UK and NZ trade deal gets the green light

Industry News | | MIC Customs Solutions |

Another ambitious FTA has been signed by Britain, this time with New Zealand.


The UK and New Zealand have signed what has been described as a ‘far-reaching’ free trade agreement that should significantly boost their economic relationship over the coming years.

But how will this work and why were both sides so keen to participate? Here, we’ll take a closer look at the potential benefits.

The deal is signed

Negotiations towards an FTA were first launched in June 2020, with an agreement in principle achieved in October 2021. British prime minister Boris Johnson and his New Zealand counterpart Jacinda Ardern gave the go-ahead for the deal proper last month, and it has now finally been signed by UK international trade secretary Anne-Marie Trevelyan and New Zealand minister for trade and export Damien O’Connor.

This deal follows hot on the heels of a similar pact between the UK and Australia and is expected to boost the relationship between both sides by nearly 60 percent. 

Advantages for Britain 

As part of the agreement, tariffs will immediately be eliminated on all UK exports to New Zealand. This includes the current ten percent levy on clothing and footwear and the five percent tax on construction equipment like excavators.

This should significantly benefit British exporters doing business in that part of the world, particularly smaller enterprises.

Furthermore, it should open up the possibility of more trade in the agricultural sector. Since 1973 and its entry into the Common Market, Britain has imported much of its beef and dairy products from the EU tariff-free. However, since Brexit, the UK has been seeking out other markets in order to reduce the cost of things like milk and cheese, something New Zealand could provide.

In 2020 New Zealand supplied less than one percent of Britain’s dairy imports and only 424 tonnes of beef, so these figures are expected to increase significantly now.

Although the government concedes that the FTA will not directly boost Britain's GDP by much - less than 0.2 percent of its total trade was done with New Zealand last year - this move is seen as the latest in a series of steps away from reliance on Europe and towards better relationships in the Indo-Pacific region.

Indeed, Mr Johnson is also likely to be hoping that the FTA will help in the UK’s accession into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a pact he has been keen to enter for some time now.

Advantages for New Zealand

Meanwhile, from New Zealand’s perspective, the country is sure to be pleased with Britain’s agreement on the elimination of 96.7 percent of tariffs for its products immediately.

The exceptions include sensitive agricultural products, which will have a transitional tariff rate quota (TRQ) applied and then gradually lifted in the coming years.

This is likely to lead to a 50 percent boost to exports and an instant 0.3 percent increase in GDP.

Another benefit is the increased access to one of the biggest markets for meat and dairy products outside of the current limits imposed by World Trade Organization rules.

Again, this will likely be welcome news for businesses involved in exporting, especially smaller ones.

Commenting on the signing of the agreement, Ms Trevelyan said: “Like all our new trade deals, it is part of a plan to build a network of trade alliances with the most dynamic parts of the world economy.”

It will definitely be interesting to see how this FTA evolves and whether businesses can establish whole new supply chains as a result.