  provisions,  covering, 
among others, effective implementation of ILO fundamental principles and rights at work and 
cooperative provisions in EU FTAs, is expected to have an overall positive social impact.  

Stakeholders  noted  the  importance  of  maintaining  social  standards.  Non-profit  sector 
stakeholders  noted  specific  issues  related  to  education  and  social  security  and  stated  their 
belief that these sectors should not be subject to trade liberalisation. 

5.9. Impact on consumers 

Consumers may be affected in various ways by the potential enhancements in the EU's trade 
and investment relations with Australia and New Zealand. Impacts may be felt in areas such 
as expenditure, prices and choice.  

For New Zealand, consumer prices would increase negligibly under option C1 (0.02%) and 
marginally  under  option  C2  (0.14%).  By  contrast,  for  Australia  consumer  prices  would  go 
down under both options (-0.13% and -0.14% respectively). For the EU, options C1 and C2 
would  both  bring  a  negligible  increase  in  consumer  prices  (0.03%  and  0.06%  respectively). 
The smaller change sin the EU should be viewed in light of the different size of the overall 
economies,  and  the  relative  importance  of  bilateral  trade  to  the  EU,  Austaralia  and  New 
Zealand.  

In  terms  of  economic  welfare  (this  is  an  economic  indicator  that  compares  the  change  in 
consumer  utility),  the  impact  on  the  EU,  Australia  and  New  Zealand  would  be  positive.  In 
absolute values, in the long term the EU's gains would vary between €2.6 billion (under the 
conservative  option)  and  €4.8  billion  (under  the  increased  liberalisation  option).  New 
Zealand's  and  Australia's  welfare  gains  would  also  be  positive  (see  also  the  figures  under 
point 5.4.). 

The EU's policy not to lower standards for safety, the environment and in other areas will also 
ensure that the current level of protection is upheld. In both Australia and New Zealand there 
is  already  a  high  level  of  food  and  product  safety  and  regulatory  frameworks  that  ensure 
general  consumer  protection.  Therefore  the  FTAs  are  not  expected  to  have  any  immediate 
impact in this area. Instead the intended improvements to regulatory cooperation could result 
in higher protection in these areas in the future. 

Expanding  trade  would  provide  more  choices  for  consumers  in  the  EU,  Australia  and  New 
Zealand (e.g. due to counterseasonality of some agricultural products). Consumers could also 
benefit indirectly from cooperation on consumer protection. 

In  their  responses  to  the  public  consultation  stakeholders  highlighted  the  importance  of 
maintaining the  EU's high level of consumer  protection. Many  stakeholders  believe that the 
FTAs will have a positive impact on consumers.  

37 

 
 
 
 
5.10. Impact on human rights 

As  described  under  the  environmental  and  social  impacts,  EU  FTAs  address  trade  and 
sustainable  developments  issues,  and  thus  also  labour-related  human  rights.  It  is  also 
important  to  note  that  EU  policy  is  to  establish  standard  human  rights  clauses  in  political 
framework  agreements  such  as  the  EU-Australia  Framework  Agreement  and  the  EU-New 
Zealand Partnership Agreement on Relations and Cooperations. These agreements provide an 
overarching framework for, among others, human rights aspects of the bilateral relationships. 
Trade  agreements  are  designed  to  become  part  of  the  overall  institutional  framework  for 
bilateral relations, to further EU objectives on human rights. 

Context and overview of the human rights situation 

Australia  

Overall Australia has a positive human rights record domestically and is heavily involved in 
advocating  human  rights  in  the  Indo-Pacific  region  and  internationally.  Human  rights  in 
Australia  are  protected  by  a  democratic  governmental  process,  freedom  of  the  press  and  a 
separate judiciary, even if human rights are not explicitly outlined in a Bill of Rights. There 
are  a  healthy  number  of  NGOs  and  independent  agencies  who  both  advise  the  government 
and  promote  human rights. Freedom of speech and religious beliefs are protected. Australia 
appointed a full-time Human Rights Commissioner, and also announced additional measures 
to provide a safety net for women and children at high risk and took further efforts towards 
gender equality and upholding the rights of persons with disabilities. 

Despite this overall positive assessment, Australia recognises human rights are a priority area 
for  policy  action.  The  social  situation  for  indigenous  people  notably  remains  a  priority  area 
for  any  government  and  despite  the  moves  towards  more  explicit  recognition  of  indigenous 
rights,  additional  action  is  needed  to  improve  on  every  indicator.  UN  agencies  (incl. 
UNHCR),  UN  rapporteurs  as  well  as  domestic  and  international  human  rights  groups  have 
also voiced concern about Australia's policy towards refugees and asylum seekers arriving in 
Australia  by  boat.  During  the  UN's  UPR  (Universal  Periodic  Review38),  Australia  was 
encouraged to review its detention and asylum policies, to close the gap between indigenous 
and  non-indigenous  peoples  and  to  ratify  a  number  of  key  international  human  rights' 
instruments, including the Optional Protocol to the Convention against Torture.  

Through  its  dialogues  (on  security,  counter  terrorism,  and  migration)  the  EU  engages  with 
Australia on migration policy and on countering radicalisation and terrorism. In 2015, the EU 
and  Australia  agreed  to  maintain  regular  formal  exchanges  on  international  human  rights' 
issues.  

The EU-Australia Framework Agreement (FA), initialled in March 2015 includes the respect 
of human rights as one of essential elements of the bilateral framework. Since the FA creates 
an overall institutional framework, other specific agreements, such as the future EU-Australia 
FTA  will  become  an  integral  part  of  the  overall  bilateral  relations  as  governed  by  this  FA. 
This  institutional  framework  will  help  to  ensure  that  human  rights  considerations  are  fully 
taken  into  account.  The  FA  will  also  provide  opportunities  to  further  enhance  dialogue  and 
cooperation on human rights issues. 

New Zealand 

38 UPR is an UN  process, which involves a review of the human rights records of all UN Member States 

38 

 
 
 
                                                            
Human  rights  in  New  Zealand  are  sufficiently  protected  under  national  laws  and  in 
accordance  with  international  human  rights  conventions.  In  general,  the  country's  human 
rights  situation  is  considered  positive.  New  Zealand  has  an  independent  Human  Rights 
Commission.  

Following the 2014 UPR recommendations, New Zealand has adopted legislation to address 
the prevention of torture and ill treatment (notably through the Vulnerable Children Act) and 
cyberbullying  (through  the  Harmful  Digital  Communication  Act).  New  Zealand  has 
acknowledged  the  need  to  prioritise  child  poverty,  family  violence  and  gender  issues  (i.e. 
gender pay gap and the prevention of violence against women). The government is well aware 
of these challenges and is making a genuine effort to address them. 

The  EU  and  New  Zealand  hold  regular  human  rights  consultations  in  international  fora, 
including at the UN.  

The  EU-New  Zealand  Partnership  Agreement  on  Relations  and  Cooperation  (PARC)  was 
signed  on  5  October  2016.  The  PARC  includes  the  respect  of  human  rights  as  one  of  the 
essential elements of the bilateral framework. Since the PARC creates an overall institutional 
framework, other specific agreements in the future, such as the future EU-New Zealand FTA 
will become an integral part of the overall bilateral relations as governed by the PARC. This 
institutional  framework  will  help  to  ensure  that  human  rights  considerations  are  fully  taken 
into  account.  The  PARC  will  also  provide  opportunities  to  further  enhance  dialogue  and 
cooperation on human rights issues. 

Assessment of impacts of the different options on human rights 

The  analysis  of  the  human  rights  impact  of  trade-related  policy  initiatives  focuses  on  the 
potential  impacts  of  the  different  trade  policy  options  under  consideration.  The  specific 
human  rights  likely  to  be  affected  by  the  FTAs  with  Australia  and  New  Zealand  have  been 
identified below. This report includes analysis of the potential impact on human rights of the 
particular trade measures under consideration.  

The  potential  economic,  social,  human  rights  and  environmental  impacts  of  the  eventual 
agreements  will  be  examined  in  more  details  through  independent  Sustainability  Impact 
Assessments  (SIAs).  The  SIAs  will  rely  on  a  wide-ranging,  continuous  consultation  of 
stakeholders – notably civil society – in the EU, Australia and New Zealand. The SIAs will be 
finalised  ahead  of  the  initialling  of  the  agreements  and  their  findings  will  feed  into  the 
negotiating  process.  The  SIAs  will  aim  to:  (a)  assess  the  likely  effects  of  the  agreement  on 
sustainable development and human rights in the EU, the partner country and other relevant 
countries, especially LDCs; and (b) to make recommendations and propose flanking measures 
to  maximise  the  benefits  of  the  agreement  and  prevent  or  minimise  any  potential  negative 
impacts. 

The  public  consultation  asked  stakeholders  to  identify  likely  impacts,  including  on  human 
rights. Respondents considered that improved employment (such as the number and quality of 
jobs,  household  income  and  wages)  and  the  affordability  of  essential  goods  and  services 
would  be  the  most  positively  affected  areas.  Some  respondents  were  concerned  about    the 
potential  harm  to  social  and  labour  rights,  but  stated  that  this  could  be  limited,  if  there  was 
only a conditional liberalisation, one which ensured a level playing field. 

Having  combined  the  stakeholders'  feed-back  with  the  main  findings  of  other  independent 
assessments, most importantly the recent UPRs of Australia (2015) and New Zealand (2014), 

39 

 
 
 
the  following  particular  rights,  with  a  closer  relationship  to  the  economy  were  selected  for 
closer assessment.39 

•  availability  and  affordability  of  essential  goods  or  services  /  right  to  an  adequate 

standard of living; 
right to health;  
rights of indigenous peoples; and 

• 
• 
•  business and human rights. 

Direct impact on human rights is difficult to isolate because there are a number of different 
political frameworks  (i.e.  dealing  with different areas) that have an impact on them and the 
generally  recognised  high  level  of  human  rights  enjoyed  in  the  EU,  Australia  and  New 
Zealand. Therefore the impact on human rights is limited mostly to the indirect promotion of 
social  and  economic  rights,  such  as  the  right  to  an  adequate  standard  of  living,  the  right  to 
health, or the right to work.  

Options C1 and C2 also have the potential to lessen the gender gap in employment, as they 
would  create  overall  employment  opportunities,  and  raise  the  overall  standard  of  living.  In 
addition, the EU policy of including civil society dialogue mechanism in its FTAs and greater 
transparency  in  general  would  contribute  to  the  enjoyment  of  human  rights  related  to 
business, while other elements of the envisaged FTAs would provide important benchmarks 
(e.g. reference to international conventions and multilateral agreements). 

Availability and affordability of essential goods or services / Right to an adequate standard of 
living 

Overall, increased market access is estimated to lead to welfare gains (see table under point 
5.4).  Real  GDP  is  also  estimated  to  rise  under  both  options.  Import  prices  for  essential 
products would not experience significant change. In option C1 the projected changes in the 
consumer price index (CPI) would be negligible in the long term. It is worth noting that for 
the  EU  and  New  Zealand  the  CPI  would  increase  while  for  Australia  it  would  decrease.  In 
option  C2  the  changes  are  bigger,  but  still  negligible  for  the  EU  and  negative  for  Australia 
(that  is  the  average  consumer  price  level  would  fall).  For  New  Zealand  the  CPI  change  is 
more  apparent  (+0.29%)  and  is  likely  the  result  of  increased  exports  of  some  agricultural 
products  and  overall  wage  increases.  Welfare  gains  and  the  rise  of  GDP,  coupled  with 
increasing  wages,  would  more  than  compensate  for  the  increase  in  the  CPI.  Also,  the 
modelling  results  show  that  the  wage  increase  is  predicted  to  be  more  significant  in  the 
unskilled category thus proportionally providing more benefits to unskilled workers.  

However, while the overall standard of living is expected to grow, increased market access for 
primary  agriculture  may  negatively  affect  the  standard  of  living  and  traditional  lifestyle  of 
small farmers in the EU. Adverse impacts on rural employment in the EU are possible, both 
skilled and unskilled agricultural labour may face adverse consequences. 

Right to health 

Both  Australia  and  New  Zealand  have  highly  developed  health  systems  that  include 
government-run  pricing  and  reimbursement  schemes  for  pharmaceuticals.  Trade  agreements 

39 Impacts on environmental issues (including the right to a clean environment) and social and labour issues 
(including the rights to enjoyment of just and favourable conditions of work, and to social security, including 
social insurance) were assessed under separate points 5.7. and 5.8. Therefore they are not repeated here. These 
particular rights, however, are included in the summary table. 

40 

 
 
 
                                                            
negotiated by the EU, Australia and New Zealand, respectively with other partners have not 
altered the running of these schemes or led to higher costs for medicines.  

Comprehensive  FTAs  between  the  EU  and  Australia  and  New  Zealand  respectively  under 
options C1 and C2 could lead to decreasing existing import duties and further streamlining of 
regulatory  cooperation  on  pharmaceuticals  (e.g.  closer  cooperation  on  Good  Manufacturing 
Practices).  

Comprehensive  FTAs  would  include  a  guarantee  that  would  preserve  the  parties'  ability  to 
regulate  in  the  public  interest  to  achieve  legitimate  public  policy  objectives  such  as  the 
protection and promotion of public health.  

Rights of indigenous peoples 
Depending on the specific situation, trade agreements40 can include exceptions and carve-outs 
to  ensure  the  respective  governments'  ability  to  adopt  measures  that  preserve  the  rights  and 
preferences for indigenous peoples.  

