United Kingdom free trade agreement will come into effect early

Public Policy / news

The effect of the NZ-UK free trade agreement will be modest as the countries already have a fairly open trading relationship

5th May 23, 10:31am by Dan Brunskill

New Zealand and the United Kingdom have agreed to start trading under the rules of the newly negotiated free trade agreement at the end of this month, ahead of schedule.

The new start date was announced while Prime Minister Chris Hipkins was in the UK for the coronation of King Charles III.

New Zealand exporters will save approximately $37 million per year on elimination of tariffs alone, according to the Ministry of Foreign Affairs and Trade.

Hipkins said it was a “gold-standard” free trade agreement which reflected the close relationship between the two countries.

“The market access outcomes are among the very best New Zealand has secured in any trade deal,” he said.

British prime minister Rishi Sunak said the deal would unlock new opportunities for businesses and investors across New Zealand and the UK.

A research briefing prepared by the UK House of Commons Library was more circumspect, saying the economic effect was likely “to be very small”.

“According to the Government’s Impact Assessment, GDP will be 0.03% higher in 2035 as a result of the agreement, although this is subject to considerable uncertainty.

"The small economic effect is unsurprising given the relatively limited amount of trade the UK does with New Zealand and the fact that barriers to trade with New Zealand are generally fairly low.”

An independent estimate by ImpactECON found the fully implemented deal in 2040 would boost New Zealand’s annual real GDP by between $710 million and $811 million, or roughly 0.1%.

Minister for Trade and Export Growth Damien O’Connor said the agreement was expected to boost GDP by up to $1 billion, and expand goods exports to the UK by over 50%.

“The FTA is great news for our wine industry, which is currently our biggest exporter to the UK by value earning around $470 million last year. The deal saves exporters at least $25 million in tariffs immediately. The deal also removes tariffs of up to 20 percent on seafood products”.

An upgraded version of the Working Holiday Scheme—with an extended age limit, maximum stay time, and working time—will also start in July this year.

Export New Zealand welcomed the news, saying it would deepen the NZ-UK economic relationship.

“This agreement is great news for New Zealand exporters and the market access package is one of the best New Zealand has been able to negotiate”.

"We'll see 99.5 per cent of current exports entering into the UK tariff-free once the deal enters into force and a clear path to 100 per cent tariff elimination for NZ exporters to the UK.”

The United Kingdom was also set to join the Trans-Pacific Partnership (CPTPP) agreement and the two deals will help the NZ and UK relationship to “flourish over the coming years".

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24 Comments

by treadlightly | 5th May 23, 11:54am 1683244492

it's the importer and consumer who ultimately carries any cost of tariffs rather than the exporter I would have thought and so is there any saving for us. It does make our exports more competitive though and so might increase the demand for them.

by J.C. | 5th May 23, 12:37pm 1683247078

NZTE appointed a new trade commissioner for the UK who's very experienced with understanding consumers and shoppers. Good to see such appointments made. On the flip side, the appointee was plucked from Vietnam and the ASEAN team - 5 months later and still nobody on the ground to pick up his work.

by ShoreThing | 5th May 23, 12:50pm 1683247808

It seems doubtful there will be much in the way of immediate benefits for us. This seems more like a way for us to be able to diversify our export markets away from China, should there be any worsening of relations with them.

by J.C. | 5th May 23, 1:18pm 1683249535

Diversifying away from China is nuts in my opinion. Biggest addressable mkt in the world with increasingly sophisticated needs - which translates into higher margins.

by ShoreThing | 5th May 23, 1:25pm 1683249913

I meant in the sense that we are in a situation where we don't really have much of a choice. Russia was taken off SWIFT, and you face sanctions if you want to trade with them. There is a non-zero chance that the path with China progresses down a similar route this decade or next.

by nigelh | 5th May 23, 1:35pm 1683250507

"and you face sanctions if you want to trade with them"

Are you sure about that? You can still buy fertlliser from Russia but face a 35% tariff premium in NZ. The USA has exempted most if not all Russian fertiliser from being imported into the USA without a penalty tariff.

NZ going above and beyond the call of duty.

by Advisor | 5th May 23, 1:49pm 1683251344

We're well-ahead of many others in becoming the virtue-signalling capital of the world.

I heard that units within MBIE are having to bend over backwards to get even the basic inflation adjustments to their budgets. This includes space research, which for ~$10m in taxpayer spend oversees a sector that contributes $1.8b to the NZ economy. Not important enough for the Crown to invest any more money into it.

Also, MBIE is growing its Diversity & Inclusion team, promoting incumbents and hiring new people to the team.

by ThoughtsAndTorts | 5th May 23, 1:58pm 1683251935

> Also, MBIE is growing its Diversity & Inclusion team, promoting incumbents and hiring new people to the team.

FFS. This is the absolute last thing we need. Diversity and Inclusion teams are without fail just make work programs for the uselessly educated and lazy.

by Advisor | 5th May 23, 3:25pm 1683257101

Not just work programmes, DEI functions within government agencies are increasingly becoming another layer of red tape on government deliverables, particularly ones being released to public. I guess to make sure government documents do not hurt any feelings.

