EU and New Zealand sign Horizon Europe deal as new association details emerge

Brussels and Wellington have released new details of the agreement that associates New Zealand to Horizon Europe, the first time a far-flung country has joined the programme under a new policy to open up the framework programme to distant but democratic, rich nations.

The agreement will be watched closely in Canada, Japan and South Korea, where officials are at various stages of negotiation with the European Commission about joining Horizon.

On 9 July New Zealand prime minister Chris Hipkins witnessed the signing of the association agreement alongside Commission president Ursula von der Leyen during a trip to Brussels. Wellington also signed off on a free trade agreement with the EU during the same trip.

“Here […] we mark a first,” said von der Leyen at a press conference during the visit. “The first association agreement with a country that is not geographically close to Europe, not in our neighbourhood, but that is of course very close to us in so many other ways.”

So far, the official agreement with New Zealand has not been made public, but a version sent by the Commission to the European Council back in March has been circulating online, and according to Emily Robinson, acting manager for international science partnerships at New Zealand’s Ministry of Business, Innovation and Employment [MBIE], it is “very similar to the agreement that was signed on 9 July, barring a few minor and technical amendments.” The official agreement should be published “within the coming weeks”, she added.

What’s the bill?

As the Commission seeks to bring distant countries into Horizon Europe, one key question for those joining is how much it will cost them.

The agreement sets out New Zealand’s payment schedule until the end of the framework programme. This year it is set to pay €2.1 million. This will rise to €5 million by 2027, taking total payments to around €18 million.

Significantly, this is far less than New Zealand might be expected to pay if, as is normal for EU states, its payments were proportional to the size of its economy.

New Zealand is only associating to the industrial and research consortia-focused Pillar 2 of Horizon Europe. This part of the programme has a budget of €53.5 billion, and constitutes the majority of Horizon spending.

New Zealand’s economy is around 1.5% the size of the EU’s, which would equate to a bill of roughly €800 million for Pillar 2 participation over the course of the programme.

But officials in Wellington and Brussels made it clear that New Zealand’s fee had been reduced because as a newly associated country it will take some time to get up to speed in bidding for and winning grants.

The agreed payments are the result of joint modelling between the EU and New Zealand of how much money Kiwi researchers are likely to win, said Robinson.

“We do expect that some factors will mean New Zealand has lower participation than a purely GDP-focused calculation would suggest,” she said. “This is mainly due to this being the first framework programme that New Zealand is associated to, our geographic distance from Europe and the fact that awareness and familiarity of New Zealand’s associated status in both New Zealand and Europe will take time to build.”

A Commission spokesperson confirmed that New Zealand’s payments are based on “envisaged participation” rather than a GDP calculation.

Pay as you go

However, what New Zealand actually ends up paying in practice will depend on the success of its researchers. If it wins more or less than the envisaged payments, then the difference will be repaid through an “automatic correction mechanism” set out in the agreement.

“This system ensures New Zealand contributes financially to the programme in line with its actual participation,” a Commission spokesperson said.

The risk here is that this leaves Wellington on the hook for a theoretically unlimited transfer of money to Brussels, a consideration likely to be a sticking point in the ongoing negotiations with Canada, South Korea and Japan.

“Greater success than expected could increase our costs, although this would be seen as a good problem to have, and MBIE has a range of options available should this eventuate,” said Robinson.

However, the New Zealand government has repeatedly declined to spell out precisely how it would respond if costs spiral.

Applications so far

New Zealand researchers have only been able to apply to Horizon Europe since February, so it is still too soon to see whether such an overshoot is occurring.

But the government revealed on 10 July that so far, Kiwi researchers have made 12 bids as part of Horizon research consortia, seeking €7.3 million for New Zealand partners. Over the course of the programme, Wellington expects 220 applications and a 20% success rate.

Robinson said the ministry is “comfortable with current levels of applications for 2023”.

The association agreement does also include one unusual saving measure to keep costs down. New Zealand representatives flying to Europe as observers to Horizon Europe committees will only be reimbursed for economy class – no small sacrifice, given it’s a 30-hour trip, with several stops, from Wellington to Brussels.

MEPs unhappy

The New Zealand deal however has irked MEPs who worry it gives the Commission power indefinitely to re-sign agreements with third countries like New Zealand without consulting the parliament. Which countries are invited to associate is inherently political, they argue, because Horizon rules stipulate they need to be democracies.

While it is unlikely that MEPs will actually scuttle the New Zealand deal by voting against it, they are nonetheless refusing to give it their approval.

Christian Ehler, a parliamentary rapporteur for Horizon Europe, tweeted on 10 July that the agreement was “still just provisional because the EP [European Parliament] still has to consent to it.”

“This agreement is a completely new approach to association,” he said. “The EP wants full democratic oversight to monitor how this novelty works out. We made it crystal clear that this is a necessary condition for our consent.”

A drop in the ocean

New Zealand’s association is a diplomatic win for the Commission as it tries to build stronger research links with democracies in the aftermath of Russia’s invasion of Ukraine.

But the amount of money Wellington will bring into the programme is tiny compared to the hole caused by the absence of neighbouring Switzerland and the UK.

The UK has set aside £6.9 billion for Horizon participation until the end of 2025, should it end up joining.

Both former stalwarts of the framework programmes are still not associated. Brussels and London have overcome a wider dispute over the Northern Ireland Protocol that was stymying talks, but are still thought to be haggling over the financial details of association, with London hoping for stronger limits on its net contribution.