Australia 

Australia's Aboriginal and Torres Strait Islander peoples today make up approximately 3% of 
Australia's  population.  However,  successive  governments  have  faced  challenges  in  their 
policies  towards  the  Aboriginal  population.  The  "reconciliation"  movement  is  said  to  have 
begun  with  the  1967  referendum  to  remove  clauses  in  the  Australian  Constitution  that 
discriminated  against  indigenous  Australians.  The  referendum  established  citizenship  status 
and  confirmed  voting  rights  for  all  indigenous  Australians.  Australian  government  policy 
towards Aboriginal and Torres Strait Islanders has enjoyed bipartisan support since the launch 
of the "Close the Gap" campaign in 2006. The campaign's goal is to close the health and life 
expectancy  gap  between  Aboriginal  and  Torres  Strait  Islander  peoples  and  non-indigenous 
Australians  by  2030.  The  Progress  and  Priorities  Report  2016,  issued  by  the  Close  the  Gap 
Steering  Committee  pinpointed  the  major  challenges  especially  in  the  health  sector.  The 
passing  of  legislation  acknowledging  indigenous  Australians  as  the  first  inhabitants  of 
Australia in March 2013 constituted an important and positive first step towards constitutional 
recognition. 

Australia's trade policy takes account of the rights of indigenous peoples and of the need to 
retain the flexibility to implement policies favouring aboriginals. An example of such policies 
in  the  economic  field  is  the  specific  reservation  of  local  public  procurement  in  favour  of 
indigenous people. 

New Zealand 

Maori,  the  indigenous  inhabitants  of  New  Zealand,  make  up  about  15%  of  New  Zealand's 
population. The Treaty of Waitangi (1840) is at the heart of the relations with Maori in New 
Zealand.  The  Waitangi  Tribunal  established  under  the  Treaty  of  Waitangi  Act  (1975)  is 
charged with investigating and making recommendations on claims brought by Maori relating 
to actions or omissions of the Crown (state) that breach the promises made in the Treaty of 
Waitangi.  

New Zealand, in all its FTAs since 2011, includes a so-called "Waitangi-clause" to safeguard 
the  primacy  of  the  Treaty  of  Waitangi  and  to  retain  the  flexibility  to  implement  domestic 
policies  favouring  Maori.  It  is  expected  that  a  future  EU-New  Zealand  FTA  would  also 

40 For example: the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU 

41 

 
 
 
                                                            
include such a clause, but in any case a future FTA would not hinder New Zealand's ability to 
carry out appropriate polices regarding the rights of Maori.  

Business and human rights 

Comprehensive  trade  agreements  include  broader  trade  and  sustainable  development 
provisions  in  their  agreements,  including  corporate  social  responsibility  (CSR).  This 
recognises the role of private businesses in promoting and furthering labour rights. Their role 
is complementary to the role of states. 

Australia 

There  is  a  growing  awareness  in  Australia  about  the  need  to  recognise  the  relationship 
between business and human rights. Since 2014 a Supply Chains Working Group comprising 
experts  from  government,  business,  industry,  civil  society,  unions  and  academia  has  been 
examining ways to address serious forms of labour exploitation in the supply chains of goods 
and services. The first national dialogue on business and human rights took place in 2014 at 
the  initiative  of  the  Global  Compact  Forum  Australia  and  the  Australian  Human  Rights 
Commission  (AHRC).  In  2015  the  AHRC,  together  with  Australian  Centre  for  Corporate 
Social  Responsibility  and  the  Global  Compact  Network  Australia,  produced  a  report41 
mapping  how  Australian  businesses  currently  deal  with  human  rights  issues  in  their  supply 
chains. The report highlighted labour rights abuses such as child labour, slavery, trafficking, 
unfair wages and unacceptably poor working conditions. 

New Zealand 

The  Human  Rights  Commission’s  "Caring  Counts"  report  in  2012  highlighted  unequal  pay 
among carers for the elderly. In October 2015 employers and unions agreed to a government 
proposal to set up a joint working group to draw up principles to deal with pay equity claims 
under the Equal Pay Act. In April 2016, the UN Human Rights Committee, in its concluding 
observations  on  the  sixth  periodic  report  of  New  Zealand,  noted  that  there  remains  a 
'significant wage gap between women and men, which disproportionately affects low-income 
women, especially Maori and Pasifika women'. The gender pay gap has shrunk over the past 
17 years, but the most recent figures show stagnation in this indicator.  

Summary of potential impacts on particular rights 
The table42 below sets out potential effects that stem from the FTAs, including from the EU’s 
intention  to  include  a  trade  and  sustainable  development  chapter  with  specific  principles  of 
environmental protection and labour rights (see also the first paragraphs of points 5.8. and 5.9. 
above, respectively).  

Particular rights 

Options C1 and C2 

41  Human rights in supply chains: Promoting positive practice 
https://www.humanrights.gov.au/sites/default/files/document/publication/2015_AHRC_ACCSR_HR_in_supply
_chains_0.pdf  
42 Option A was not included in this table as the status quo would have no direct or indirect impact on particular 
human rights. As options C1 and C2 both foresee an ambitious Trade and Sustainable Development chapter 
these are not further differentiated. 

42 

 
 
 
 
 
 
 
                                                            
Right  to  enjoyment  of  just  and  favourable 
conditions of work  
(incl.  child  labour,  freedom  of  associations 
and collective bargaining) 

EU 

Australia 

Right to clean environment 

New Zealand 

EU 

Australia 

New Zealand 

Availability  and  affordability  of  essential 
goods  or  services43  Right  to  an  adequate 
standard of living 

EU 

Australia 

New Zealand 

Right to enjoyment of the highest attainable 
standard  of  physical  and  mental  health, 
Right to health 

EU 

Australia 

Rights of indigenous peoples 

EU 

New Zealand 

Business and human rights 

Australia 

New Zealand 

EU 

Australia 

New Zealand 

Direct effect: 0 
Indirect effect: + 
Direct effect: + 
Indirect effect: + 
Direct effect: + 
Indirect effect: + 
Direct effect: 0 
Indirect effect: 0/- 
Direct effect: 0 
Indirect effect: 0/- 
Direct effect: 0 
Indirect effect: 0/- 
Direct effect: + 
Indirect effect: + 
Direct effect: + 
Indirect effect: + 
Direct effect: + 
Indirect effect: + 
Direct effect: 0 
Indirect effect: + 
Direct effect: 0 
Indirect effect: + 
Direct effect: 0 
Indirect effect: + 
Direct effect: 0 
Indirect effect: 0 
Direct effect: 0 
Indirect effect: + 
Direct effect: 0 
Indirect effect: + 
Direct effect: 0 
Indirect effect: + 
Direct effect: + 
Indirect effect: + 
Direct effect: + 
Indirect effect: + 

5.11. Governance impact 

Australia  and  New  Zealand  have  well-developed  anti-corruption  and  anti-fraud  governance 
structures  comparable  with  those  of  the  EU.  Australia  and  New  Zealand  are  consistently 
ranked  by  various  organisations  among  the  least  corrupt  countries.  The  EU-Australia 
Framework  Agreement  and  the  EU-New  Zealand  Partnership  Agreement  on  Relations  and 
Cooperation  already  include  provisions  on  good  governance,  cooperation  on  anti-corruption 
and anti-fraud.  

Comprehensive  FTAs  under  options  C1  and  C2  would  include  transparency  rules  to  ensure 
good  involvement  and  consultation  with  stakeholders  and  the  publication  of  rules  and 
investment.  Enhanced  rules  for  public 
measures 

international 

trade  and 

impacting 

43 “Essential goods or services” includes as a minimum: water; essential foodstuffs; clothing; essential primary 
healthcare; basic shelter and housing; and the most basic forms of education. 

43 

 
 
 
 
 
 
 
                                                            
procurement  under  both  options  would  prescribe  transparency,  fairness,  legal  predictability 
and judicial review and would thus have a positive impact.  

In  line  with  the  longstanding  EU  policy  on  trade  agreements,  a  dedicated  set  of  provisions 
under  a  specific  trade  and  sustainable  development  chapter  would  ensure  promotion  of 
environmental  and  labour  standards.  Anti-fraud  provisions  are  included  in  comprehensive 
FTAs  negotiated  by  the  EU  and  would  also  be  included  in  FTAs  with  Australia  and  New 
Zealand. 

In  line  with  the  "Trade  for  All"  Communication,  the  inclusion  of  dedicated  anti-corruption 
provisions in the future agreements would be considered in order to increase cooperation and 
participation of government and civil society in the fight against corruption.  

5.12. Administrative impact 

In the context of the potential FTAs with Australia and New Zealand, administrative impact 
means  the  costs  incurred  by  economic  operators  and  public  authorities  in  meeting  legal 
obligations stemming from the new framework for trade and investment relations with the two 
countries.  These  could  include  obligations  to  (i)  provide  information  on  their  action  or 
production,  either  to  public  authorities  or  to  private  parties,  (ii)  register  and  enforce  certain 
obligations and rights, (iii) carry out cooperation activities, etc.  

The  administrative  impact  of  the  options  C1  and  C2  can  be  assumed  to  be  of  similar 
magnitude. However, the impact under option C2 would be greater because the larger number 
of changes to NTBs would require more intensive cooperation between regulatory bodies.  

The  details  of  implementation  and  associated  administrative  costs  would  depend  on  the 
negotiated  provisions.  In  general,  the  provisions  and  therefore  the  associated  administrative 
costs are expected to be in line with other comparable agreements. This may require setting 
up additional  institutional bodies to  deal with EU-Australia and EU-New Zealand trade and 
investment relations. However, it would not be necessary to set up completely new types of 
administrative  action.  The  reduction  of  trade  barriers  and  cooperation  in  the  area  of  good 
regulatory practice can reduce administrative costs and create mutual benefits. 

5.13.  Assessment  of  administrative  capacity  of  Australian  and  New  Zealand 

customs to implement the agreement (notably on application of rules of origin) 

Australia's  and  New  Zealand's  customs  rules  include  provisions  on  non-preferential  and 
preferential rules of origin, while preferential rules of origin are also set out in FTAs to which 
the  two  countries  are  party.  Australia44  (since  1966)  and  New  Zealand  (since  1972)  have 
granted  an  autonomous,  non-reciprocal  preferential  arrangement,  the  general  system  of 
preferences  (GSP),  to  developing  countries.  This  arrangement  involves  administering 
preferential rules of origin requirements. 

Due  to  their  respective  extensive  networks  of  FTAs  and  GSP  schemes,  both  Australia  and 
New Zealand have the expertise and infrastructure to deal with the rules of origin mechanism. 
Both  countries  are  familiar  with  different  methods  of  verifications  and  administrative 
assistance  that  were  included  in  their  different  FTAs.  The  EU  and  New  Zealand  have  also 
concluded  negotiations  for  a  bilateral  Customs  Cooperation  and  Mutual  Administrative 
Assistance Agreement, which is expected to be signed in 2017.  

44 Australian System of Tariff Preferences (ASTP) 

44 

 
 
 
 
                                                            
Therefore,  it  can  be  concluded  that  Australia  and  New  Zealand  possess  developed 
administrative capacity to properly and effectively implement the provisions of rules of origin 
in their future bilateral FTAs with the EU. 

5.14. Impact on the budget of the European Union  

Options  C1  and  C2  would  have  limited  effects  on  the  budget  of  the  EU.  This  is  because  a 
large  part  of  the  current  EU  imports  from  Australia  and  New  Zealand  are  subject  to  low  or 
zero tariffs. Based on the projected pattern of EU imports from Australia and New Zealand in 
the  long  term  and  the  average  tariff  rates  applied  currently,  annual  foregone  revenue  from 
eliminating tariffs under options C1 and C245is estimated as follows.  

•  Option C1: €146 million for the EU-Australia FTA and €100 million for the EU-New 

Zealand FTA.  

•  Option C2: €166 million for the EU-Australia FTA and €208 million for the EU-New 

Zealand FTA.  

In reality, the actual impact on the EU budget would also include indirect impacts in terms of 
changes in tariffs on imports from third parties, and in VAT-linked and GNI-linked resources. 
These would likely raise the EU’s overall revenues under both options, and so compensate for 
a part of the above-mentioned foregone revenue.  

6. HOW DO THE OPTIONS COMPARE? 
This Chapter links both the positive and negative impacts of each policy option described in 
Chapter 5 directly to the objectives mentioned in Chapter 3. The different policy options were 
compared using criteria of effectiveness in achieving the objectives, efficiency, and coherence 
with overarching EU policy objectives. The analysis looks not only at the trade and economic 
impacts (including on SMEs and specific sectors), but also their impacts on consumers, and 
the environment, social and human rights, as well as budgetary and administrative impacts. 

6.1. Positive and negative effects of the policy options  

Option A: Baseline 

It  is  reasonable  to  assume  that  no  further  reduction  of  trade  and  investment  costs  can  be 
expected  from  the  current  arrangements,  beyond  resolving  some  smaller  market  access 
barriers  and  the  impact  of  the  expected  growth  of  economic  activity  unrelated  to  bilateral 
trade and investment relations. The baseline option  would mean that the  growth  of  bilateral 
trade  and  investment  flows  would  likely  continue  along  with  the  expansion  of  the  relevant 
economies,  but  there  would  be  no  new  drivers  for  additional  growth  of  bilateral  trade  and 
investment  volumes,  and  therefore  no  significant  further  gains  in  overall  welfare  could  be 
expected in the EU, Australia or New Zealand. It would also mean that a comparatively less 
favourable environment for European exports and investment in Australia and New Zealand 
would further deteriorate relative to the competitors from non-EU countries.  

45 The difference between the two options is the modelled impact of keeping the status quo under option C1 
for EU imports from Australia and New Zealand of a number of sensitive agricultural sectors. 