When interviewing for a public sector role, some departments allow candidates to request a DEI expert be present at all interactions, you know, if they find the interviewers too "old, pale and stale" for their liking.

by Poppyc | 5th May 23, 4:55pm 1683262512

Nz and the US both have sanctions policies against trade with Russia. In order to trade you will need to ensure you do not breach the policies (eg targeted people and companies under the sanctions) and that the goods are exempt from broader sanctions. It is more a white-list on what goods are allowed to be traded.

by Takere | 6th May 23, 8:24am 1683318297

The 'BRIICS+' is Mightier than the Sword. The West as we know it is dead. Long live the BRIICS+!!

by Audaxes | 5th May 23, 12:13pm 1683245635

Can NZ not find a more prosperous counterparty to engage in trade?

The lesson of Britain is that the long-expected crisis that will act as a moment of reset never arrives. The decline is usually far bigger and more structurally locked-in than the more temporary moments of crisis reflect. Things go well enough for the people that matter and there are plenty of distractions for those who don’t. And eventually, you find yourself just another vassal state in a cold, grey ocean. Link

by Von Metternich | 5th May 23, 2:06pm 1683252419

Delicious, you are by far my favourite commentator on here now just for posting Palladium mag. Best web magazine in existence atm.

by J.C. | 5th May 23, 2:25pm 1683253506

This is beautiful. Thanks Audaxes.

British institutions exert impressive amounts of soft power for a tiny island nation. One can think of the country as playing the role of an Italian city-state in the fourteenth century: it capitalizes on historic cultural prestige, educates the children of elites from its former empire, and serves as a playground for wealth and status games while not really producing anything of hard value.

by Squishy | 5th May 23, 12:19pm 1683245959

Will the British keep their end of the deal? They seem pretty eager on backing out of deals that don't immediately suit them.

by OldSkoolEconomics | 5th May 23, 12:27pm 1683246427

It wont matter much. They (and the EU) are pretty much broke and their imports will be buying less and cheaply.

When their next govt gets in (Labour.. or the UK communist party as they are better known) that will get worse fast.

So..much as i hate to say it - trading wise our best bet is to go for broke with china and india.. easiest to all sign up as Xi's minions now and not put up too muc resistance ...

All chant along : 'i love Xi. I love the one party.. I love....'

by ThoughtsAndTorts | 5th May 23, 1:54pm 1683251653

Hard disagree. The idea we can naively trade with authoritarian regimes and they will somehow become liberal democracies and abstain from all bad behaviour has been shown to be an utter fantasy from the last 30 years or so.

Russia and Western Europe's economies had never been more integrated before the invasion of Ukraine. China has not democratised in the slightest while they have grown into a manufacturing powerhouse.

We can and should trade with China but "going for broke" with them is incredibly naive and yet another example of pursuing the short term gain for a long term loss. On top of that we can't ignore that our biggest and most important neighbour (Australia) has signed on to AUKUS and the reality is we are going to (wisely) go along with them.

I would rather I and my future children live in a relatively poorer democracy with rule of law that hasn't been inflitrated by the CCP than an in theory richer country where those precious legacies of our past are gone. If the CCP goes and China reforms we can reevaluate. But any cursory reading of the history of the 20th century shows that communism is a dangerous and aggressive ideology we would be foolish to dismiss.

by OldSkoolEconomics | 5th May 23, 2:07pm 1683252445

I agree with you 100%. The problem is that the west (we) got greedy and now Rome (NYCity) burns... usa and europe have destroyed their own economies.

We cant really complain.. greed and destruction seems to go hand with our lifestyle.

There is only one likely (if very disagreeable) outcome. It will lead to significant suffering and loss of feeedom.. but for the planet a one government (Xi) its probably much better than the current arrangement.

I cant really see an alternative ending. Strangely most civilisations seem to destroy themselves this way.

by Larry76 | 5th May 23, 3:01pm 1683255688

Are you actually suggesting that a future where your children's and grand-children's wealth is strip-mined and sent back along the Belt & Road to Dear Leader Pooh is better, along with intimidation and occupation whenever us natives get too restless?

Christ - if that's where we are at I have to ask when it was that we lost our spine & sold out to the highest authoritarian bidder.

by ThoughtsAndTorts | 5th May 23, 3:37pm 1683257827

This is just silly doomerism. There are things we can do and are doing but it will take time and effort.

by J.C. | 5th May 23, 12:40pm 1683247212

One of the issues with the UK market in terms of food and bev is that the market is increasingly dominated by EDLP players such as Aldi. Very difficult for NZ to compete there except for perhaps fresh produce.

by Hans Brink | 5th May 23, 6:52pm 1683269520

NZ will just keep dropping the price of our stuff to compete. No gain in the long run.

by interesting1234 | 5th May 23, 2:27pm 1683253624

They will benefit by this mostly, but on the plus side it will increase the number of people 30-35 able to come to NZ from the UK on working holiday visa and thus more of them will make a life and put roots down here, form a love for NZ and follow through with partner, work and residency visas. In a time of high competition for global talent, and considering we already have relatively good cultural ties with the UK, NZ may be a good option for many of them to come with already decent skillsets.

by J.C. | 5th May 23, 3:20pm 1683256845

In a time of high competition for global talent, and considering we already have relatively good cultural ties with the UK, NZ may be a good option for many of them to come with already decent skillsets.

Typically highly talented people don't move to NZ for their careers. It's more of a lifestyle choice.