Sustainability Impact Assessment in support of the EU-New Zealand Free Trade Agreement Negotiations

SIAs analyse the potential economic, social, human rights and environmental impact of trade agreements being negotiated by the European Union (EU). They are based on a robust analysis of the changes that are likely to be caused by the trade agreement in the EU, the partner country and developing countries. Equally important, they include wide-ranging consultations of stakeholders in the EU and the partner country. SIAs are undertaken independently by external consultants commissioned by the European Commission. SIA findings and recommendations feed into the negotiations, helping negotiators to optimise the related policy choices.

New Zealand is among the fastest growing developed economies. In line with this, bilateral trade in goods between the EU and New Zealand has risen steadily in recent years, reaching about €8.7bn in 2017. Against this background, the EU and New Zealand have agreed to negotiate an EU-New Zealand Free Trade Agreement (FTA). On 22 May 2018, the Council of the European Union authorised the opening of negotiations, which started in June 2018. The SIA in support of the trade negotiations was implemented by us in cooperation with Trade Impact BV, Global Sustainable Solutions, Trinomics and staff of the University of Wellington. Work started in January 2019 and was completed in July 2020.

The SIA, as all SIAs, consisted of two equally important and complementary components:

  • a robust analysis of the potential economic, social, human rights and environmental impact (both negative and positive) that the trade agreement under negotiation could have in New Zealand, the EU and in other relevant countries (notably the EU's outermost regions and least developed countries); and
  • a continuous and wide-ranging consultation process to ensure a high degree of transparency and the engagement of all relevant stakeholders in the conduct of the SIA.

The economic impact analysis provided the starting point for the SIA, as many of the other effects are consequences of the agreement's economic effects. The economic impact analysis was not restricted to changes in New Zealand's and the EU's exports and imports but covered a vast range of economic factors. Among the issues that the economic analysis comprised are:

  • The identification, description and analysis of the tariffs and non-tariff obstacles affecting trade between the EU and New Zealand;
  • The impact of removing both tariffs and non-tariff barriers affecting trade in goods and services;
  • The impact on behind-the-border issues, government procurement and investment liberalization;
  • The impact on SMEs as well as on participation in global value chains;
  • The impact of the FTA on third regions, in particular the EU Outermost Regions and least developed countries (LDCs);
  • Implications which the agreement might have for the promotion of good governance and fight against corruption; and
  • The links between the EU-New Zealand trade agreement and both parties' conclusion of trade agreements with other countries.

The starting point for the economic analysis was the CGE modelling undertaken by the Commission, complemented by additional quantitative and qualitative analysis.

The social analysis responded to the question of how a reduction of tariff and non-tariff barriers due to the Trade Agreement, and the resulting changes in trade and investment flows between the EU and New Zealand may affect the situation on the labour market, job quality, welfare, rights of consumers, and public policies and services, such as social protection, education, and health-care in both New Zealand and the EU. In particular, the following types of impact were addressed:

  • impact on employment levels across sectors of economic activity, gender, and skills groups, i.e. low-skilled and highly skilled workers;
  • impact on women in their diverse roles as workers, entrepreneurs, traders, and consumers;
  • impact on consumer welfare including inequality and vulnerable groups;
  • impact on job quality, including wages, types and duration of contracts (including differences between direct employment and sub-contracting), working hours, health and safety at work (e.g. the number of fatal and non-fatal injuries at work), as well as number of labour inspectors and inspections carried out at work places;
  • impact on consumers, including the availability and affordability of goods and services (including through changes in consumer price index), as well as their safety and quality;
  • impact on rights at work as enshrined in the eight ILO fundamental conventions, i.e. non-discrimination at work and the situation of vulnerable workers (e.g. disabled persons and migrant workers), respect for freedom of association, and the right to collective bargaining, and social dialogue, including the presence of the social partners (trade unions and employers’ associations) across sectors and types of enterprises;
  • mpact on public social policies, such as education and health-care, social protection as well as availability, accessibility, and quality of the provided services;
  • impact on uptake of Corporate Social Responsibility practices, including those implementing international instruments in this area, as well as respect for decent work in global supply chains.

The human rights analysis responded to the question of how the Free Trade Agreement may affect the human rights situation in both New Zealand and the EU. The assessment was carried out by taking into account the EC human rights impact assessment guidelines as well as using the Better Regulation Toolbox. It is based on the international human rights normative framework, including core UN human rights treaties and conventions, the Charter of Fundamental Rights of the European Union, the European Convention on Human Rights and other relevant regional human rights conventions, core ILO Conventions, and, where relevant, customary international law. In particular, the human rights analysis:

  • identified the specific human rights most likely to be affected by measures included in the FTA under negotiation;
  • analysed the extent to which measures foreseen in the free trade agreement may enhance or impair the enjoyment of the relevant rights and/or may strengthen or weaken the ability of the EU or New Zealand to fulfil or progressively realise their human rights obligations;
  • identified individuals or specific groups of people or those living in a particular region that are likely to be specifically affected by those changes.

Particular attention was paid to women's rights and the effect that the trade agreement could have on gender equality, including possible differential effects on men and women. Gender aspects played an important role across all dimensions of the study, including the consultations.

In the environmental impact assessment, we assess the most significant potential environmental impacts resulting from the FTA in both the EU and New Zealand. Although the analytical work carried out in the ex-ante study has shown that, overall, environmental impacts are likely to be limited both in New Zealand and the EU, selected environmental effects or effects in certain sectors still needed to be studied.

We identified six main environmental impact areas: climate change, air quality, land use & soil, biodiversity, water and waste. Even though the impact assessment on each environmental impact area relies on both qualitative and quantitative research methods (where applicable), the analyses for the first two impact areas (climate change and air quality) heavily employ quantitative methods. The analyses on the remaining impact areas mostly rely on qualitative methods.

The general impact analysis was complemented by assessments of selected economic sectors and thematic case studies.

Continuous and wide-ranging consultations with stakeholders both in New Zealand and the EU ensured a high degree of the SIA’s transparency, as well as enriched the analysis with information “from the ground”, and provided feedback on draft results. The main channels for communication and consultation – apart from this website – were:

  • Interviews and surveys, including online surveys, with key stakeholders; and
  • Civil society dialogue meetings in the EU.

Study outputs

All reports produced are available for download from the European Commission, including the Commission's position paper (July 2021) in response to the SIA.