45 

 
 
 
 
 
                                                            
It is worth noting that the impact could be distributed unevenly across  the  EU,  Australia  or 
New  Zealand  reflecting  regional  differences.  However  the  "Rotterdam  effect"  and  complex 
value  chains  do  not  enable  to  pinpoint  the  overall  regional  differences.  Extrapolating  from 
specific sectors concentrated in specific regions could be misleading. This aspect is valid for 
projections of option A as well as options C1 and C2.  

Option C1: comprehensive FTAs with conservative liberalisation assumptions 
For  the  EU,  this  option  is  estimated  to  generate  a  change  in  real  GDP  of  close  to  0.01%46, 
(€2.1 billion) in the long term. Economic welfare would increase by €2.6 billion in the long 
term,  while  EU  goods  and  services  exports  to  Australia  and  New  Zealand  are  estimated  to 
grow by in the long term by 16.4% and 14.2% respectively.  

For Australia, real GDP is estimated to grow by 0.13% (€2.7 billion), and economic welfare 
increases by €0.9 billion while Australian exports to the EU would grow by 6.9%in the long 
term. 

For  New  Zealand,  real  GDP  is  estimated  to  grow  by  0.28%  (€0.7  billion)  and  economic 
welfare increase by €0.4 billion while New Zealand exports to the EU grow by 10.5% in the 
long term. 

Option C2: comprehensive FTAs with increased liberalisation assumption  

For  the  EU,  this  option  is  estimated  to  generate  a  change  in  real  GDP  of  close  to  0.02%. 
Given the size of the EU economy, this can be considered as significant (€4.9 billion) in the 
long  term.  Under  this  option  economic  welfare  would  increase  by  €4.8  billion  in  the  long 
term, while EU exports to Australia and New Zealand are estimated to grow in the long term 
by 33.3% and 32.4% respectively.  

For Australia, real GDP is estimated to grow by 0.20% (€4.2 billion) and economic welfare 
increase by €1.8 billion, while Australian exports to the EU would grow by 11.1% in the long 
term. 

For  New  Zealand,  real  GDP  is  estimated  to  grow  by  0.52%  (€1.3  billion)  and  economic 
welfare increase by €0.6 billion, while New Zealand exports to the EU would grow by 22.2% 
in the long term. 

This option would provide an overall much larger economic benefit. However the full 
liberalisation of the EU's sensitive agricultural sectors would mean a notable negative impact 
on the ruminant meat sector as measured by sectoral output and job reallocation.  

6.2. Summary table of the effects of the different policy options 

Criteria 

General objectives 

Promoting  smart,  sustainable  and 
through the expansion of trade 

inclusive  growth 

Options 

C1 

+ 

+ 

C2 

++ 

++ 

A 

0 

0 

46 The projected increases for options C1 and C2 are compared to the option A projected by the CGE model in 
the long term, thus these would indicate additional gains in the long term compared to the baseline.  

46 

 
 
 
 
                                                            
Creating job and labour opportunities and welfare gains 

Increasing  benefits  to  consumers  (i.e  in  terms  of  choice, 
availability and price)  

Improving Europe’s competitiveness in global markets 

Strengthening  cooperation  on  trade-related  issues  with  a 
like-minded partner. 

Specific objectives 

Reap the benefits of enhanced trade and investment flows 
between  the  EU  and  Australia  and  between  the  EU  and 
New Zealand by reducing existing barriers for trade and 
investment, and  

-  exploring  forward  looking  regulatory  cooperation  in 
select areas as appropriate 

- taking into account the EU agricultural sensitivities 

Level  the  playing  field  with  other  countries  that  already 
have  preferential  treatment  due  to  their  free  trade 
agreements with Australia and New Zealand. 

Provide  a  new,  up-to-date  framework  for  the  EU-
Australia and EU-New Zealand economic relationships in 
the light of the political framework agreements that were 
recently concluded with both Australia and New Zealand 
respectively.  

Overall effectiveness 

Efficiency (time and resources spent in relation to 
estimated effectiveness) 

Coherence with overarching EU policy objectives (for 
example, outlined in the EU 2020 strategy) 

Gains from simplification effects 

0 

0 

0/- 

0/- 

0 

0 

0 

0 

0/- 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

++ 

++ 

++ 

++ 

++ 

++ 

++ 

-- 

++ 

0 

++ 

++ 

0/- 

0 

- 

0 

+ 

+ 

+ 

+ 

++ 

++ 

+ 

++ 

6.3. Identification of a preferred policy option  

The two sub-scenarios of option C would be preferable to the baseline scenario (option A) for 
all criteria.  

Overall, option C2 appears the most preferable option based on the summary table in point 6.2 
above,  apart  from  one  major  exception  for  EU  agricultural sensitivities. The assumption for 
option  C2  includes  full  liberalisation  of  all  agricultural  sectors,  including  sensitive  sectors. 
Such full liberalisation would likely have significant negative impact on these specific sectors. 
On  all  other  criteria,  option  C2  (the  FTAs  with  increased  liberalisation  scenario)  would  be 
more  beneficial  for  all  criteria  than  option  C1  (the  conservative  FTAs  scenario).  This  is 
because, as outlined above, additional economic and other gains can be obtained by reducing 
NTBs and from increased convergence of regulatory frameworks to facilitate trade and related 
business  operations.  Closer  trade  and  investment  cooperation  facilitates  trade  and  creates 
more  economic  growth,  and  thus  leads  to  more  job  creation  opportunities  and  a  higher 
47 

 
 
 
increase  of  welfare  gains.  Accordingly,  option  C2  (the  FTAs  with  increased  liberalisation 
scenario)  performs  better  when  weighed  against  the  criteria  of  effectiveness,  efficiency  and 
coherence partly due to the planned reduction of NTBs. In turn, it also creates more benefits 
from simplification effects, which would be particularly beneficial for SMEs. 

As a consequence, the preferred option for the EU would be option 2, albeit with some special 
provision for sensitive agricultural sectors to mitigate the otherwise negative impact expected 
on specific sectors. In particular, EU sensitivities must be taken into account for the ruminant 
meat, dairy and sugar sectors (the latter only in the case of Australia). For these sectors the 
existing  trade  policy  approach  of  partial  liberalisation,  for  example  through  TRQs  could  be 
used.  Partial  liberalisation  in  these  sectors  on  the  EU  side,  however,  would  result  in  less 
forthcoming negotiating  positions  from Australia and New Zealand and could lead to a less 
ambitious overall outcome than in the modelled assumption under option C2. However, it is 
not  currently  possible  to  ascertain  the  precise  extent,  if  any,  to  which  the  outcome  would 
diverge. The outcome of the scoping exercises identified Australia's and New Zealand's clear 
political  will  to  seek  a  high  level  of  ambition  that  would  correspond  to  the  scenario  under 
option C2, while the Commission maintained that the EU's agricultural sensitivities needed to 
be taken into account. 

This preference is also in line with joint political declarations of the EU leaders – Commission 
President  Juncker  and  European  Council  President  Tusk  -  and  Australian  Prime  Minister 
Turnbull and New Zealand Prime Minister Key, respectively.  
On 25 February 2016, the European Parliament adopted a resolution47 on the opening of FTA 
negotiations  with  Australia  and  New  Zealand.  Among  others,  the  EP  resolution  "considers 
that the full potential of the Union’s bilateral and regional cooperation strategies can only be 
realised by concluding high-quality FTAs with both Australia and New Zealand in a spirit of 
reciprocity  and  mutual  benefit"  and  "believes  that  the  negotiation  of  two  separate,  modern, 
ambitious, balanced and comprehensive FTAs with Australia and New Zealand in accordance 
with  the  specific  features  of  those  economies  is  a  pragmatic  way  of  deepening  the  bilateral 
partnerships  and  further  reinforcing  the  existing,  already  mature  bilateral  trade  and 
investment relationships". 

The preference is consistent with recent and ongoing established policies both in the EU and 
in Australia and New Zealand to negotiate ambitious and comprehensive FTAs, such as those 
recently  concluded  between  the  EU  and  Canada  (CETA).  The  most  recent  comprehensive 
agreements, such as CETA, provide a useful example to demonstrate the scope, and provide 
further  clarity  what  issues  would  fall  inside  and  outside  of  such  a  proposed  ambitious  and 
comprehensive FTA.  

7. HOW WOULD ACTUAL IMPACTS BE MONITORED AND 
EVALUATED? 

7.1. Operational objectives 

The operational objectives are to: 

47  European Parliament resolution of 25 February 2016 on the opening of FTA negotiations with Australia and 
New Zealand (2015/2932(RSP)) http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-
2016-0064&language=EN&ring=B8-2016-0250  

48 

 
 
 
                                                            
•  provide  reciprocal  and  effective  market  opening  for  goods,  services  and  investment 
(including through access to government procurement), based on a high level of ambition 
and taking into account the EU agricultural sensitivities;  

• 

tackling  barriers  in  a  comprehensive  way,  along  with  effective  implementation  and 
enforcement,  without  leaving  room  for  new  barriers  to  replace  old  ones,  including  for 
small- and medium-sized companies; 

•  ensure  a  high  level  of  protection  of  investment  and  IPR,  including  geographical 

indications both vis-à-vis Australia and New Zealand; 

•  strengthen dialogue and cooperation on regulatory frameworks (including SPS measures, 
standards, technical regulations and conformity assessment procedures) and administrative 
practices to improve regulatory coherence;  

•  contribute  to  the  shared  objective  of  promoting  sustainable  development  including 

through trade-related provisions on labour and environment; and 

•  support  and  promote  EU  values  and  standards  such  as  human  rights,  labour  rights  and 

environmental, health and consumer protection. 

7.2. Future monitoring and evaluation  

Monitoring  and  evaluation  of  the  operational  objectives  will  have  to  use  several  data 
collection  methods.  This  is  because  not  all  objectives  are  equally  quantifiable  and  some 
monitoring  may  depend  on  a  qualitative  evaluation  based,  for  example,  on  feedback  from 
stakeholders through a survey. Moreover, the monitoring needs will depend on the outcome of 
the negotiations with Australia and New Zealand respectively. Therefore the needs identified 
in this impact assessment will need to be updated once the negotiations have been concluded. 

Monitoring  can  be  facilitated  by  short-  and  medium-term  analysis  of  the  measurable 
indicators  mentioned  in  the  table  below  such  as  changes  in  the  relative  value  of  bilateral 
exports and imports as well as the change (number, value and share) of public procurement 
tenders secured by EU companies in Australia and New Zealand.  

Concerning the operational objectives, the same is valid for monitoring tariff reductions and 
changes  in  trade  flows,  as  these  become  apparent  in  tariff  schedules  and  trade  statistics. 
However, a more complex set of indicators is necessary for monitoring reductions in the cost 
of NTBs. Convergence of standards and changes in regulations and law can be analysed in a 
qualitative  manner  by  gathering  information  on  the  legal  and  administrative  measures,  their 
implementation and any related impact on trade and investment. 

To  analyse  whether  transparency  has  increased,  whether  more  information  is  available  and 
whether there is a general perception that the cost of doing business has gone down, surveys 
could be carried out among stakeholders. 

Monitoring indicators: 

Operational 
objectives 

Provide reciprocal 
and effective 
market opening for 

Indicators 

Unit of 
measurement 

Source of 
data 

Target 

Value of bilateral 
trade in goods and 

bn €, % change  

Eurostat 

Australian 

Increase the 
value and 
share of 

49 

 
 
 
 
 
services  

Value of EU's 
share in total trade 
of Australia or 
New Zealand 

Number of public 
procurement 
tenders won by EU 
bidders, value of 
bids 

Number of trade 
barrier cases 
resolved 

statistics 

Statistics 
New Zealand 

% change 

Number of tenders 
won, bn €, % 
change 

Number of trade 
barriers resolved 

DG TRADE 
(MACFLOW 
database) 

bilateral 
trade  

Increase in 
value and  
number of 
tenders 
won by EU 
bidders in 
Australia 
and New 
Zealand 

Decrease of 
number of 
trade 
barrier 
cases 

Value of 
investment 

bn €, % change 

Number of 
registered/protected 
GIs 

volume and change 
of exports of GI 
protected products 

Number of policy 
areas 

Number of 
registered/protected 
GIs 

Exports of GI 
products 

Number of policy 
areas where 
regulatory 
coherence has been 
improved 

Increase of 
number of 
protected 
GIs, 
increase of 
FDI  

Increase of 
number of 
policy areas 

DG 
TRADE/DG 
AGRI 

Australian 
and New 
Zealand  
government 
departments 

DG TRADE, 
Australian 
and New 
Zealand  
government 
departments 

goods, services and 
investment 
(including through 
access to 
government 
procurement), 
based on a high 
level of ambition  

Tackling barriers in 
a comprehensive 
way, along with 
effective 
implementation and 
enforcement, 
without leaving 
room for new 
barriers to replace 
old ones, including 
for small- and 
medium-sized 
companies 

Ensure a high level 
of protection of 
investment and 
IPR, including 
geographical 
indications both 
vis-à-vis Australia 
and New Zealand 

Strengthen 
dialogue and 
cooperation on 
regulatory 
frameworks 
(including SPS 
measures, 
standards, technical 
regulations and 
conformity 
assessment 
procedures) and 
administrative 
practices to 

50 

 
 
 
 
 
 
improve regulatory 
coherence 

Contribute to the 
shared objective of 
promoting 
sustainable 
development, 
including through 
trade-related 
provisions on 
labour and 
environment  

Support and 
promote EU values 
and standards such 
as human rights, 
labour rights and 
environmental, 
health and 
consumer 
protection 

Please note: 

Monitoring of 
implementation of 
relevant 
international 
conventions  

Monitoring 
reports of 
international 
organisations 

Increased 
number of 
areas with 
satisfactory 
situation 

Number of 
meetings 
promoting these 
objectives 

Number of 
meetings 

DG TRADE, 
other 
Commission 
departments, 
EEAS 

Australian 
and New 
Zealand  
government 
departments  

•  All operational objectives are to be measured once a year 
•  The baseline for all operational objectives is 2017 

Evaluation 

The  effects  of  any  agreements  concluded  with  Australia  and  New  Zealand  will  undergo  in-
depth  evaluation  once  they  have  been  in  force  for  sufficient  time  to  ensure  availability  of 
meaningful data. This is in line with the commitment made in 2015 Communication ‘Trade 
for All — Towards a more responsible trade and investment policy’. 

