Trade Minister Damien O’Connor travelled to London to sign the NZ-UK free trade agreement, which he described as “spectacular”.
Exporters are shrugging off protections for British farmers in New Zealand’s trade agreement with the United Kingdom as a necessary cost of getting eventual tariff-free access for their own products into the British market.
Trade Minister Damien O’Connor signed off the final agreement with his UK counterpart in London on Tuesday after two years of negotiations.
O’Connor described it as a “spectacular deal” with gains in market access for exporters second only to NZ’s groundbreaking deal with China.
“Effectively we have got tariff-free access into a traditional high-value market probably only bettered by our access into China,” O’Connor said.
“This is a spectacular deal and has been hard-won but worth every bit of the effort,” O’Connor said.
The agreement, which still needs to be ratified by the majority of lawmakers in both countries’ parliaments, will eliminate tariffs on 97% of product categories on its first day, covering 70% of NZ’s existing exports to the UK.
Tariffs on wine, honey, onions, vegetable seeds, infant formula and some seafood products will be scrapped immediately.
For the most sensitive agricultural products, including cheese, butter, beef and sheep meat, new tariff-free quotas over and above existing World Trade Organisation quotas will be created.
Butter and cheese quotas will increase annually, allowing gradually more exports to enter the UK tariff-free for the first five years of the agreement.
After five years, the quotas will be abolished, replaced with tariff-free access subject to limited safeguard measures for a further five years, after which there will be completely free trade in butter and cheese with the UK.
For beef and sheepmeat, tariff-free quotas rise gradually before being abolished entirely after 15 years, although tariffs could still apply to both for a further five years should special safeguard measures be invoked by the Brits.
Based on current trade volumes, NZ exporters are expected to save up to $37m annually in tariffs over the first 15 years of the agreement.
More savings are expected, however, as exporters divert more of their products to the UK over coming years to take advantage of the gradual move towards tariff-free access.
According to the Ministry of Foreign Affairs and Trade’s National Interest Analysis, annual exports to the UK could increase by a further $2.2 billion by 2040 from $1.5b now.
Dairy Companies Association chair Malcolm Bailey said the deal was a good one for the dairy industry and largely resembled the outline agreement reached by both sides last October.
October’s agreement foreshadowed the inclusion of special safeguards protecting British farmers from surges in imports once tariffs are finally removed.
The final agreement fleshed out more detail, revealing British farmers can apply to have WTO duties reimposed on NZ imports if they can prove the agreement has led to a major increase in competing imports causing “serious injury” to the local industry.
Bailey said while the clause was not ideal it could only last for a maximum of five years and was a price worth paying for an agreement eliminating tariffs totally in what was still a short timeframe.
“We do not want this stuff but at the same time if we had to agree to a safeguard provision to get the deal we got then we would do it in a heartbeat … and we did,” Bailey said.
Meat Industry Association chief executive Sirma Karapeeva said while exporters would have preferred to see tariffs for beef and sheepmeat phased out over a shorter period than the 15 years eventually settled on, they were also realistic that such an approach was needed to get the deal over the line.
“It does reflect the complexity of the negotiation and the sensitivities around agricultural products from both sides,” Karapeeva said.
“I think where they landed is the best that they could get and it is good that they could get it across the line actually.”
Karapeeva said the deal was not just about tariffs.
Meat exporters would also benefit from so-called trade facilitation measures designed to cut down on paper work holding exports up at the border.
“There are expedited goods clearance times around goods generally and a very, very quick clearance time for perishable goods,” she said.
“I think it is less than 10 hours to clear the goods through customs, which is really valuable for chilled meat products.”
