May 22, 2018 / 8:30 AM / 7 months ago

EU agrees to start Australia, New Zealand trade talks

BRUSSELS (Reuters) - European Union countries cleared the way on Tuesday for the bloc to begin free trade talks with Australia and New Zealand in a drive to forge new alliances as trade tensions with the United States increase.

The European Commission, which negotiates on behalf of the 28 EU members, said EU trade chief Cecilia Malmstrom would visit both countries to open talks in June before negotiators convene in Brussels in July for a first round of discussions.

The EU forecasts that ambitious and comprehensive agreements could boost its exports to the two countries by a third in the long term, although there are caveats about opening up EU markets to farm produce such as butter and beef.

The bloc is the third largest trade partner of both Australia and New Zealand.

“Despite the distance, trade between the EU and these two countries is already roughly the same as with Mexico or Canada,” the Commission said.

Since its plans for a trade alliance with the United States were frozen after Donald Trump’s presidential election victory, the EU has focused instead on trying to champion open markets and seal accords with other like-minded countries.

The EU is also facing the prospect of U.S. import tariffs on its steel and aluminum and possible U.S. sanctions on Iran that could restrict its companies doing business there.

The bloc has struck trade accords struck with Japan, Mexico, Singapore and Vietnam and is in negotiations with the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay.

European Commission President Jean-Claude Juncker said in September month that the EU should launch and conclude free trade agreements with Australia and New Zealand in the next two years.

If Juncker’s time frame is achieved, the EU would get in ahead of Britain, which is also courting its two former colonies but cannot negotiate independent trade deals until it leaves the EU in March 2019.

Still, that timetable seems stretched, given talks themselves will only start this year and given that both deals will include “sensitive” agricultural products.

New Zealand is the world’s top sheep meat and dairy exporter, while Australia is a exporter of beef and wheat.

EU countries are struggling to agree how much beef they should let in, with France, Ireland and others saying their cattle farmers are under threat. Beef is also a key export demand of Mercosur.

The EU mandates, which are very similar, say that for such sensitive products longer transition periods or “other arrangements”, which could include limited quotas, should be considered.

Reporting by Philip Blenkinsop; Editing by Raissa Kasolowsky and Hugh Lawson

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