*** 

51 

 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 1 - Procedural information 

The Directorate-General (DG) for Trade is the lead service for this Impact Assessment Report 
(Agenda planning: 2015/TRADE/40).  

An  Inter-service  Steering  Group  (ISG)  was  established  on  13  November  2015  inter  alia  for 
the  purpose  of  this  Impact  Assessment.  The  ISG  included  all  other  relevant  services  of  the 
Commission  -  Secretariat-General,  Legal  Service,  DG  Communication,  DG  Economic  and 
Financial  Affairs,  DG  Internal  Market,  Industry,  Entrepreneurship  and  SMEs,  DG 
Competition,  DG  Employment,  Social  Affairs  and  Inclusion,  DG  Agriculture  and  Rural 
Development,  DG  Energy,  DG  Mobility  and  Transport,  DG  Climate  Action,  DG 
Environment,  DG  Research  and  Innovation,  Joint  Research  Centre,  DG  Communications 
Networks,  Content  and  Technology,  DG  Maritime  Affairs  and  Fisheries,  DG  Financial 
Stability, Financial Services and Capital Markets Union, DG Regional and Urban Policy, DG 
Taxation and Customs Union, DG Education and Culture, DG Health and Food Safety, DG 
Migration  and  Home  Affairs,  DG  Justice  and  Consumers,  Service  for  Foreign  Policy 
Instruments, DG Trade, DG Neighbourhood and Enlargement Negotiations, DG International 
Cooperation  and  Development,  DG  International  Cooperation  and  Development,  DG 
Humanitarian Aid and Civil Protection (ECHO), Eurostat, DG Informatics, DG Budget - and 
the European External Action Service (EEAS).  

The ISG has met six times: 27 January 2016, 17 June 2016, 28 July 2016, 27 October 2016, 
24 January 2017 and 9 February 2017.  

The  evidence  used  for  the  impact  assessment  included  input  by  stakeholders  to  the  public 
consultation  (see  Annex  2);  a  quantitative  econometric  modelling  simulation  (see  Annex  4) 
and  external  expertise  via  the  study  commissioned  to  feed  into  the  impact  assessment  (see 
Annex 5). Furthermore the external study also uses evidence from a broad range of sources, 
including the published submissions to the stakeholder consultations that the Australian48 and 
the New Zealand49 governments conducted concerning their FTAs with the EU.  

In addition, information, evidence and results gained from other related studies and analysis 
were  also  considered  such  as  the  Commission's  study  on  the  cumulative  effects  of  trade 
agreements on the agricultural sector50. 

The draft Impact Assessment Report was submitted to the Regulatory Scrutiny Board (RSB) 
on 14 February 2017 and was examined during the RSB meeting of 15 March 2017.  

Brief  overview  on  how  the  Board's  recommendations  have  led  to  changes  compared  to  the 
earlier draft: 

Recommendations  of 
Scrutiny Board 

the  Regulatory 

Modifications  to  the  Impact  Assessment 
Report 

(1)  The  report  does  not  adequately  describe  The  report  was  amended  to  clarify  the 

48 http://dfat.gov.au/trade/agreements/aeufta/submissions/Pages/submissions.aspx 
49 https://www.mfat.govt.nz/en/trade/free-trade-agreements/agreements-under-negotiation/eu-fta/call-for-
public-submissions-on-the-proposed-eu-fta/ 
50 http://ec.europa.eu/agriculture/trade-analysis/impact-assessment_en  

52 

 
 
 
 
 
                                                            
it 

aims 

context 
the 
address 

and 
the 
the  broader  policy 
initiative: 
multilateral  objective  of 
whether 
specific 
to 
shortcomings  of  the  existing  bilateral  trade 
relationships or whether it is part of a broader 
strategic agenda to modernise EU FTAs with 
partner countries. 

(2)  The  report  insufficiently  qualifies  the 
results  of  the  modelling  exercise  and  other 
supporting evidence. 

(3)  The  level  of  ambition  in  terms  of  social, 
labour  and  environmental 
is 
unclear. 

standards 

(4) The report does not sufficiently elaborate 
on  some  elements  of  the  options  and  their 
related impacts.  

twofold objectives of the initiative to address 
(a)  specific  concerns  related  to  the  existing 
EU  trade  relations  with  Australia  and  New 
Zealand (b) in line with the general EU trade 
policy. (IAR sections 2, 3, 4 and 5.)  

The  report  was  amended  to  better  describe 
Australia and New Zealand specific problems 
concerning  non-tariff  barriers,  investment, 
services and public procurement.  

The  report  was  amended  to  explain  the 
estimation  of  untapped  trade  potential.  (IAR 
section 5.) 

The  report  was  amended  to  explain  the 
rationale  for  assessing  jointly  instead  of 
separately the impacts of FTAs with Australia 
and New Zealand. (IAR section 1.)  

The  report  was  amended  to  clarify  the 
relationship  between  this  Impact  Assessment 
and  the  subsequent  Sustainability  Impact 
Assessments 
the 
negotiations have started. (IAR introduction.) 

to  be  conducted  once 

It  was  made  more  explicit  that  the  report 
relies  on  stakeholders' 
input,  economic 
modelling,  external  study  and  reflects  the 
Commission's expert judgment.  

The report was amended to better explain the 
baseline  scenario  and  the  projections  of  the 
economic modelling. (IAR sections 4 and 5) 

relating 

The  report  was  amended  to  clarify  the  level 
of  ambition  and  scope  of  the  proposed 
agreements 
sustainable 
development. Possible flanking policies could 
be  identified  at  a  later  stage  as  part  of  the 
Sustainability  Impact  Assessment  process. 
(IAR introduction and sections 4 and 5.) 

to 

The  report  was  amended  to  clarify  the 
reasons  for  discarding  sectoral  agreements 
(option  B2);  the  actual  differences  between 
the  scenarios  options  C1  and  C2;  and 
elaborated  further  on  the  feasibility  of  an 
asymmetric  tariff  and  NTB  reductions.  The 
to  provide  further 
report  was  amended 
clarifications  on  the  challenges  to  identify 
likely  geographical  distribution  of  impacts 
resulting  from  the  proposed  FTAs.  (IAR 

53 

 
 
(5)  The  reporting  of  the  consultation  results 
lacks specificity. 

sections 4 and 6.) 

The summary of the stakeholder consultation 
was  amended  to  more  precisely  reflect  the 
categories 
expressing 
of 
different views. (Annex 2.)  

stakeholders 

Input  from  the  open  public  consultation  was 
supplemented  with 
the  Commissions' 
information  from  the  regular  dialogues  that 
the  Commission  maintains  with  stakeholders 
and  its  trading  partners.  (Across  all  sections 
of  the 
  IAR,  in  particular  on  problem 
definition  and  drivers,  and  assessment  of 
impact.) 

54 

 
 
 
Annex 2 - Stakeholder consultations 

The information and views in this Annex do not necessarily reflect the official position of the 
European  Commission.  It  summarises  the  input  by  the  stakeholders  who  participated  in  the 
public  consultation  on  the  future  of  economic  and  trade  relations  between  the  EU  and 
Australia and New Zealand, respectively. 

The Inception Impact Assessment51 (IIA) was published in February 2016 and open for 
comments52.  The  Commission  received  two  comments  on  the  IIA,  one  from  an  EU  based 
company  describing  a  particular  barrier  regarding  organic  fertiliser  certification  and  organic 
farming in Australia and New Zealand, and one from an Australian citizen noting that in his 
view Australia's human rights situation is not on the level of the EU Charter of Fundamental 
Rights. 

1. Background on the online public consultation 
The online public consultation53 was designed to gather detailed views relating to the future 
trade and economic relationship between the EU and Australia and New Zealand, respectively 
to  feed  into  the  Impact  Assessment  Report  on  the  potential  Free  Trade  Agreements  (FTAs) 
between the EU and Australia and New Zealand, respectively. 

Between  11  March  and  3  June  2016,  the  Commission  carried  out  an  online  public 
consultation, which was launched on the DG Trade website and posted on ‘EU Survey’54 (the 
Commission's on-line tool for conducting such public consultations). Stakeholders - interested 
parties  within  the  EU  and  in  third  countries  -  were  invited  to  answer  51  questions.  The 
Commission received 108 answers from a wide range of respondents. Stakeholders' responses 
were  published  (unless  when  respondents  indicated  otherwise  by  the  respondent)  via  EU 
Survey.55 

2. Overview of respondents of the online public consultation 

Altogether 108 responses were received:   

-  89 responses via the online EU Survey tool, and  

-  19 responses in the form of a letter or pdf document describing the respondent's views.  

Responses were received from a wide range of respondents representing industry associations, 
private companies and citizens in the EU as well as Australia and New Zealand who feel they 
could be affected by FTAs with those countries.  

51 http://ec.europa.eu/smart-regulation/roadmaps/docs/2015_trade_040_aus_nz_trade_agreement_en.pdf 
52 http://ec.europa.eu/smart-regulation/roadmaps/index_en.htm  
53Online public consultation on the future of EU-Australia and EU-New Zealand trade and economic relations  
http://trade.ec.europa.eu/consultations/index.cfm?consul_id=195  
54https://ec.europa.eu/eusurvey/runner/AUZ_NZ  
55 http://trade.ec.europa.eu/consultations/index.cfm?consul_id=195  

55 

 
 
 
 
 
 
 
                                                            
A  significant  part  of  the  submissions  came  from  business  associations  and  enterprises 
representing  the  agricultural  sector  (meat,  dairy,  sugar,  wine  and  spirits,  fruit  and 
vegetables).  Nearly  half  of  the  submissions  came  from  the  EU-wide  business  associations: 
farming,  food  products,  beverages,  food  and  beverages  service  activities,  and  textiles  and 
clothing.  In  general,  one  can  observe  a  broad  coverage  of  all  the  industrial  sectors  as 
submissions also include sectors covering chemicals,  metals, minerals,  electrical equipment, 
manufacturing, retail trade.  

In terms of size of enterprises there was a fairly even distribution of replies from SMEs (10) 
and large companies (11). 

There were a relatively smaller number of submissions by civil society (NGOs, 8, trade union 
1) and individual citizens (11).  
Figure 1: Breakdown of respondents by category56 

In terms of geographical distribution, most of the respondents are based in one of the 28 EU 
Member  States  (75%)  including  from  a  respondent  based  in  one  of  the  EU’s  outermost 
regions. New Zealand-based submissions (13.5%) outnumbered Australia-based submissions 
(3%). Replies also came from stakeholders established outside of the EU: Switzerland, Chile 
and the US (8%).  

56 Figure resulting from the analysis of the on-line submissions on the EU Survey website.   

56 

 
 
 
 
                                                            
Almost  half  of  the  respondents  declared  being  involved  in  trade  between  the  EU  and 
Australia.  However,  only  18%  of  them  appear  to  have  investments  either  in  the  EU  (for 
Australia-based respondents) or in Australia (for EU-based respondents). As regards the EU 
and New Zealand, 48% of respondents are involved in trade between the two countries and 
half this ratio has investments in either the EU or New Zealand.  

3. Limitations of the consultation  

Firstly,  as  in  any  such  online  public  consultation,  the  replies  submitted  by  the  respondents 
cannot be regarded as a representative sample of all stakeholders. This is intrinsic to this 
method  of  consultation  (including  that  the  number  of  questions  and  the  length  of  the 
questionnaire  has  to  be  balanced  with  the  aim  of  collecting  as  much  and  comprehensive 
information as possible, in a period of three months). Therefore numerical weights of different 
submissions do not necessarily correspond to the representativeness of that opinion among the 
stakeholders. For example among the business sector respondents a single company's unique 
issue might not necessarily be of systemic importance, while a consolidated submission by a 
large business organisation could provide insight of general issues that have a broadr, cross-
cutting impact. To avoid possibly misleading interpretations this summary does not attempt to 
numerically weigh the submissions.   

Secondly, more than 2/3 of the respondents were from the business sector (either enterprises 
or business associations), while the non-profit sector (non-governmental organisations, trade 
unions, private citizens, etc.) provided relatively few responses. Responses from the business 
sector  focused  on  market  access  (both  for  more  liberalisation  or  pointing  out  sectors  that 
should be protected from further liberalisation) and trade rules, while the responses from the 
non-profit  sector  pointed  out  the  need  to  preserve  high  standards  for  consumers,  social 
and  environmental  aspects,  public  services,  educations,  social  security  and  animal  welfare, 
among others as well as the importance of inclusive, transparent negotiation process. 

Thirdly,  it  should  be  recalled  that  this  Impact  Assessment  Report  is  aimed  at  informing  the 
Commission’s  recommendation  to  open  negotiations  and  negotiate  with  Australia  and  New 
Zealand  respectively,  without  knowing  the  eventual  outcome  of  the  negotiations.  The 
potential  economic,  social,  human  rights  and  environmental  impacts  of  the  eventual 
agreements  will  be  examined  by  means  of  independent  Sustainability  Impact  Assessments 
(SIAs),  which  will  be  carried  out  by  external  consultants  simultaneously  with  the 
negotiations.  

