Venkat Raman
Auckland, October 21, 2021
$1 billion boost to the economy; $37.8 million annual savings for exporters
New Zealand and the United Kingdom have agreed in principle to enter into a Free Trade Agreement that will witness a significant boost to bilateral trade, along with other benefits.
Trade and Export Growth Minister Damien O’Connor and his team of officials have just returned from London after meetings with their counterparts.
Benefits to New Zealand Exporters
The deal, stated to be historic, and second after Brexit, will accrue a series of benefits to New Zealand exporters. Among them are (1) removal of all tariffs on about 97% of goods imported from New Zealand (2) elimination of all tariffs on all types of Honey, Wine, Kiwifruit, Onions, a wide range of Dairy and Meat products (3) elimination of tariffs on almost all industrial products (4) improved access for beef and sheep markets in the United Kingdom and (5) improvement and extension of working holiday arrangements for New Zealanders
These benefits are expected to accrue savings valued at $37.8 million on an annual basis for New Zealand exporters and add $1 billion to the New Zealand economy.
According to indications, export of beef is expected to increase five-fold, from 12,000 tonnes to 60,000 a year, while sheep meat from 149,205 tonnes to more than 164,000 tonnes – both over a period of 15 years.
Horticulture, Fisheries, Dairy, Meat and Services and Investment are sectors that will receive a major fillip as the Free Trade Agreement is signed by the two countries.
Two PMs on the Free Trade Pact
British Prime Minister Boris Johnson described the new trade deal as ‘a cherry on the top of a long and lasting partnership between the United Kingdom and New Zealand.
“It is good for both our economies, boosting jobs and growth as we build back better from the pandemic. We already share deep ties of history, culture and values, and I look forward to the next chapter in our friendship,” he said.
New Zealand Prime Minister Jacinda Ardern, who spoke with her British Counterpart Boris Johnson last evening, said that both countries are committed to a ‘mobility dialogue outside the FTA that will consider how people-to-people links can be deepened even further.
“This will include working expeditiously to extend and improve the existing New Zealand-UK Working Holiday/Youth Mobility scheme. Work on this will begin immediately. These schemes create opportunities for young New Zealanders to develop their skills and work experience while travelling and living in the UK; and vice versa,” she said.
Ms Ardern said that for many young New Zealanders, an overseas experience has become a rite of passage, providing a pathway to develop their skills and work experience while travelling and living in the United Kingdom.
Mr Johnson described the new trade deal as “the cherry on the top of a long and lasting partnership between the United Kingdom and New Zealand.”
“It is good for both our economies, boosting jobs and growth as we build back better from the pandemic. We already share deep ties of history, culture and values, and I look forward to the next chapter in our friendship,” he said.
Mr Johnson said that Britons will have the benefit of ‘wonderful New Zealand products’ even more cheaply than before and we have got Sauvignon Blanc to Manuka Honey and Kiwifruit and all sorts of other benefits.
“This is a good moment for the UK and our partnership with New Zealand and we are absolutely thrilled that we seem to have driven for the line. We have scrummed down, we have packed tight and we have got the ball over the line and we have got a deal,” he said.
Giving details of the deal, Mr O’Connor said that UK is New Zealand’s seventh-largest tradition partner prior to Covid, with a two-way trade valued at $6 billion (as of March 2020).
Meaningful market access
Pre-Covid estimates also projected that New Zealand goods to the UK will increase up to 40% and that our GDP will benefit up to $970 million due to the FTA, he said.
“It was crucial that our Agreement needed to provide comprehensive and commercially meaningful access for New Zealand exporters and businesses, and especially to those sectors that are the backbone of New Zealand’s economy such as our dairy and meat producers. This deal achieves that,” Mr O’Connor said.
He said that removing tariffs and other barriers that have limited the growth of New Zealand’s goods and services trade as well as investment connections, the deal will allow exporters and businesses greater market access.
“This FTA will also include the most ambitious commitments that New Zealand has ever negotiated on trade and the environment and is our first bilateral trade deal to include specific provisions on climate change. The United Kingdom has agreed to take concrete steps to eliminate subsidies on fossil fuels. New prohibitions have been agreed to combat over-fishing and more than 260 environmentally beneficial products have been prioritised for tariff elimination, the largest environment goods list ever agreed,” Mr O’Connor said.
Key market access outcomes
The market access package is among the very best New Zealand has secured in an FTA.
Tariffs will be eliminated on 100% of New Zealand’s exports to the UK
Tariffs on 97% of products will be eliminated from day one
At full implementation
Modelling shows New Zealand goods exports to the UK will increase by up to 40%.
Modelling shows New Zealand GDP increasing up to $970 million.
Tariff savings for New Zealand exporters: estimated $37.8 million per year based on current export volumes
Horticulture highlights
Tariffs will be eliminated from day one on wine (export value $463.1 million), honey (export value $74.9 million) and onions (export value $8.0 million).
Tariffs will be eliminated after three years for apples (export value $63.6 million), with tariff-free access for off-season exports for the first three years.
Fisheries highlights
Tariffs will be eliminated from day one on Hoki (export value $2.2 million), and on mussels after 3 years (export value $6.4 million).
Dairy highlights
Tariffs will be eliminated after five years for butter (export value $1.6 million) and cheese (export value $500k), with significant quotas that will operate and provide duty-free access for significant volumes of trade until all tariffs have been eliminated. Many other dairy products will also become tariff-free.
This opens an important market that exporters have effectively been locked out for a long time due to high tariffs.
Meat highlights
Tariffs will be eliminated after 15 years for sheep meat (export value $366.1 million) and beef (export value $4 million), with significant quotas that will operate and provide duty-free access for significant volumes of trade until all tariffs have been eliminated.
Services and Investment
The UK is currently New Zealand’s sixth-largest source of overseas investment and the fourth most important destination for New Zealand offshore investment.
In the year to March 2020, UK investment in New Zealand amounted to $5.47 billion.
The UK is an important services market for New Zealand. In the year to March 2020, New Zealand exported $1.67 billion of services to the UK and imported $1.18 billion worth of UK services.
