Politicians cross party lines to embrace the Free Trade Pact with Britain

But in the United Kingdom, perceptions are not all that warm

Boris Johnson speaking to Jacinda Ardern on October 20, 2021 (Screen Grab)

Venkat Raman
Auckland, October 21, 2021

New Zealand politicians have crossed party lines to enthusiastically welcome the proposed Free Trade Agreement (FTA) with Britain, the reception on the other side has been somewhat lukewarm, with some sections of the population even fearful of the prospects.

The Bilateral Pact

As reported earlier, 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. 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.

Our Report can be read here.

National Party pleased

National Party, the country’s main Opposition, said that it was pleased with the agreement in principle to have in place a Free Trade Pact.

The Party’s Trade and Export Growth spokesperson Nicola Grigg said that National wants to see New Zealand do well in the world and trade is our best opportunity to do that.

National Party Trade and Export Growth spokesperson Nicola Grigg
(Party Website Photo)

“An immediate elimination of 97% of tariffs on our exports is unprecedented. The United Kingdom is a very important market for New Zealand exporters. It is our seventh-largest goods export destination with two-way trade worth nearly $6 billion. We are glad to see significant improvements for export conditions for the red meat, dairy, wine, honey, seafood and horticultural sectors in particular,” she said.

Ms Grigg said that with the country’s public debt standing at $120 billion (and predicted to rise to $185 billion), experts have a crucial role in getting higher volumes of trade to help. Securing high quality and comprehensive free trade deals is an important part of the solution.

Australia-UK FTA

“The Australia-UK agreement was the benchmark for what New Zealand should have been aiming to achieve in terms of timeframes for tariff-free trade. It is pleasing to see reductions in dairy tariffs occur in the same timeframe, but I am a little disappointed for our red meat farmers that tariff elimination will take longer than it will for their Australian counterparts. While it appears our quotas of sheepmeat will be greater, beef will be less. In trade deals, though, there is always some give and take,” Ms Grigg said. 

She called on the government to seek the membership of UK in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Agreement, saying that National will support the efforts.

Fantastic News: ACT Party

The ACT Party, which has been largely critical of the Labour government on almost all policies and programmes endorsed the ensuing FTA between New Zealand and UK, describing it as ‘fantastic news.’

Deputy Leader and Trade spokesperson Brooke van Velden said that market access provided by the FTA is comparable to that of Australia and hence it ‘meets the first test.’

ACT Party Deputy Leader Brooke van Velden
(Party Website Photo)

“The second test will be ensuring that the provisions come true over the coming years, and the trend is towards further liberalisation. New Zealand farmers helped to pull us through the Covid-recovery, New Zealand’s DNA is that we are a trading nation, with some of the finest agricultural produce in the world,” she said.

According to Ms van Velden FTAs drive growth, reduce costs to consumers and increase productivity, a key indicator for the quality of life enjoyed by all New Zealanders.

“ACT has always been the strongest proponent of free trade. We welcome the news,” she said.

UK farmers unhappy

The National Farmers Union said the deal, like the one with Australia, could have a “huge downside”, especially for UK dairy and meat farmers.

Union President Minette Batters said that the Australia and New Zealand deals mean “we will be opening our doors to significant extra volumes of imported food – whether or not produced to our own high standards – while securing almost nothing in return for UK farmers.

The fact is that UK farm businesses face significantly higher costs of production than farmers in New Zealand and Australia, and it is worth remembering that margins are already tight here due to ongoing labour shortages and rising costs on farm,” she said.

Ms Batters said that the British government is now asking British farmers to go toe-to-toe with some of the most export-orientated farmers in the world, without the serious, long-term and properly funded investment in UK agriculture that can enable us to do so.

No benefit for Britain

Shadow Trade Secretary Emily Thornberry said that the government figures showed that the deal would “cut employment in our farming communities, produce zero additional growth, and generate just £112 million in additional exports for UK firms compared to pre-pandemic levels. The only winners would be the mega-corporations that run New Zealand’s meat and dairy farms,” she said.

Secretary of State for International Trade Anne-Marie Trevelyan (Wikipedia)

“As our economy recovers from the pandemic, we need trade deals that will boost jobs and growth, open up big new markets for UK exporters, and support our objectives to buy, make and sell more in Britain. This trade deal with New Zealand fails on every count,” she said.

However, Secretary of State for International Trade and Board of Trade President Anne-Marie Trevelyan said that she is ‘very comfortable’ with the Pact.

“British farmers should not be concerned about increased lamb imports because the lambing seasons were different in the UK and New Zealand. Our trade with New Zealand is currently worth £2.3 billion a year but has the potential to increase by up to 30% by 2030,” she said.

British Shadow Trade Secretary Emily Thornberry (Wikipedia)

It is a CPTPP-driven deal

Following is an Analysis by BBC Reporter Ramzan Karmali

A bottle of New Zealand Sauvignon Blanc could cost 20p less as a result of this trade deal and other products like Manuka honey and kiwi fruits could also cost less.

In terms of overall trade, even by the UK government’s own analysis, a tariff-free trade deal will make no difference at all to the country’s GDP – the total value of the goods and services the UK produces.

Overall the trade between the two countries is less than 0.2% of the UK total and in fact, in 2018 New Zealand ranked as only our 53rd biggest trading partner.

So why does this deal matter?

The UK signed its first big post-Brexit deal with Japan last year and in June it also signed a draft agreement for a trade deal with Australia.

Both countries, as well as New Zealand, are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP.

The combined GDP for the 11 nations that form the CPTPP in 2020 was £8.4 trillion ($16.5 trillion), one of the key reasons given by the UK government when it formally applied earlier this year. This deal is the first agreed upon during the tenure of Anne-Marie Trevelyan, who took over from Liz Truss last month. She believes that by getting this deal done the UK’s application to the CPTPP will be looked upon more favourably.

That being said, the trade deal the UK really wants is with the US.

But with the recent change in administration in the White House that seems further away.

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