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New Zealand trade deal underlines Global Britain’s post-Brexit ambitions

·6-min read
new zealand jacinda ardern
new zealand jacinda ardern

Red meat politics has seldom been as complicated as it is today – loaded up with historical sensitivities, yet increasingly significant in paving the future of post-Brexit Britain.

Boris Johnson and Jacinda Ardern, New Zealand’s prime minister, brokered a trade agreement on Wednesday, culminating 15 months of Zoom-based talks amid a time difference fit to shatter sleep patterns.

It marks the UK’s second proper trade deal of the post-Brexit era, at least in principle. Now Brits can import more lamb chops, Sauvignon Blanc, manuka honey and kiwi fruit from New Zealand, at a cheaper price.

Hopes of reaching a deal by the end of summer were hampered by hang-ups, thought to hinge largely on access to services, while trade officials also had to adjust to quirks of home working like interruptions from pets and children.

But a breakthrough came when newly minted International Trade Secretary Anne-Marie Trevelyan met her Kiwi counterpart Damien O’Connor last week, in Sorrento, Italy at the G20 summit of trade ministers.

Progress then came in the form of a bilateral call in Rome, when the two managed to push through remaining sticking points and pave the way for a final agreement. By coincidence, they again found themselves side-by-side when delegations from both sides boarded the same flight back from Rome to London.

In the wake of their encounters, an agreement in principle was sealed across a final run of gruelling meetings.

The product is a 27-page document – part outline, part ambition, and including some modern elements on climate and gender.

The brokered deal holds huge political and strategic significance for Britain as the country goes it alone, having left the EU.

Stepping stone deal

It signals an end to cool trading relations between New Zealand and Britain, since the latter pulled the plug on the Pacific country’s exports such as lamb when it joined the European Economic Community in 1973 – a disaster for Kiwi companies. Ardern said she decided to “park that longstanding grievance”, drawing a line under the period.

It’s also another step towards the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) - the trading bloc of Pacific rim nations that is a key target of ‘Global Britain’ as hopes of a quick deal with the United States fade.

The agreement’s headline elements are familiar – like that reached with Australia ahead of the G7 summit in June, the UK and New Zealand have vowed to phase out all tariffs, with levies on agricultural products disappearing gradually over the next decade and a half.

Any deal, however, is likely to be economically meaningless on a national scale: the Government’s own assessments suggest it could actually hurt growth, knocking about 0.01pc off GDP over 15 years.

“It’s economically insignificant,” says Sam Lowe, a senior research fellow at the Centre for European Reform. “But it is part of the broader strategy and approach, which is centred around acceding to the CPTPP… this was a necessary stepping stone, and I suppose it signals the UK’s intent.”

Like the deal with Australia, the concord between London and Wellington has drawn an immediate backlash from British farmers, who warn it leaves UK markets open to a slew of imports from New Zealand, particularly famed for its lamb.

“Yes, the concerns that we had with the Australia deal apply to the New Zealand deal,” says Nick von Westenholz, director of trade strategy for the national union of farmers.

One year quotas that have been agreed far outscale current imports from New Zealand, giving the country’s exporters an immediate boost, and room to grow.

When challenged on this, ministers have insisted that New Zealand – and Australia – are more interested in fast-growing Asian markets than flooding the UK with cheap meat.

“They have the opportunity to sell many of their meat products into the Asian markets where they get high prices,” Trevelyan told MPs on Thursday. “So we are not expecting them to use these quotas in these early years.”

Longer term, it’s not so clear what might happen. New Zealand’s producers, for their part, signalled that they might be more ambitious than the Government might think.

Sirma Karapeeva, head of New Zealand’s Meat Industry Association, said the sector was “disappointed in the length of the transition period”. But, she added: “With full tariff elimination after 15 years and quota volumes that grow until that time, companies will be able to build their interests in the United Kingdom market.”

City looks on

Of course, the agreement is bigger than just agriculture.

It includes significant commitments on expanding services access, including new provisions on mobility that will make it easier for UK contractors to travel to New Zealand to work – subject to certain “safeguards”.

Another adjustment means British companies investing in New Zealand will only be subject to screening if they pump in more than NZ$200m (£104m), double the old cap. That’s a potential boon to companies wanting to use the country as a staging post for the Indo-Pacific region.

Other agreements include expanding market access for financial services, and facilitating data transfers between the countries – important news for City businesses.

Whitehall is gambling that these factors end up outweighing the potential pain if antipodean farmers decide to stake a claim to British supermarket shelves.

Much of the detail, however, will be thrashed out over the coming months as the agreement becomes a deal. “This is where it gets complicated,” Trevelyan told MPs.

“Agreements in principle obviously make for great press releases and photo ops,” says George Riddell, trade strategy director at EY.

“[But] for businesses actually looking to use the agreement, they've got a while yet to actually do anything with it.”

Its arrival is also a reminder for the Government to finalise details with Australia, which would be the first ground-up trade deal since Brexit. Lowe thinks the Kiwi agreement could inject some more pace into talks with the Aussies.

“There could be a slight competition between the two in terms of who actually gets the ‘real one’ first,” he says.

Scrutiny is growing: on Thursday, in the wake of the announcement, Trevelyan confirmed the creation of a refreshed Trade and Agriculture Commission, which will “independently” examine new trade agreements.

MPs are also watching. The International Trade Committee immediately launched a new inquiry, with chair Angus Brendan vowing they would “be looking underneath the bonnet and kicking the tyres”.

Bigger, tougher trade deals loom, with the US, India, Canada and Brazil all possibilities in the coming years.

While it could create employment opportunities, more supermarket selection and cheaper foreign produce for consumers, some industry groups, particularly farmers, may be hoping the UK takes them at a slower pace.

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