The SIAs will rely on a wide-ranging, continuous consultation of stakeholders – notably civil 
society. The SIAs' findings will feed into the negotiating process. The SIAs will aim to: (a) 
assess the likely effects of the agreement on sustainable development and human rights in the 
EU,  Australia  and  New  Zealand  and  other  relevant  countries,  especially  Least  Developed 
Countries  (LDCs);  and  (b)  to  make  recommendations  and  propose  flanking  measures  to 
maximise the benefits of the agreement and prevent or minimise potential negative impacts. 

4. Summary of stakeholders' contributions by issue 

4.1. Current state of play of bilateral trade and economic relations 

57 

 
 
 
 
 
More  than  half  of  the  respondents  consider  that  the  current  state  of  the  EU's  bilateral 
economic  relations  with  both  countries  is  not  satisfactory.  Around  20%  of  them  think 
otherwise.  

A  significant  part  of  the  respondents,  who  were  not  directly  affected,  was  not  aware  of  the 
existing  sectoral  agreements  between  the  EU  and  Australia  and  New  Zealand,  respectively, 
i.e. the EU-Australia Mutual Recognition Agreement, the EU-Australia Wine Agreement, the 
EU-New  Zealand  Mutual  Recognition  Agreement  and  the  EU-New  Zealand  Veterinary 
Agreement.  Those  of  the  respondents  who  were  aware  of  these  agreements  often  note  that 
further improvements should be made.  

According  to  certain  respondents,  the  EU-Australia  Mutual  Recognition  Agreement 
(MRA) has contributed positively to the EU-Australia trade relation (bilateral harmonisation 
of standards  and technical regulations) and has led to specific results such as conformity of 
assessment  for  automotive  products  and  low  voltage  electrical  equipment  at  the  point  of 
export.  Further  improvements  to  be  considered  would  be  the  assessment  of  implementation 
and  consideration  of  potential  review,  upgrade  and  expansion  of  the  agreement  to  other 
sectors  including  agriculture,  standards  for  the  digital  environment,  more  cooperation  on 
General  Manufacturing  Practice  (GMP)  inspections  and  a  framework  for  MRA  of 
qualifications and diplomas in the professional services sectors.  

Some stakeholders note the positive impact of the EU-Australia Wine Agreement that has 
led to an increase of trade in wine. A respondent underlines that this agreement was supposed 
to facilitate dealing with differences with regard to wine GIs but that it has not worked in all 
cases for European GIs. 

A  number  of  respondents  noted  that  the  EU-New  Zealand  Veterinary  Agreement  has 
helped  to  reduce  many  potential  trade  irritants  in  the  trade  of  animals  and  animal  products 
between  the  EU  and  New  Zealand.  The  agreement  has  led  to  specific  results  such  as  the 
rapidity  of  consignment  clearance  at  port  of  entry  and  resultant  cost  reduction  from  fewer 
inspections, 
improved 
communication and cooperation, increased EU pork sales to New Zealand, increased import 
of  lamb  from  New  Zealand,  less  complicated  veterinary  certification  and  the  recognition  of 
equivalence  of  sanitary  measures  between  the  two  sides.  The  2015  amendments  of  the 
agreement  have  helped  to  further  streamline  requirements  and  facilitate  trade  into  the  EU 
including expediting listings of food establishments.  

to  resolve  minor 

in  paperwork 

the  ability 

through 

issues 

Finally,  the  EU-New  Zealand  Mutual  Recognition  Agreement  has,  according  to  some 
stakeholders, led to certain improvements and represents a useful basis for mutual recognition 
of  testing  and  conformity  assessment,  providing  cost-savings  for  exporters  while  preserving 
important policy objectives. 

In general, one can observe a general trend in the contributions from all types of stakeholders 
based in the EU as well as in the partner countries showing support for further improving the 
EU's  sectoral  bilateral  economic  and  trade  arrangements  with  both  Australia  and  New 
Zealand. 

4.2. Overview of priority sectors 

Respondents were asked to identify priorities in the EU-Australia and EU-New Zealand trade 
and  economic  relationship.  Many  respondents,  mainly  the  EU-based  producers'  associations 
insist on the necessity to take into account the sensitivities of the agriculture sector.  

58 

 
 
 
The EU based business respondents indicate the following general priorities: 

- 

the reduction of tariff barriers (for all the sectors, goods and services) and non-tariff 
barriers (SPS and TBT);  

-  clear, simple to use, strict and efficient rules of origin;  

- 

- 

the reduction of cross-border transaction fees and shipping costs, the simplification of 
import  rules  within  the  EU  and  in  New  Zealand/Australia  in  terms  of  export 
documents;  

the  promotion  of  best  practices  such  as  more  transparency,  those  related  to  animal 
welfare or to farm management;  

- 

the facilitation of Foreign Direct Investments (FDI);  

-  a  high  level  of  investment  protection  with  neutral  and  efficient  investor-to-state 

dispute settlement;  

- 

strong  protection  and  enforcement  of  Intellectual  Property  Rights  (IPR)  including 
geographical indications (GIs); 

-  more regulatory cooperation (e.g. for pharmaceuticals);  

- 

the harmonisation of norms and standards; and 

-  a strong chapter on sustainability in the production chains and business practices and 
of  an  appropriate  environment  chapter  with  provisions  to  best  ensure  proper  and 
effective wildlife protection, biodiversity conservation and reductions in logging. This 
latter  point  was  also  echoed  by  respondents  from  the  not-for-profit  sector  in  the  EU 
and in partner countries as well. 

Priority sectors were then detailed according to each sector's interests.  

A  significant  share  of  business  sectors  respondents  based  in  the  EU  and  in  the  partner 
countries  indicates  that  the  agri-food  sector  and  market  access  for  food  and  agricultural 
products should be treated as a priority in negotiations. Stakeholders mention barriers due to 
tariffs  and  quarantine 
insufficient  protection  and  enforcement  of  GIs,  agricultural 
requirements, non-tariff barriers, SPS concerns and regulatory divergences. The development 
of  agriculture  industry  is  also  mentioned  as  a  priority  for  the  sector  as  further  cooperation 
could  yield  further  trade  through  technology  exchange.  Stakeholders  cite  products  requiring 
specific attention: meat (beef, sheepmeat), dairy products, other animal products (e.g. wool), 
fruits and vegetables (e.g. kiwifruit, apple, and avocado), processed fruits and vegetables (e.g. 
canned peaches, tomatoes), olive oil, and sugar. As regards alcoholic beverages respondents 
highlight  their  priorities  in  the  case  of  Australia:  the  elimination  of  import  tariff  and 
equalisation of excise tax rates for whisky and other spirits; and in the case of New Zealand: 
the early adoption of the Geographical Indications Act. Moreover, stakeholders also mention 
the protection of producers' traceability information and the use of logistic hubs. 

Business respondents based in the EU underline their interest in the automotive industry and 
that  trade  agreements  that  Australia  has  concluded  result  in  a  less  favourable  conditions  for 
EU products exported to Australia and New Zealand. Business respondents from the EU also 
note  that  luxury  car  tax  applied  in  Australia  functions  as  a  barrier.  Stakeholders  from  the 
pharmaceutical/chemicals  sector  highlight  the  regulatory  aspects  and  protection  of  IPR  as 
priorities.  Similarly  other  EU  business  respondents  also  underline  market  access  for 
chemicals,  (renewable)  raw  materials  and  energy.  Other  business  respondents  from  their 
respective  industrial  sectors  noted  as  their  priorities  by  respondents:  machine  building, 

59 

 
 
electronics,  infrastructure,  railway,  and  mining  equipment.  Respondents  also  note  local 
content requirement, standards, testing and certification issues. Business respondents in the 
EU as well as from the partner countries highlight public procurement as a priority area. 

Business respondents note their priorities as regards the services sector: service liberalisation, 
professions,  review  of  how  recognition  of  professional  qualifications  has  worked  bilaterally 
between New Zealand and Australia, construction services, ICT, engineering and architectural 
services, healthcare, water management and aviation. Business respondents also note the need 
of facilitation of two-way investment.  

Finally, respondents were asked to suggest how the EU should pursue these priorities. On 
one hand, several respondents suggest to pursue an ambitious trade strategy that will enable 
exporters  and  investors,  particularly  SMEs  to  benefit  from  future  FTAs  once  concluded 
including strengthening regulatory cooperation with both countries. On the other hand, some 
of  the  EU  business  respondents  suggest  the  exclusion  of  specific  products  from  the  future 
FTAs (e.g. bovine meat, sugar and high sugar-containing products) while not-for profit sector 
respondents  suggest  not  covering  certain  issues  linked  with  societal  choices  such  as 
education system and social security. Some business respondents note that they consider the 
EU should concentrate on other priorities.  

4.3. Trade in Goods 

A number of business respondents in the EU and partner countries consider that import tariffs 
(or  similar  measures)  hinder  trade  between  the  EU  and  Australia  and  New  Zealand, 
respectively.  

The main sectors in which/products for which EU business respondents experience problems 
are agriculture and food products (beef meat, pig meat, dairy, processed food products, fresh 
and dried fruit, nuts, processed fruit & vegetables, confectionary, processed fishery products, 
alcoholic  drinks),  semi-finished  plastics,  textile  and  clothing,  cars  and  car  parts,  machine 
building, electronics, chemicals, and (renewable) raw materials. 

While  according  to  some  respondents  both  Australia  and  New  Zealand  encounter  problems 
when exporting dairy and meat to the EU (beef, lamb, sheep, pork and poultry). Australian 
business  respondents  underline  the  limited  market  access  in  the  EU  for  their  specific 
agricultural products (sugar, cereals, dairy, and fruit and vegetables). New Zealand business 
respondents  also  note  problems  when  exporting  to  the  EU  (for  example,  in:  horticultural 
products,  sparkling  wine,  Bluefin  tuna,  tomatoes,  honey,  kiwifruits,  berries,  apricots  and 
onions).  

Some  business  respondents  in  the  EU  and  in  other  countries  note  potential  problems  with 
current  practices  in  customs  procedures  and  border  enforcement;  however,  respondents 
did not provide details on the type of problem encountered.  

A  number  of  business  and  also  non-business  respondents  in  the  EU  and  in  the  partner 
countries consider that differences between EU and Australian and New Zealand regulations 
or standards hinder trade activities between the three countries, such as divergent standards, 
technical regulations, conformity assessment procedures and sanitary and phytosanitary (SPS) 
measures.  Stakeholders  also  mention  the  different  interpretations  of  EU  regulations  and 
standards among EU Member States.  

4.4. Trade in Services  

60 

 
 
 
 
Some business respondents consider that there are barriers to trade in services between the EU 
and Australia and New Zealand. Some business respondents suggest that potential FTAs with 
both  countries  should  deliver  more  commitments  on  cross-border  trade  in  services  (incl. 
ensuring cross-border data flow and ban possible local server requirements) or that it should 
capture  the  improvement  of  GATS  offers  provided  by  Australia  and  New  Zealand  in  their 
other FTAs such as the Trans-Pacific Partnership (TPP) as negotiated. 

Some  business  respondents  identify  specific  barriers  impacting  on  them.  For  example, 
because  of  the  rules  which  are  due  to  come  into  force  on  taxation  of  e-services,  one  of  the 
respondents  had  to  decide  not  to  supply  such  services  to  consumers  in  Australia  and  New 
Zealand.  

According to Australian business respondents, improvements should be made on the EU side 
regarding the lack of market mobility for Australian professionals within the EU (i.e. foreign 
lawyers  and  insurance  providers).  Market  access  to  the  EU  for  other  services  sectors  – 
financial  services,  air  transport  services,  and,  road  transport  services  –  are  also  noted  as  of 
concern. The respondents point out that the aim should be to ensure that third country service 
suppliers can benefit from reforms of the EU’s internal market for services.  

A business stakeholder note that the EU should call for sub-federal regulatory reform of the 
service  economy  and  expect  a  greater  integrationist  commitment  from  the  Australian  States 
and  Territories.  Another  remark  is  that  the  EU  should  be  concerned  with  the  registration 
difficulties  for  foreign  architects  in  Australia  and  with  Australia’s  reluctance  to  liberalise 
trade in postal, courier and telecommunications services, including broadband.  

Stakeholders  from  the  non-profit  sector  underline  the  importance  of  preserving  public 
services, the governments' right to regulate and propose exclusion of certain sectors such as 
certain type of educational services from the scope of the future agreements.   

4.5. Investment 

A few EU business respondents indicate concrete barriers to direct investment flows between 
the EU and Australia/New Zealand and equally, some of the respondents consider that there 
are 
of 
investors/investment or that investors from other jurisdictions receive preferential treatment in 
the EU or Australia or New Zealand.  

discriminatory 

investment 

protection, 

regarding 

treatment 

problems 

Some EU business respondents identify specific barriers to EU investments: 

In Australia:  

-  Equity cap in telecom and national airlines; 

-  FDI screening - compulsory notification and possible authorisation requirements; and 

-  Some existing sectoral restrictions should be lifted: postal & express delivery; 

distribution services (car sector: e.g.); professional services (legal and accounting); 
financial services, gambling and betting, aviation, in maritime transport, etc. 

In New Zealand: 

-  Under New Zealand’s thin capitalisation rules there are limits on the “deductibility” of 
interest in relation to the debt of a New Zealand taxpayer who is controlled by a non-
resident;  

-  Equity cap in telecom, and national airlines carrier; and 

61 

 
 
 
-  Lack  of  commitments  in  distribution  services  (franchise);  restrictions  on  agriculture 

related services, as well as R&D services. 

Stakeholders  put  forward  different  opinions  on  investment  dispute  resolution,  a  non-profit 
respondent  opposed,  while  a  number  of  EU  business  sector  respondents  advocated  the 
inclusion of such a mechanism. 

