21 Oct 2021

UK free trade deal to eliminate tariffs for all New Zealand exports

12:15 pm on 21 October 2021

New Zealand has agreed in principle to the United Kingdom's second free trade deal since Brexit, eventually eliminating tariffs on all New Zealand exports to the country.

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Photo: Ministry of Foreign Affairs and Trade

The deal, worth an estimated $1 billion over 15 years to the New Zealand economy, would eliminate tariffs on all New Zealand exports, including honey, wine, kiwifruit, onions, most industrial products and - crucially - a range of dairy and beef products.

Tariffs on more than 97 percent of product lines will be removed as soon as it takes effect, accounting for about 63 percent of New Zealand's current exports.

However, it would take up to five years for dairy and 15 for sheep meat and beef tariffs to be completely removed, although those industries will enjoy duty-free quotas in the meantime, with quota volumes gradually increasing over time which vary by industry.

In return, New Zealand will eliminate tariffs on all UK-originating goods from day one of the agreement.

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Prime Minister Jacinda Ardern announces the free trade deal at Parliament. Photo: RNZ / Samuel Rillstone

The deal includes provisions ensuring animal welfare, and commitments to address environmentally harmful subsidies like those for fossil fuels or overfished stocks, marking the first time New Zealand has had a trade deal that acknowledges climate change and animal welfare.

It also specifically recognises Te Tiriti o Waitangi and includes a commitment to recognise and protect the ka mate haka.

The two countries will now work towards getting a final agreement in place just over a year after talks first began in June last year. Prime Minister Jacinda Ardern said that would take place over the next few months, and it was hoped to have the deal in force "by next year".

New Zealand, after Australia, is the second country to secure a Free Trade Deal with the UK, post Brexit.

"The market access outcomes are among the very best New Zealand has secured in any trade deal, a point made to me by one of our most seasoned negotiators," Ardern said.

"It's one of our best deals ever and secured at a crucial time in our Covid recovery ... this is a huge deal for New Zealand."

Ardern said she spoke to UK Prime Minister Boris Johnson last night "to mark this historic moment and its importance in forging a stronger and more dynamic future relationship between two close friends and partners".

"This deal serves New Zealand's economy and exporters well as we reconnect, rebuild and recover ... and look forward into the future," she said.

In a statement, 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."

Ardern said New Zealand's largest current export to the UK, wine, was expected to benefit from $14.1m in tariffs removed annually, and would recognise New Zealand wine-making practices and address labelling and certification requirements faced by New Zealand's winemakers.

Ardern said beef volumes would increase from 12,000 tonnes to 60,000 tonnes; sheep meat exports will rise from 149,205 tonnes to over 164,000 tonnes.

Prime Minister Jacinda Ardern and her British counterpart Boris Johnson speak via teleconferencing.

Prime Minister Jacinda Ardern and her British counterpart Boris Johnson speak via teleconferencing. Photo: Supplied

Speaking from his MIQ room after a trade trip to Europe, Trade Minister Damien O'Connor said this represented "a new era of market" for New Zealand exporters.

"It was crucial 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."

Investor state dispute rules were a major bone of contention in the Comprehensive and Progressive Agreement for Trans-Pacific Partnerships, but O'Connor said they would not feature in this deal.

O'Connor said it also "recognises the unique and historical relationship that exists between Māori and the British Crown which is reflected through an indigenous chapter creating a platform for cooperation on a range of issues important to Māori," with New Zealand the only country globally to "successfully include such a chapter in two Free Trade Agreements".

"I want to personally thank Secretary Trevelyan who made progressing this free trade agreement a priority and I look forward to working closely with her on a range of future matters," he said.

He said he believed the transitional quotas "provide all the opportunity that the industry needs".

"We are starting from a reasonably low base, this provides huge additional capacity and I think anyone in the meat sectors who wants to export into these markets will have the opportunity to have tariff-free access through those."

Quotas for beef would increase yearly from 12,000 tonnes up to 60,000 by year 15, with bigger increases in years 11 to 15. Sheep meat quotas would increase by 35,000 tonnes a year in the first four years, and 50,000 per year until the 15th year.

Butter and cheese would have duties reduced in six equal reductions over five years, being fully tarriff free from year six.

The agreement in principle released today sets out the key elements of the free trade deal with the UK, with the text to be finalised over the coming months. O'Connor said they hoped to have it done by the end of the year.

Alongside the deal are talks to "improve and extend" working holiday arrangements, with Ardern saying that would be similar to what was recently agreed with Australia, to "consider how people-to-people links can be deepened even further".

"This will build on the tradition of overseas experiences, which we have long shared," Ardern said.

"I was a benefactor of that scheme, travelling to the UK in 2006 to work for the civil service so it's a particular interest of mine. These changes will improve the access that young New Zealanders will have in the years to come to live and work in the UK - a key priority that was identified in public consultations about an FTA with the UK."

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