The NZ-UK free trade agreement - what you need to know
RNZ | 5 May 2023
The NZ-UK free trade agreement - what you need to know
From the end of this month, most trade between New Zealand and the UK will be tariff-free - but there is more to it than that.
Prime Minister Chris Hipkins this week announced the free trade agreement (FTA), years in the making, will come into force from 31 May - sooner than expected.
When the details were finalised last year, it was estimated the boost to the New Zealand economy would be in the order of $1 billion a year, boosting exports to our seventh-largest trading partner by more than 50 percent.
"This deal will unlock new opportunities for businesses and investors across New Zealand and the UK, drive growth, boost jobs, and most importantly build a more prosperous future for the next generation, " British Prime Minister Rishi Sunak said on Friday (NZ time).
So, what exactly does the deal entail? You can read the full deal here, all 1700 pages of it, or skim our summary below.
First of all, the UK will eliminate customs duties for almost everything we export there - such as wine, honey, onions, kiwifruit and dairy products. Ninety-seven percent of tariffs will be gone, covering more than two-thirds of Kiwi exports, by value.
Over the next three to seven years, tariffs will be dropped on cherries and some seafood and dairy products, making up 0.5 percent of our exports.
Trade in the remaining 30 percent of goods by value - apples, butter, cheese, beef and sheep meat - will be liberalised over a number of years, but will have "immediate tariff-free access under quota arrangements" in the meantime.
Fresh apples will take three years, butter and cheese five years, beef 10 years ("followed by a product-specific safeguard for a further 5 years") and lastly, sheep meat in 15 years.
In return, New Zealand will drop all of its tariffs on UK goods - including gin, chocolate, motorhomes and campervans, "which are currently subject to tariffs ranging between 5-10 percent".
"All customs duties on all products will be eliminated between both countries once fully implemented," the Ministry of Foreign Affairs and Trade’s website said.
The UK has secured a few protections against a surge in New Zealand produce - some of them for the duration of the 15-year transition - which can be read about here.
Tariffs make up just a part of the agreement though. Here’s a taster of what else is in it.
The FTA includes a chapter on animal welfare, "which will help to ensure that neither country lowers their animal welfare requirements in a manner which impacts trade".
In other words, neither of us should weaken animal welfare standards to get an advantage over the other.
"The chapter also sets out how both countries will work together cooperatively, including in international standard-setting bodies, to promote animal welfare practices," MFAT said.
The FTA includes a chapter outlining cooperation on consumer protection, "a first for the UK’s independent trade policy".
New Zealand, for example, will have to uphold the UK’s tough data protection laws for any information sent here.
"It also addresses the need for cooperation between countries to provide for and enable effective access to redress for consumers in each other’s jurisdictions," MFAT said.
The deal simplifies customs processes between the two nations, "ensuring efficient clearance for traders and the use of electronic systems, including paperless trading and the establishment of a ’single window’ system for submitting the necessary customs documentation electronically".
Perishable items should be clear of customs within six hours, for example, and other goods in 48.
Small- and medium-sized businesses
Under the deal, small- to medium-sized businesses looking to trade will be able to go online and "easily access the information they need… without having to consult external trade experts".
"Businesses will be able to access information covering topics such as transit procedures, the documentation they need to complete, and operation hours for customs offices at ports and border crossings procedures," the UK’s Department for International Trade said.
UK businesses will be able store data in New Zealand without incurring "unnecessary" and "unjustified" costs, UK officials said.
There are also "provisions to promote innovation and economic growth through cooperation, including in relation to emerging technologies and digital inclusion", MFAT said.
Environment and climate
MFAT said the UK deal contained the "most far-reaching free trade agreement commitments New Zealand has ever negotiated on trade and the environment".
"It includes provisions addressing subsidies which are not only environmentally harmful but also trade distorting, including commitments to prohibit subsidies for fishing overfished stocks and to take steps to eliminate harmful fossil fuel subsidies. The agreement also includes an article on sustainable agriculture."
Electric vehicles and wind turbine parts are two notable examples where tariffs will be gone, UK officials noted.
The FTA will also see the two countries:
- "tackle illegal logging, illegal deforestation and forest degradation"
- "tackle environmental challenges such as illegal wildlife trade (including in ivory), air pollution, marine pollution and litter"
- "promote biodiversity, sustainable agriculture, and the transition to a circular economy"
- "address inadequate fisheries management, illegal, unreported, and unregulated fishing, and prohibit certain subsidies to combat overfishing".
The FTA has dispute settlement provisions where the two nations can settle differences on environmental policy that affects trade.
For the first time, a New Zealand bilateral trade agreement includes a dedicated chapter on gender equality and how it affects trade.
"This chapter reaffirms the commitments on both sides to the implementation and promotion of relevant international agreements fostering women’s economic advancement, and includes cooperation arrangements to promote utilisation of the benefits of the FTA by women," MFAT said.
"It also promotes cooperation in data analysis and monitoring of the gender-based effects of trade. The chapter also focuses on providing opportunities for wāhine Māori to engage in trade."
Māori trade and economic co-operation
The UK is keen to develop "links between UK and Māori-owned enterprises", saying it could "lead to increased choice for British consumers for a variety of different products in the future".
The UK has promised to endeavour to advance recognition and protection of the haka ’Ka Mate’, but stopped short of "protection through intellectual property rules or changes to those rules".
The deal contains a standalone chapter on labour, mostly to affirm "each country’s obligations under relevant International Labour Organisation conventions" and "agreement to the important principle that labour standards must not be undermined to secure trade advantage"
It also promotes gender equality in the workplace, requires each nation to fight modern slavery in supply chains, and encourage "good business practice and corporate social responsibility".
Services and investment
The UK economy is heavily dependent on the provision of services - think lawyers, financial services, etc - and the FTA will make it easier for them to operate in New Zealand, for example by making it easier to have their qualifications recognised here, and vice versa.
Investment criteria will be loosened too, "meaning fewer UK investments into New Zealand will be subject to review". This puts the UK on an equal footing to nations we already have agreements with via the CPTPP.
New Zealand will extend the length of its copyright terms by another 20 years.
Both countries will look at ways to improve travel opportunities for young people, including "working to extend and improve the existing New Zealand-UK working holiday/youth mobility scheme".
The FTA does not include investor-state dispute settlement provisions, which would allow foreign investors to take legal action against either government for decisions which affect their investments.
This is just an overview of the lengthy agreement, years in the making. One more arguably notable thing in it is that New Zealand retailers will not be allowed to sell whisky "labelled or advertised with representations of Scottish whisky localities including Campbeltown, Islay, Highland, Lowland, or Speyside unless manufactured in Scotland".
New Zealand has a number of trade deals in place with other nations - some bilateral, others through multinational agreements.
- ASEAN-Australia-New Zealand Free Trade Area Agreement
- Australia-New Zealand Closer Economic Relations Free Trade Agreement (CER)
- Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP)
- Generalised System of Preferences
- New Zealand-China Free Trade Agreement
- New Zealand-Hong Kong, China Closer Economic Partnership Agreement
- New Zealand-Korea Free Trade Agreement
- New Zealand-Malaysia Free Trade Agreement
- New Zealand-Singapore Closer Economic Partnership
- New Zealand-Thailand Closer Economic Partnership Agreement
- Regional Comprehensive Economic Partnership (RCEP)
- Digital Economy Partnership Agreement (DEPA)
- Pacific Agreement on Closer Economic Relations (PACER Plus)
- Trans-Pacific Strategic Economic Partnership (P4)
More details on these can be found on the Customs and MFAT websites.