4.6. Intellectual property rights 

Some EU business respondents note that there are problems of protection and enforcement of 
IPR  in  Australia  and  New  Zealand;  a  few  business  respondents  from  the  partner  countries 
consider that there are problems in the EU.  

EU  business  respondents  advocate  for  strong  IPR  provisions  and  highlight  a  number  of 
specific issues: 

-  Protection  of  EU  geographical  indications  (GIs)  should  be  a  sine  qua  non  of  FTAs 
with  Australia  and  New  Zealand  (in  particular  for  foodstuffs  and  agricultural 
products), and call for the  implementation of the GI Act in New Zealand and for an 
update  and  an  effective  application  of  the  EU-Australia  wine  agreement  with 
additional new GIs to be included. 

-  Shortcomings  in  terms  of  earlier  resolution  of  patent  disputes,  including  injunctions 

and appropriate compensation for damages. 

-  Patent term extension (PTE) for pharmaceuticals, improved mechanism of preventing 
infringing  generic  medicine  entry,  and  not  to  raise  the  threshold  for  inventive  step 
assessment. 

-  Problems regarding registration of new plant variety (kiwifruit propagating material) 

in New Zealand. 

A number of New Zealand and Australian business respondents note that the EU’s system for 
protecting  GIs  potentially  reduces  their  ability  to  produce  and  market  certain  products  (e.g. 
cheese types using names considered to be generic in New Zealand and Australia).  

4.7. Public procurement 

Some  business  respondents  from  the  EU  and  the  partner  countries  consider  that  there  are 
difficulties for them to access public procurement in Australia, in New Zealand and in the EU.  

Some  EU  business  respondents  call  for  Australia  to  join  the  Government  Procurement 
Agreement (GPA) of the WTO and also for more commitments from New Zealand. Business 
respondents  recommend  that  future  agreements  between  the  EU  and  Australia  and  New 
Zealand, respectively should go further than their respective GPA market openings (offer) 
and  include  all  levels  of  government  and  local  entities.  Certain  EU  business  respondents 
underline  barriers  they  face  in  both  Australia  and  New  Zealand,  such  as  the  homologation 
process prior to procurement, the expensive procedure and the fact that few evaluation criteria 
are objective. 

According to EU business respondents, as regards Australia, the EU should be concerned with 
the protectionist (‘Buy Local’ or ‘Australian Made’) motivations behind a major part of its 
government  procurement  policy,  particularly  at  the  sub-national  level,  as  well  as  the 

62 

 
 
 
 
Australian  Government’s  support  for  Australian  private  bidders  in  their  attempts  to  win 
tenders through the Australian Industry Participation Plan.  

According  to  some  New  Zealand  based  business  respondents,  there  are  also  a  number  of 
examples of public procurement policies in the EU that discriminate against New Zealand 
products. 

4.8. Competition environment 

Some  respondents  across  different  categories  of  stakeholders  consider  that  the  regulatory 
framework  ensures  fair  competition  in  Australia  and  New  Zealand.  A  few  respondents  take 
the  opposite  stance.  Certain  EU  business  respondents  underline  that  problems  encountered 
with  regard  to  fair  competition,  and  also  note  their  concerns  related  to  anti-dumping 
measures in New Zealand and in Australia. 

A  number  of  business  sector  respondents  identify  issues  seen  as  problems  relating  to 
competition environment and anti-dumping measures impacting on them: 

EU business stakeholders note that in Australia and New Zealand: 

-  Renewal  of  several  anti-dumping  duties  for  which  there  is  no  evidence  that  import 
would  cause,  or  threat  to  cause,  a  serious  impairment  of  the  domestic  industry  (e.g. 
canned peaches).  

-  Request for safeguard measures on EU products for which there is a lack of sound 

justification (e.g. tomatoes). Issues regarding postal services  

-  State Trading Enterprises in the agriculture and fisheries sector as an issue. 

-  Export  subsidies  in  the  textiles  and  leather  sector,  and  export  facilitation  in  the 

automotive sector. 

Australia and New Zealand business stakeholders note that in the EU:  

-  Complex  competition  policy,  difficulty  to  navigate  and  ensure  compliance  with, 

particularly for smaller firms or non-EU firms.  

-  Existence  of  competition  distortion  due  to  European  additional  costs  concerning 
production  model,  environment-friendly  production  rules,  low  labour  costs,  different 
standards concerning breeding, transport and slaughter. 

-  Some  aspects  of  EU  policy  –  such  as  the  system  for  protecting  Geographical 

Indications – may raise concern of fair competition. 

-  One stakeholder suggests that anything that can streamline investment approvals or 
give New Zealand and Australian firms' greater certainty about their obligations under 
EU competition law as early as possible would be welcomed. 

A  non-profit  sector  respondent  notes  that  foreign  companies  should  not  be  offered  special 
rights or advantages over the domestic ones. 

4.9. SMEs 

Stakeholders were asked to identify which sectors pose particular challenges to SMEs in the 
EU,  in  Australia  and  in  New  Zealand.  EU  business  sector  respondents  note  tariff  barriers, 
rules of origin, customs procedures, and technical barriers to trade. Other sectors such as 

63 

 
 
 
 
services,  investment,  IPR,  government  procurement,  dispute  settlement,  competition 
policy, trade unions, SPS and the divergence of standards of production were mentioned 
by a few respondents.  

According to business sector respondents, the future FTAs with Australia and New Zealand 
would benefit SMEs by inducing more output and more employment due to higher exports, 
cheaper production costs through cheaper imports, facilitated trade with other countries due to 
converging  standards,  technology  transfer,  possibility  to  move  from  lower  to  higher  value 
added products/services, lower costs for import requirements, increased business cooperation 
between SMEs.  

Business sector respondents also mentioned specific sectors expected benefits from the future 
FTAs such as the EU cane refining sector and more options regarding sourcing cuts of meat 
where there is a deficit supply in the EU. 

4.10. Consumers 

Respondents were asked to give their opinion on the potential impact on consumers from the 
reduction of barriers to trade and investment between the EU and Australia and New Zealand. 
Many respondents believe that the impact would be positive for consumers. Other respondents 
did not answer the question, or had no opinion. 

Respondents  across  different  segments  of  the  stakeholders  consider  that  the  impact  for 
consumers  of  liberalisation  of  trade  and  investment  between  the  three  countries  will  be 
positive as regards specific outcomes such as: 

-  Prices of goods and services;  

-  Choice of goods or services;  

-  Quality of goods and services;  

-  Safety of goods and services;  

- 

Information available to consumers; and  

-  Protection and enforcement of consumer rights. 

Some  EU  based  non-profit  sector  respondents  note  concerns  such  as  regarding  education, 
which  according  to  a  respondent,  should  not  be  part  of  the  future  FTAs  as  it  would  have 
negative  effects  on  quality,  price,  access  and  equity.  Other  non-profit  sector  respondents  in 
the EU note the importance of maintaining the existing high standards. 

4.11. Trade and sustainable development  

Respondents  were  asked  to  give  their  opinion  on  the  social  impact  from  the  reduction  of 
barriers  to  trade  and  investment  between  the  EU  and  Australia  and  New  Zealand.  The  non-
profit  sector  respondents  underlined  in  general  the  need  to  maintain  the  existing  EU  social, 
environmental and human rights standards.  

A significant part of the respondents believe that there will be an impact on consumers in the 
EU  and  Australia  and  New  Zealand.  According  to  the  different  types  of  respondents,  areas 
related to social issues that could be positively affected by the reduction of barriers to trade 
and  investment  in  the  EU  are  predominantly:  employment  in  terms  of  number  of  jobs  and 
employment in terms of quality of jobs. Respondents also consider that the household income, 

64 

 
 
 
 
wages and the affordability of goods and services will be impacted in a positive manner. More 
specifically,  non-business  respondents  underlined  the  need  to  pay  attention  to  the  free  and 
equal access to education, to ensure the participation of NGOs in the negotiations process and 
to have a solid chapter on social and environmental sustainability. 

As regards social issues, labour rights and human rights in Australia, respondents in the EU 
and  Australia  consider  that  employment  –  number  of  jobs,  quality  of  jobs,  wages  and  the 
affordability of essential goods and services will be the most positively affected areas. Some 
respondents  stressed  that  ensuring  a  level  playing  field  through  conditional  liberalisation 
could mitigate the negative impact of the barriers removal on social and labour rights.  

With  regard  to  New  Zealand,  areas  which  will  be  positively  affected  according  to 
respondents  from  the  EU  and  New  Zealand  are:  number  of  jobs,  quality  of  jobs,  wages, 
household income and the affordability of essential goods and services. 

Then,  a  significant  part  of  the  respondents  considers  that  the  reduction  of  barriers  to  EU-
Australia/EU-New Zealand trade and investment will have an environmental impact in the 
EU, in Australia and in New Zealand. However, respondents have mixed assessment when 
defining  which  areas  will  be  the  most  affected  ones  either  in  a  positive  or  negative 
manner. For example, some respondents consider that future FTAs will have a positive effect 
on climate change, including greenhouse gas emissions, but almost the same number believe 
the effect will be negative. 

Some respondents underlined that if there is a negative impact, it could be mitigated by:  

-  Recognising laws arising from international treaties as regards environment;  

-  Excluding environment-friendly sectors;  

-  For  the  EU,  protecting  the  model  of  production,  working  for  its  maintenance,  as  it 

engenders precious ecological services (landscapes, hedges, biodiversity); and 

-  Encouraging equivalence and a level playing field through conditional liberalisation. 

A  non-profit  sector  respondent  considers  that  more  trade  generated  by  FTAs  would  lead  to 
more pollution. 

Finally, many respondents consider that the EU and Australia/New Zealand should co-operate 
further  in  order  to  promote  adherence  to  internationally  agreed  principles,  rights,  and 
agreements on labour and the environment. Respondents consider that it could be achieved 
through cooperation on reaching the Sustainable Development Goals and within international 
organisations  by  promoting  membership  in  and  compliance  with  all  relevant  environment-
focused conventions and international agreements by implementing all agreed multilateral and 
other standards (such as animal welfare).  

4.12. Other issues 

Respondents  were  asked  to  define  whether  they  consider  that  issues  related  to  energy  and 
raw  materials  (for  example,  measures  aimed  at  increasing  transparency,  ensuring  non-
discrimination  and  limiting  anti-competitive  practices,  addressing  renewable  energy  related 
issues)  should  be  addressed  in  the  bilateral  EU-Australia  and  EU-New  Zealand  economic 
cooperation  frameworks.  A  number  of  EU  business  respondents  consider  this  an  important 
issue  to  be  addressed  in  EU-Australia  and  EU-New  Zealand  relations.  In  this  regard, 
respondents suggest a number of policy areas and the type of possible actions: 

65 

 
 
 
-  The EU should promote a larger uptake of renewables (PV, wind and bioenergy) in 

Australia and New Zealand.  

-  Recommend inclusion of strong provisions on access to energy and renewable raw 

materials in the future FTAs.  

-  Construction of a regulatory system scrutinising supply chains for conflict minerals. 
(Self-certification  of  responsible  importers  of  tin,  tantalum,  tungsten  and  gold 
originating  from  conflict  affected  and  high-risk  areas,  and  a  greater  level  of 
transparency throughout the minerals supply chain. The EU should continue taking an 
active  role  in  raw  materials  diplomacy  and  engage  -  together  with  trading  partners  - 
with regions where many smelters and refiners are located.) 

A significant part of respondents considers that trade and investment agreements between the 
EU  and  Australia  and  New  Zealand,  respectively  should  include  specific  provisions  on 
improving future regulatory coherence (for example, measures providing for cross-cutting 
disciplines  in  order  to  develop  and  implement  more  efficient  and  more  compatible 
regulations).  As  policy  areas  and  type  of  possible  actions  regarding  regulatory  coherence, 
respondents suggested:  

-  Harmonisation of technical standards, regulatory cooperation (agriculture, chemicals, 

biosecurity).   

-  Minimum  standards  of  treatment  for  foreign  investors  and  investor  state  dispute 

settlement in cases of arbitrary treatment and/or expropriation. 

-  Product approval and accreditation processes should be standardised and the same in 

EU and Australia. 

-  Considering a sector specific annex for spirits in future FTAs (to facilitate trade and 
improve  cooperation  in  the  development  and  transparency  of  regulations  affecting 
such trade). 

-  Alignment  of  beer  and  cider  standards  (e.g.  permissible  ingredients)  and  labelling 

requirements. 

-  Considering  an  Information  and  Communication  Technology  (ICT)  Regulatory 

Chapter. 

-  Making  sure  there  is  reciprocity,  in  terms  of  trade  facilitation,  IPR  and  competition 

policy. 

-  The successes of the Veterinary Agreement in achieving ongoing regulatory coherence 
around animal products sanitary issues can and should be extended into other areas. 

Other issues raised by respondents: 

-  Additional  trade  barriers  in  Australia:  rigid  technical  requirements  in  the  chemical 
sector (note registration, documentation, customs procedures), quantitative restrictions 
in the vehicle sector.  

- 

In  relation  to  services,  trade  barriers  are:  distance,  fragmentation  of  Australian 
‘common’  market,  lack  of  mobility  of  high-skilled  professionals,  also  for  short  term 
assignments. 

-  Sector  specific  considerations  related  to  rules  of  origin:  sugar,  sugar  containing 
products,  (prevent  the  export  of  non-originating  sugar)  motor  vehicles  and  car  parts 

66 

 
 
(commercially  relevant  rules)  textile  and  clothing  (follow  the  principle  of  a  "double 
transformation"). 

