New Zealand strikes free trade agreement with the United Kingdom; Benefits for meat exporters to be phased in over 15 years

New Zealand and the United Kingdom have agreed in principle to enter into a Free Trade Agreement (FTA), expected to grow the New Zealand economy by nearly $1 billion a year.

New Zealand will remove tariffs on all UK exports as soon as the FTA comes into force.

The UK will only remove tariffs on 96.7% of tariff lines when the agreement takes effect.

New Zealand beef and sheep meat exporters will have free access to the UK after the agreement has been in place for 15 years. In the interim, the tariff-free quota is increasing. 

Butter and cheese exporters will have free access after five years. New Zealand exporters of other dairy products, apples and mussels will have free access after three years. As with meat exports, conditions for exporters will be improved during the transition period. 

Here is a visual summary of key tariff reductions, provided by New Zealand's Ministry of Foreign Affairs and Trade (click on the magnifying glass to zoom in):

New Zealand and the UK have also agreed to improve and extend Working Holiday arrangements.

New Zealand is the second country to secure a new agreement with the UK post Brexit.  

The final text of the FTA will be finalised over coming months.

Meat industry welcomed FTA, despite disappointment over 15-year transition period

The Meat Industry Association welcomed the FTA, noting the New Zealand red meat sector has not had quota free access to the British market since the UK joined the European Union in 1973.

Association chief executive Sirma Karapeeva said, “Following the UK leaving the EU, New Zealand’s 1300 tonne beef quota was split between the UK and the EU, leaving New Zealand with only 454 tonnes of beef access into the UK. Outside of this quota, New Zealand beef exports attracted tariffs of up to 70%, meaning virtually no out of quota trade occurred.

“Improved access will allow companies to deepen and expand relationships, and crucially, compete on a level playing field with our international competitors.

“While the red meat sector is disappointed in the length of the transition period, and quality of access is often in the detail of trade agreements, we recognise that this was a difficult negotiation and want to acknowledge the hard work of negotiators and the Minister to achieve this result.

“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 UK market.”

FTA could boost NZ exports by 40%

Prime Minister Jacinda Ardern said, “There are incredible gains for our exporters, including the immediate elimination of all duties on 97% of New Zealand’s existing exports to the UK, including wine, honey, onions, a range of dairy products, and most industrial products - which once fully implemented is expected to save exporters $37.8 million per year based on current export volumes. 

“Beef volumes will increase from 12,000 tonnes to 60,000 tonnes, and for sheep meat they will rise from 149,205 tonnes to over 164,000 tonnes, with free market access after 15 years - putting more money back into the pockets of our farmers while presenting them the opportunity for further growth."

Trade Minister Damien O’Connor said the UK was New Zealand’s seventh largest trading partner pre-Covid, with two-way trade worth nearly NZ$6 billion to March 2020.

The FTA is expected to see New Zealand goods exported to the UK increase by up to 40%, boosting New Zealand's GDP by $970 million, according to pre-Covid estimates. 

“This FTA will also include the most ambitious commitments New Zealand has ever negotiated on trade and the environment, and is our first bilateral trade deal to include specific provisions on climate change," O'Connor said.

"The UK has agreed to take concrete steps to eliminate subsidies on fossil fuels. New prohibitions have been agreed to combat over-fishing.

“And over 260 environmentally beneficial products have been prioritised for tariff elimination - the largest environment goods list ever agreed."

Excerpt from in principle agreement

Here’s an excerpt from the in principle agreement:

Key commitments include:          

New Zealand and the UK will remove customs duties on 100% of tariff lines for originating products, in line with the agreed treatments which will be set out in respective tariff schedules.

• The UK will eliminate tariffs on 96.7% of tariff lines on the day the FTA enters into force.
• New Zealand will eliminate tariffs on 100% of tariff lines on the day the FTA enters into force.
• New Zealand and the UK will share tariff preference utilisation data.
• New Zealand and the UK will also agree commitments in respect of prohibiting export duties, facilitating trade in remanufactured, repaired and altered goods, ensuring transparency of import and export licensing procedures, and upholding WTO rules in respect of import and export restrictions.

For specific products, the following has been agreed:

Beef

The UK will remove duties on beef after 10 years (duty-free from Year 11 onward).

During the first 10 years following entry-into-force of the Agreement, a duty-free transitional quota will be made available for originating beef imports from New Zealand. This quota volume will increase in equal annual instalments, in line with the below:

• • Year 1: 12,000MT
  • Year 10: 38,820MT
• If this quota is filled in a given year, any further originating imports of beef from New Zealand will be subject to MFN base rates.
• During years 11-15 following entry-into-force, a product specific safeguard will be applied to beef. Trigger volumes will increase in equal annual instalments, in line with the below:
  • Year 11: 43,056MT
  • Year 15: 60,000MT
• If the trigger volume is met in a given year, the UK will apply a duty of 20% to any further originating imports of beef from New Zealand, for the remainder of the year.
• The product specific safeguard will be removed at the end of Year 15 and beef trade will be fully liberalised.

Sheep meat

• The UK will fully liberalise sheep meat after 15 years (duty-free from Year 16 onward).
• During this time, a duty-free transitional quota will be made available for originating imports of sheep meat from New Zealand. This quota volume will be set as below:

Years 1-4: 35,000MT per year

Years 5-15: 50,000MT per year

• If this quota is filled in a given year, any further originating imports of sheep meat from New Zealand will be subject to MFN base rates.
• In a given year, trade can only occur under the FTA quota once the utilisation of New Zealand’s WTO country-specific sheep meat quota into the UK has reached 90%.

Butter

• The UK will fully liberalise butter duties in 6 equal reductions over 5 years.
• During this time, a duty-free transitional quota will be made available for originating butter imports from New Zealand. This quota will open at 7,000MT from entry into force and will build in equal annual instalments to 15,000MT at Year 5.
• Butter will be duty free, quota free from Year 6 onwards.

Cheese

• The UK will fully liberalise cheese duties in 6 equal reductions over 5 years.
• During this time, a duty-free transitional quota will be made available for originating cheese imports from New Zealand. This quota will open at 24,000MT from entry into force and will build in equal annual instalments to 48,000MT at Year 5.
• Cheese will be duty free, quota free from Year 6 onwards.

Fresh apples

• Duties on fresh apples exported from 1 January to 31 July will be fully liberalised from entry into force.
• For fresh apples exported from 1 August to 31 December the UK will fully liberalise duties in equal instalments over 3 years.
• During this time, a seasonal, duty-free transitional quota will be made available for originating fresh apple imports from New Zealand. This quota will be set at 20,000MT per year for 3 years.
• Fresh apples will be duty free, quota free year-round from Year 4 onwards.

New Zealand will manage the administration of all transitional volumes for the products set out above. No additional conditions or restrictions will apply, beyond those set out in respect of sheep meat.

Customs duties on all other UK tariff lines will either be eliminated on entry into force of the agreement, or in a small number of cases will be removed in equal reductions over 3 or 7 years.