New Zealand and the Gulf States Co-operation Council finalised negotiations in 2009 but the deal was yet to come into force because of Saudi Arabia’s continued hold-out on its ratification.
Following a meeting with the Prime Minister of the United Arab Emirates, Key met the Crown Prince of Saudi Arabia Al-Waleed bin Talal last week.
Back in Wellington at his weekly press conference on Monday Key said most GCC states were positive about signing off the deal but the Saudis remained “cautious”.
Key said no specific obstacles to finalising the agreement were raised by the Crown Prince.
The pair talked through the next steps to concluding the deal which, when ratified, should scrap $60m of tariffs paid by NZ’s mainly agricultural exporters to the GCC and expand trade with the six oil-rich states.
“There's a meeting taking place later in the year", Key said.
"Nothing was clearly identified (as a sticking point). Really, it's just about whether they want to take the next step."
But when contacted on Wednesday the Government’s chief negotiator for the GCC deal, Ministry of Foreign Affairs and Trade official Martin Harvey, said as far as he was aware a date had still to be set for officials from both sides to complete the routine technical work required for ratification of any trade agreement.
Sales to the six oil-rich GCC states of Saudi Arabia, UAE, Oman, Kuwait, Bahrain and Qatar had doubled in the past two years in the face of an “insatiable” demand for sheep meat.
Rob Hewett
Silver Fern Farms
That included verification of the language used in the text – both in English and Arabic – of the agreement to ensure it meant what both sides took it to mean when negotiations were finalised in 2009.
A source close to the Beehive who accompanied Key on his trip to the Middle East said Key’s trip had not pulled off the breakthrough required to get the deal over the line.
“The PM did say it has got closer as a result of this visit. I have to say I did not see much evidence to back that up beyond the fact that we showed very high-level commitment to them as a partner.”
The source said NZ’s refusal to resume large-scale live sheep exports to Saudi Arabia was no longer an obstacle to the kingdom’s ratification of the deal on account of the $6m investment by the NZ taxpayer in a “demonstration farm” in the desert near the port of Damman, owned by local businessman Hamood Al Ali Khalaf.
Khalaf owns a butchery chain in Saudi Arabia and invested millions of dollars in farms in Hawke’s Bay in the 2000s on the understandingthe government of then Prime Minister Helen Clark would allow the resumption of large-scale, live sheep exports to the kingdom.
The live sheep trade servicing the Haj festival during which Muslims slaughter livestock was halted in 2003 following widespread coverage in the media of the deaths of hundreds of Australian sheep en route to the Persian Gulf on the MV Cormo Express.
The subsequent failure by Clark’s government to resume live exports led the well-connected Khalaf to use his influence to sway Saudi Arabia to block ratification of the final agreement with NZ as one of the six GCC states.
In April last year Trade Minister Tim Groser said agreement over protocols to resume live export of small numbers of sheep for breeding purposes to Khalaf’s farm – which includes 16 centre-pivot irrigators and an abattoir paid for by the NZ government – would go a long way to clinching Saudi’s backing for its stalled trade deal with NZ.
Khalaf dined with four cabinet ministers – including Primary Industries Minister Nathan Guy – during a visit by top-level Saudi officials to Wellington in April last year during which he expressed his satisfaction with the efforts made by the NZ government.
He also met Key in a private meeting room at the NZ embassy in Riyadh last week.
The source said Khalaf had appeared happy to back Saudi’s ratification of the deal with NZ.
“People genuinely thought that was going to be enough. The operation is running fine. we have done our thing and they seem happy.”
The source said the deposing of the Crown Prince Al-Waleed as heir apparent to the Saudi throne by the reigning monarch King Salman bin Abdulaziz Al Saud the day after Key’s visit might have been a factor in the lack of progress.
“I suspect people knew that there was stuff going on in the background and were not willing to commit either way (to the free trade deal).”
Meanwhile, one industry leader on Key’s visit to the GCC, Silver Fern Farms chairman Rob Hewett, said the meat industry continued to eagerly anticipate completion of the deal.
While tariffs were relatively low at 4.2%, Hewett said sales to the six oil-rich GCC states of Saudi Arabia, UAE, Oman, Kuwait, Bahrain and Qatar had doubled in the past two years in the face of an “insatiable” demand for sheep meat.
Middle East sales accounted for 10% of SFF’s revenues.
He said given the slender profit margins in the meat export industry any reduction in duties in overseas markets was significant.
The dairy industry, however, would be the biggest beneficiary of any free trade deal by virtue of its larger trade with the GCC which totalled $1.4b in 2013. The average tariff faced was 5%.