-  Animal  welfare  issues  in  particular  were  noted  by  a  number  of  non-profit  sector 

respondents. 

In  general,  many  respondents  consider  that  future  FTAs  between  the  EU  and  Australia  and 
New Zealand, respectively would benefit the stakeholders in the EU and in Australia and New 
Zealand and would present new opportunities for exporters and investors in these markets.  

67 

 
 
 
Annex 3 - Who is affected by the initiative and how? 

Based  on  the  proposed  policy  choice  in  question  i.e.  based  on  Option  C2,  which  will 
nonetheless take into account the EU agricultural sensitivities, this Annex aims at: 

−  setting  out  the  practical  implications  (such  as  key  obligations  or  timescale)  of  the 
initiative  for  a  representative  enterprise  and/or  public  administration  (or  particular 
groups or individuals if directly regulated), 

−  describing  the  actions  that  the  enterprise  or  public  authority  might  need  to  take  in 
order  to  comply  with  the  obligations  under  the  proposed  intervention  and  indicate 
wherever possible the likely costs to be incurred in meeting those obligations. 

In  the  specific  case  of  an  Impact  Assessment  Report  concerning  negotiating  authorisation/ 
directives, it is not possible at this stage to have a clear picture of the final provisions to be 
concluded at the end of the negotiating process. 

Moreover,  free  trade  agreements  are  not  limited  to  specific  sectors,  or  in  terms  of  their 
application  in  time.  They  potentially  cover  all  economic  activities  as  from  entry  into  force 
(and theoretically indefinitely). In this respect, the Communication ‘Trade for All - Towards 
an  More  Responsible  Trade  and  Investment  Policy’  highlights  that  EU  trade  policy  is  "for 
all":  consumers,  employees,  small-  and  medium-sized  enterprises,  and  the  poorest  in 
developing countries. Finally, trade operators can always use the non-preferential treatment.  

In this context, at this very early stage, only a general and simplified attempt can be made to 
summarise  the  likely  implications  for  the  various  groups  of  stakeholders  (in  each  case  both 
European, Australian and New Zealanders ones grouped together), as follows: 

Exporting producers of industrial goods: will benefit from new trade opportunities and cost 
savings  due  to  liberalisation  and  reduction  of  NTBs.  Liberalisation  of  trade  in  services  will 
also support further economic integration in manufacturing. 

Exporting  producers  of  agricultural  products:  as  for  industrial  goods,  the  producers  will 
benefit  from  new  trade  opportunities  (except  in  the  case  of  the  EU  for  the  sensitive 
agricultural  sectors)  and  cost  savings  due  to  liberalisation.  They  will  also  have  the  benefit 
from more stable rules on sanitary and phytosanitary measures.  

Small-  and  medium  sized  enterprises  will  benefit  from  new  trade  opportunities  and  cost 
savings due to liberalisation, as well as from provisions covering regulatory cooperation and 
other rules. See the related part of the Impact Assessment (chapter 5.5). 

Traders will benefit from lower trade costs due to reduction or elimination of tariff and non-
tariff  trade  barriers,  and  from  increased  trade  opportunities  due  to  the  various  ways  of 
liberalisation under the agreement.   

68 

 
 
 
 
 
 
 
 
 
 
 
 
 
Service  providers  will  also  benefit  from  trade  liberalisation,  enabling  new  economic 
opportunities and cost savings.  

Workers  of  the  above  mentioned  businesses  will  also  benefit  from  the  new  economic 
opportunities. 
Consumers: see the related part of the Impact Assessment (chapter 5.9). 

Authorities: see the related parts of the Impact Assessment (chapter 5.11).  

Customs authorities: as there is an established practice for implementing FTAs in the EU´s, 
Australian as well as New Zealand customs authorities, the impact of the new agreements will 
be marginal in this context. 

Third countries, notably LDCs: see the related part of the Impact Assessment (chapter 5.6).  

69 

 
 
 
 
 
 
 
Annex 4 - Analytical models used in preparing the Impact Assessment 

AGGREGATION 

The geographical and sectoral disaggregation chosen for the CGE simulations is shown in the 
two tables below. It is important to note that the model disaggregation is limited by the data 
source that is the elements and level of disaggregation of the model database57.  

Sector 

Sector name 

1   Cereals  

2  Rice 

3   Vegetables, Fruits, nuts 

4   Oil seeds, vegetable oils & fats 

5   Sugar 

6  Plant & animal fibres and other crops 

7  Ruminant meats 

8  Other animal products

9  Other meat  

10  Dairy products 

11  Wood and paper products 

12  Coal 

13  Oil 

14  Gas 

15  Minerals 

16  Fishing 

17  Other food products

18  Beverages and tobacco

19  Textile, apparel, leather 

20  Chemicals, rubber, plastic 

21  Petroleum, coal products 

22  Metal products  

23  Non-metallic minerals

24  Motor vehicles & transport  equipment 

25  Machinery  

26  Electronic equipment and other manufacture

27  Electricity 

28  Utility (construction, water) 

29  Transport 

30  Communication and business service 

31  Financial service and insurance 

32  Recreational and other services 

GTAP sectors

2, 3, 

1, 23

4

5, 21

6, 24

7. 8, 12, 

9, 19

10

20

11, 22

13, 30. 31

15

16

17, 44

18

14

25

26

27, 28, 29

33

32

35, 36, 37

34

38, 39

41

40, 42

43

46, 45

48, 49, 50

51, 54, 

52, 53

55, 56, 57, 47

57 GTAP 9, base year 2011 

70 

 
 
 
 
 
 
 
                                                            
Remarks 

  Region  

1  EU 

2  Australia 

3  New Zealand 

4  Turkey 

5  USA 

6  Canada 

7  Japan 

8  Korea 

9  Other high income countries 

EFTA, Mexico 

10  ASEAN 

11  Pacific countries* 

12  LDCs** 

ASEAN LDCs have been be included in ASEAN 

13  China (and Hong Kong) 

14  Other developing countries 

15  Rest of the World (RoW) 

* Subject to modelling constraints 

** A Country cannot be included in more than one region. 

BASELINE 

Step 1: Improving the market access representation 

In  order  to  build  a  comprehensive  assessment  of  market  access,  the  database  has  been 
amended introducing ad valorem equivalent (AVE) estimates of the non-tariff barriers in the 
manufacturing sectors. Additionally for the fruit and vegetables sector, an AVE for the entry 
price  system  of  the  EU  has  been  introduced  to  the  model  that  is  to  be  shocked  in  the 
scenarios.58  NTBs  for  agri-food  sectors  are  ignored  in  the  simulations  for  lack  of  a  robust 
methodology  of  quantifying  these  barriers  and  the  impact  of  their  reduction.59  As  a  final 
amendment to the database, AVEs of TRQs have been corrected to more realistically reflect 
TRQ fill rates. The calculated average tariff rate for motor vehicles and transport equipment 
imports into Australia was adjusted to take into account the actual nature of trade. 

Additionally, FTAs that are not reflected in the GTAP database but have been concluded and 
implemented meanwhile are introduced. These are, for Australia and New Zealand: 

−  Australia-Japan 

58 Ad valorem equivalents of NTB are introduced ‘on’ the standard tariff variable already in the model. This has 
the  inconvenience  that  they  create  government  revenue  even  if  this  is  not  the  case  in  the  ‘real’  world.  To 
minimise this, only the part of the NTB that is eventually reduced (cf. the section on scenarios) is added to the 
model.   
59 This is not to say that there will be no ambition in the negotiations to achieve progress on SPS issues. 

71 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
−  Australia-China 
−  Australia-Korea 
−  New Zealand-Korea 
−  TPP 

For the EU: 

−  CETA 
−  EU-Singapore 

To introduce such changes into the model, at 2011, a specific closure has been adopted. This 
closure  ensures  that  the  consistency  of  the  database  remains  after  the  introduction  of  these 
estimates. In other words, since the database contains the “picture of the world trade” at 2011, 
any  change  to  the  data  will  have  broader  effects  and  change  other  variables  from  their 
observed values when the model finds a new equilibrium. The “alter tax” closure overcomes 
this issue by allowing the introduction of new data minimising the impacts of the changes on 
the value flows in the database.60  

It is worth noting that a number of agreements are not included in the baseline, and therefore 
also not in the policy projections. It is not possible to model not final agreements, such as the 
Regional  Comprehensive  Economic  Partnership  (RCEP),  the  Trade  in  Services  Agreement 
(TiSA) and Environmental Goods Agreement (EGA) that Australia, New Zealand or the EU 
are participating in. The EU and New Zealand are parties to, while Australia is in the process 
of joining, the WTO Government Procurement Agreement (GPA). However the GPA is not 
included in the model because there is no reliable methodology for modelling the impact of 
government procurement issues. The expansion of the Information Technology Agreement, to 
which all partners are members cannot be modelled, as the final schedule is not yet available. 
61 
Step 2: Updating database to long term 

Macro variables, GDP, population and labour force (skilled and unskilled) have been updated 
to 2030: 

−  GDP from the World Bank. To shock the GDP, usually endogenous, a standard swap 

with Total Factor Productivity has been implemented 

−  Population from the ILO 

−  Labour  force  from  the  ILO;  The  respective  shares  of  skilled  and  unskilled  labour 

CEPII 

−  Small  increase  in  natural  resources  to  reflect  the  developments  around  shale  gas 

technology 

−  A  productivity  growth  for  energy  inputs  reflecting  the  implementation  of  the  Kyoto 

and Paris agreements 

SCENARIOS 

60 GTAP technical paper No. 12 https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=315 
61 The fact that all these agreements are plurilateral ones is a coincidence, rather than a defining feature. 

72 

 
 
 
 
 
 
 
 
 
                                                            
In order to simulate a modernisation of the FTA between EU and Australia and New Zealand, 
two scenarios have been simulated, labelled “Conservative” and “Increased Liberalisation”.  
In  both  of  these  scenarios,  tariffs  in  the  NAMA  sectors  are  reduced  to  zero.  However, 
liberalisation assumptions differ in other categories: 

−  Agricultural  TRQs  upon  import  into  the  EU,  simulated  by  AVE  (cf.  above),  are  left 
unchanged  in  the  first  scenario,  but  abolished,  (i.e.  the  corresponding  AVE  tariff 
reduced to zero) along with tariffs in the second scenario (“increased liberalization”). 
−  The EU entry price system for fruit and vegetables is left in place in the first scenario, 
but  the  corresponding  AVE  is  reduced  to  zero  in  the  second  scenario  (“increased 
liberalization”). 

AVE of NAMA NTBs remains unchanged in the first scenario, but reduced by 10% of their 
values  in  literature  for  EU  exports  to  Australia  and  New  Zealand  in  the  second  scenario 
(“increased liberalisation”). For imports from Australia and New Zealand to the EU, no NTB 
reductions  are  simulated.  The  reason  for  this  assumed  asymmetry  is  twofold.  Firstly  EU 
barriers  in  key  non-agricultural  sectors  are  already  rather  low  vis-a-vis  the  two  countries.62 
Secondly past experience shows that as a result of negotiations, relatively smaller partners are 
more likely to adapt their internal regulation than large partners. 

For services, a 3% AVE cut is introduced in both scenarios, embodying the effect of binding 
of  existing  liberalisation.  The  starting  point  for  the  approach  is  the  observation  that  FTA 
negotiations  usually  lead  to  only  a  binding  of  the  existing  level  of  liberalisation  in  services 
trade  (for  the  cases  where  this  level  is  lower  than  the  GATS  commitments)  as  opposed  to 
achieving new market access. However the insurance policy effect of binding current levels of 
liberalisation  has  a  positive  effect  on  services  trade,  equivalent  to  some  degree  of  ‘real’ 
market  access.  The  methodology  applied  for  this  and  other  IA  simulations  aims  to  translate 
this  insurance  effect  into  liberalisation  parameter  for  CGE  modelling.  In  an  earlier  study63 
such  ‘binding’  has  been  quantified  as  being  equivalent  to  a  reduction  of  3%  in  services 
barriers for the DDA negotiations among 46 participating countries.  

RESULTS 

GDP  and  welfare  gains  of  the  EU,  Australia  and  New  Zealand,  which  are  extensively 
discussed in section 5.4 of the main report, are presented in table 1 of this annex. At this point 
it may be useful to mention that the database of the model is compiled in US dollars. Results 
for the end of the projection period (2030) are converted in Euros by the ECB/Eurostat rate 
recorded for 2015. 

62 EU requirements are largely based on international standards, and in most cases products can be placed on the 
EU market on the basis of the supplier's declaration of conformity. For areas where third-party assessment is 
required,  mutual recognition agreements between the EU and both Australia and New Zealand are already in 
place 

63 Decreux, Y. and L. Fontagné (2011), Economic Impact of Potential Outcome of the DDA. 

73 

 
 
 
 
 
 
                                                            
Table 1: GDP, welfare and overall exports results (long term) 

Variable 

Scenario 

EU  Australia  New Zealand

GDP  
(% change) 

GDP gain  
(€ billion*) 

Welfare gain  
(€ billion*)  

EU-AustraliaUS bilateral exports  
(% change) 

Conservative 

0.01

Increased liberalisation 0.02

Conservative 

Increased liberalisation

Conservative 

Increased liberalisation

Conservative 

2.1 

4.9 

2.6 

4.8 

16.4

0.13 

0.20 

2.7 

4.2 

0.9 

1.8 

6.9 

Increased liberalisation 33.3

11.1 

Conservative 

14.2

EU-New Zealand bilateral exports  
(% change) 

Increased liberalisation 32.4
* US dollars were converted to Euros as $1.1095 to €1 (ECB)  

0.28 

0.52 

0.7 

1.3 

0.4 

0.6 

- 

- 

10.5 

22.2 

Table  2  shows  the  results  for  total  exports  of  the  three  partner  countries  under  the  two 
scenarios. As has been the case for welfare and GDP, the percentage increases are a full order 
of  magnitude  smaller  for  the  EU  than  for  the  two  partners.  This  is  quite  natural  given  the 
relative size of the three economies.  

Table 2: Change of the value of total exports (long term) 

Conservative 

Increased liberalisation

EU 
Australia 
New Zealand 

0.04% 
0.47% 
0.41% 

0.08%
0.79%
0.75%

Tables  3-6  display  the  relative  changes  simulated  under  the  two  scenarios.  EU  bilateral 
exports to both countries increase strongest in the sectors of machinery and motor equipment 
and  still  strongly  but  somewhat  less  in  the  chemicals  sector.  Imports  on  the  other  hand, 
increase  most  strongly  in  some  services  sectors  from  Australia  and  in  agri-food  sectors,  in 
particular ruminant meat, dairy and fruit and vegetables from New Zealand.  

74 

 
 
 
 
 
 
Table 3: EU exports to Australia and the effects of the two scenarios (long term) 

Sector 
rice 
cereals 
veg_fruit 
oil_seeds 
sugar 
fiber_crop 
ruminant_meat 
other animal 
other_meat 
dairy 
wood_paper 
fishing 
coal 
oil 
gas 
minerals 
other_food 
bev_tob 
textile 
chemicals 
oil_pcts 
metal_pcts 
no_metal_pct 
motor_equip 
machinery 
ele_other 
electricity 
utility 
transport 
communication 
financial 
other_serv 
TOTAL 

Conservative 

0% 
0% 
7% 
1% 
0% 
1% 
1% 
3% 
1% 
48% 
21% 
5% 
0% 
0% 
2% 
1% 
11% 
7% 
48% 
7% 
0% 
22% 
22% 
38% 
21% 
13% 
0% 
7% 
6% 
7% 
7% 
7% 
16% 

Increased 
Liberalisation
0%
2%
9%
1%
0%
4%
2%
4%
2%
49%
21%
5%
117%
15%
2936%
8%
11%
7%
104%
20%
4%
54%
58%
52%
61%
59%
-1%
8%
6%
7%
7%
7%
33%

75 

 
 
 
 
Table 4: Australian exports to the EU and the effects of the two scenarios (long term) 

Sector 
rice 
cereals 
veg_fruit 
oil_seeds 
sugar 
fiber_crop 
ruminant_meat 
other animal 
other_meat 
dairy 
wood_paper 
fishing 
coal 
oil 
gas 
minerals 
other_food 
bev_tob 
textile 
chemicals 
oil_pcts 
metal_pcts 
no_metal_pct 
motor_equip 
machinery 
ele_other 
electricity 
utility 
transport 
communication 
financial 
other_serv 
TOTAL 

Conservative 

1% 
1% 
20% 
5% 
1% 
2% 
1% 
24% 
2% 
1% 
2% 
23% 
0% 
0% 
1% 
0% 
75% 
17% 
37% 
10% 
2% 
4% 
21% 
14% 
9% 
5% 
1% 
11% 
9% 
9% 
9% 
9% 
7% 

Increased 
Liberalisation
113%
53%
19%
5%
124%
1%
539%
24%
2%
86%
3%
23%
1%
0%
8%
0%
75%
18%
38%
11%
2%
5%
22%
16%
10%
5%
1%
11%
9%
9%
9%
9%
11%

76 

 
 
 
 
Table 5: EU exports to New Zealand and the effects of the two scenarios (long term) 

Sector 
rice 
cereals 
veg_fruit 
oil_seeds 
sugar 
fiber_crop 
ruminant_meat 
other animal 
other_meat 
dairy 
wood_paper 
fishing 
coal 
oil 
gas 
minerals 
other_food 
bev_tob 
textile 
chemicals 
oil_pcts 
metal_pcts 
no_metal_pct 
motor_equip 
machinery 
ele_other 
electricity 
utility 
transport 
communication 
financial 
other_serv 
TOTAL 

Conservative 

0% 
0% 
2% 
1% 
0% 
2% 
1% 
0% 
40% 
27% 
5% 
1% 
-1% 
0% 
0% 
1% 
12% 
6% 
47% 
9% 
4% 
21% 
18% 
22% 
20% 
12% 
0% 
8% 
7% 
7% 
7% 
8% 
14% 

Increased 
Liberalisation
0%
4%
3%
1%
0%
5%
5%
1%
42%
29%
4%
1%
96%
14%
2057%
10%
13%
6%
101%
27%
8%
52%
54%
44%
63%
53%
0%
9%
7%
7%
7%
8%
32%

77 

 
 
 
 
 
Table 6: New Zealand’s exports to the EU and the effects of the two scenarios (long 
term) 

Sector 
rice 
cereals 
veg_fruit 
oil_seeds 
sugar 
fiber_crop 
ruminant_meat 
other animal 
other_meat 
dairy 
wood_paper 
fishing 
coal 
oil 
gas 
minerals 
other_food 
bev_tob 
textile 
chemicals 
oil_pcts 
metal_pcts 
no_metal_pct 
motor_equip 
machinery 
ele_other 
electricity 
utility 
transport 
communication 
financial 
other_serv 
TOTAL 

Conservative 

0% 
0% 
39% 
21% 
0% 
8% 
0% 
11% 
6% 
0% 
1% 
20% 
0% 
-1% 
-1% 
-1% 
54% 
15% 
19% 
29% 
3% 
16% 
5% 
13% 
9% 
8% 
0% 
9% 
9% 
9% 
8% 
8% 
11% 

Increased 
Liberalisation
35%
5%
38%
20%
425%
6%
25%
10%
5%
134%
1%
20%
0%
-1%
-1%
-2%
54%
14%
18%
29%
3%
16%
3%
14%
9%
7%
0%
9%
8%
8%
8%
8%
22%

78 

 
 
 
 
Table  7  shows  percentage  changes  in  sectoral  output  in  the  three  countries  under  both 
scenarios. Most of them are 0.1% or less for the EU, in particular in the conservative scenario. 
In the increased liberalisation scenario, more sectors are affected beyond this threshold. The 
ones  with  negative  output  changes  are  all  agricultural  subsectors,  the  ruminant  meat  sector 
with a 1.2% output decrease being the most strongly affected one. On the positive side, output 
increases more than 0.1% in the motor vehicles, machinery and gas sectors. It should be kept 
in mind, however, that the size of the latter sector in the EU is rather small.  
For Australia and New Zealand, output of individual sectors in more strongly affected, which 
is  natural  given  the  smaller  size  of  the  two  economies  relative  to  the  EU.  Output  gains  are 
found to be concentrated in the agricultural and services sectors, with, however some notable 
agricultural  sector  contractions  in  New  Zealand.  Output  losses  occur  mostly  in  the 
manufacturing sectors, in particular in those that were found above to witness strong increases 
in bilateral EU exports, however, again with some notable exceptions in both countries.  

Table 7: Relative changes of sectoral output in the three partner countries (long term) 

Conservative 

Increased liberalisation 

Sector  
rice 
cereals 
veg_fruit 
oil_seeds 
sugar 
fiber_crop 
ruminant_meat 
other animal 
other_meat 
dairy 
wood_paper 
fishing 
coal 
oil 
gas 
minerals 
other_food 
bev_tob 
textile 
chemicals 
oil_pcts 
metal_pcts 
no_metal_pct 
motor_equip 
machinery 
ele_other 
electricity 
utility 
transport 
communication 
financial 
other_serv 

EU
0.0%
0.0%
-0.2%
-0.1%
0.0%
0.0%
0.2%
0.0%
0.0%
0.1%
0.0%
0.0%
-0.1%
0.0%
-0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.2%
0.0%
-0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

Australia 
0.2% 
0.0% 
0.2% 
0.4% 
0.1% 
0.0% 
0.1% 
0.2% 
0.1% 
-0.3% 
-0.1% 
0.0% 
0.2% 
0.2% 
0.3% 
0.0% 
0.0% 
0.5% 
0.3% 
0.1% 
0.1% 
0.1% 
0.1% 
-1.4% 
-0.4% 
0.3% 
0.1% 
0.3% 
0.1% 
0.1% 
0.1% 
0.1% 

New Zealand 
-0.2%
-0.9%
2.6%
-0.3%
-0.4%
0.0%
-0.3%
1.1%
-0.1%
-0.9%
-0.2%
0.0%
0.0%
0.0%
0.2%
0.1%
0.3%
0.8%
0.7%
0.6%
0.3%
-0.2%
0.3%
-1.4%
-0.6%
0.3%
0.2%
0.8%
0.2%
0.2%
0.1%
0.2%

79 

EU 
-0.1%
-0.1%
-0.2%
-0.1%
-0.2%
-0.1%
-1.2%
0.0%
0.0%
-0.1%
0.0%
0.0%
-0.1%
-0.1%
0.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.1%
0.3%
0.2%
-0.1%
0.0%
0.1%
0.0%
0.0%
0.0%
0.0%

Australia  New Zealand
-0.3%
-1.7%
2.2%
-1.0%
-0.8%
-0.9%
4.2%
0.4%
-0.9%
0.4%
-0.4%
0.0%
0.1%
-0.1%
0.2%
0.2%
0.2%
0.7%
-0.3%
-0.3%
0.6%
-1.1%
0.4%
-2.7%
-2.9%
0.1%
0.3%
1.8%
0.3%
0.5%
0.3%
0.3%

0.4% 
0.1% 
0.2% 
0.5% 
0.7% 
-0.2% 
2.4% 
0.1% 
0.1% 
0.1% 
0.1% 
0.0% 
0.3% 
0.4% 
-0.9% 
0.0% 
0.0% 
0.6% 
0.1% 
-0.5% 
0.3% 
0.1% 
-0.1% 
-1.7% 
-2.0% 
0.2% 
0.2% 
0.6% 
0.1% 
0.2% 
0.1% 
0.1% 

 
 
 
 
 
Table 8 shows the effects on consumers and workers. Real consumer prices, embodied by the 
consumer  price  index  (CPI)  go  down  for  Australia  but  increase  for  the  other  two  partners. 
Naturally, the impacts are stronger in the increased liberalisation scenario, however, the factor 
by which the two scenarios differ is more pronounced for New Zealand.  

Real wages which are corrected for the change in CPI and therefore represent a net effect on 
worker’s purchasing power are only slightly affected in the EU, but more so in the other two 
countries,  particularly  in  New  Zealand.  Unskilled  workers  in  the  increased  liberalisation 
scenario gain as much as 0.78% by the agreement.  

Table 8: Change in Consumer Price Index (CPI) and real wages in the two scenarios (long term) 

Conservative 
CPI  Unskilled  Skilled
0.02%
0.03% 
0.17%
0.20% 
0.27%
0.32% 

0.03% 
-0.13% 
0.02% 

EU 
Australia 
New Zealand 

Increased liberalisation 
CPI Unskilled  Skilled 
0.05% 
0.05% 
0.27% 
0.33% 
0.57% 
0.78% 

0.06%
-0.19%
0.13%

Table 9 shows the impact of the two scenarios on CO2 emissions. For the EU these increases 
are negligible. For Australia and New Zealand, they amount, respectively, to 0.4% and 0.6% 
in the increased liberalisation scenario. 

Table 9: Percentage change in CO2 emissions (long term) 

EU 
Australia 
New Zealand 

Conservative  

Increased liberalisation 

0.03%
0.12%
0.29%

0.04% 
0.38% 
0.64% 

Please  note  that  some  further  results  of  the  CGE  modelling  are  described  and  used  in  the 
external study (Annex 5 to this Impact Assessment Report).  

LIMITATIONS OF THE ANALYSIS 

In  terms  of  scenario  assumptions,  the  main  limitation  is  the  fact  that  agricultural  NTBs  and 
potential reductions that can be achieved in the negotiations are not simulated. That will have 
the  effect  of  understating  the  gain  for  the  agricultural  sector  and  its  subsectors.  However, 
various academic attempts to quantify agricultural NTBs or their reduction under FTAs in the 
recent past have proven unable to deliver robust results, which is the major reason we refrain 
from a quantitative analysis of the latter.  

The  model  used  for  the  simulations  contributing  to  the  IAR,  is  the  dynamic  GTAP  model. 
Although  it  does  simulate  international  capital  flows,  it  is  not  possible  to  implement  and 
simulate  changes  in  bilateral  investment  policies.  Therefore,  the  model  analysis  could  not 
quantify the potential effects stemming from the investment chapter.  

Similarly,  the  effects  of  opening  markets  for  public  procurement  at  various  levels  of 
administration  and  the  strengthening  of  intellectual  property  rights  had  to  be  left  out  of  the 
analysis and their potential value is not quantified.  

80 

 
 
 
 
 
 
 
 
 
 
 
 
 
Finally,  we  chose,  as  is  common  practice  in  Impact  Assessments,  a  neoclassical  closure  for 
the  model.  Technically  this  means  that  factor supply  is  exogenous.  In  more  practical  terms, 
this  means  that  in  particular  it  is  assumed  that  employment  is  fixed  and  therefore,  no 
employment  effects  can  be  simulated.  This  choice  reflects  mainly  the  long-run  perspective 
which  we  adopt  when  evaluating  the  effects  of  our  trade  agreements.  It  also  reflects  the 
widely  recognised  believe  that  trade,  notwithstanding  its  significant  positive  effects  on  the 
economy, is not considered to have an effect on the so-called natural rate of unemployment. 

81 

 
 
 
 
Annex 5 - External study 

The study of LSE Enterprise is available at the following link: 

http://trade.ec.europa.eu/doclib/html/155505.htm 

82