Negotiations on a free trade agreement (FTA) between the UK and New Zealand began in June 2020. After six formal negotiating rounds, the two sides have reached agreement in principle just over a year later.
The final text of the FTA is yet to be published as negotiators still need to agree the small print and both sides will need to undertake legal reviews over the coming weeks. However, the announcements made today show that the deal is broad in scope, offering greater market access for goods and services, improved business travel arrangements and new opportunities to invest in each other’s economies.
What’s in the deal?
- Goods: tariffs between the UK and New Zealand are already low – but this agreement commits both countries to liberalising goods trade in full, with the vast majority of duties reduced to zero on the agreement’s entry into force. Tariff elimination will include duties of up to 10% on British goods such as clothing, footwear and vehicles. A small number of UK tariffs, quotas and safeguards covering sensitive agricultural goods will be phased-out over a 15-year period.
- Customs & Origin: the agreement will establish streamlined customs processes and make it easier for traders to declare the originating status of goods. It will also contain product-specific rules to enable more goods to qualify for tariff free trade (for example, only 25% of the value of exported cars will need to originate from the UK or New Zealand – down from over 50% currently).
- Services: The FTA includes a range of commitments to make it easier for services suppliers to trade and operate within each other’s economies in a non-discriminatory way, without numerical quotas, restrictions on corporate form or requirements to establish a local presence. The terms are similar in scope to the UK-Australia FTA and will enhance regulatory transparency.
- Mobility: this FTA will significantly enhance business travel opportunities, making it easier for professionals to work in each country, including for independent practitioners, intra-corporate transferees (with spouses & dependents), those travelling for investment purposes and to fulfil service contracts. The two sides have also committed to a mobility dialogue outside of the FTA to continue cooperation.
- Qualifications: the FTA will establish a framework for industry bodies to ensure recognition of professional qualifications within both countries.
- Investment: The deal includes provisions to support stronger bilateral investment, including guarantees on non-discrimination and a prohibition on performance and nationality requirements. New Zealand will also raise the threshold at which foreign investment is subject to screening from NZ$100m to NZ$200m, which could lead to savings for UK firms.
- Digital & data: the agreement will include a modern digital chapter which supports cross-border data flows, prohibits unjustified data localisation and promotes digital invoicing and contracts.
- SMEs: the FTA will include a dedicated chapter aimed at supporting small and medium sized business, ensuring they are able to access the information and practical support required to buy and sell their goods more easily across borders.
- Climate & environment: a dedicated environment chapter will commit both sides to the removal of fossil fuel subsidies and remove a range of trade barriers on environmental goods & green technology. It also reaffirms both countries’ commitments to the Paris Agreement.
The deal also includes provisions in a wide range of other areas common to modern FTAs, such as in government procurement, competition, intellectual property and trade remedies.
So what’s the verdict?
Bilateral trade between the UK and New Zealand currently stands at £2.8 billion – about 0.2% of the UK’s total trade. The relatively small trade volumes involved mean this FTA was never going to be a game-changer for the UK in purely economic terms. Indeed, the Government’s own forecasts show the deal is expected to deliver growth of just 0.01% to UK GDP over the next 15 years. As with the FTA agreed with Australia earlier this year, it also sets new precedent in opening-up the UK’s heavily protected agricultural sector to greater external competition.
However, this agreement does deliver practical value in helping to forge a more positive commercial environment in both countries, making it easier for firms to do business – whether travelling to deliver service contracts, using new simpler customs procedures or benefitting from digital documentation. The deal also has a strong strategic purpose, forging new economic ties in the Indo-Pacific region and acting as a stepping stone to the UK’s membership of CPTPP - the vast trade area spanning the Pacific rim.
What should I be doing now?
The text of the agreement hasn’t yet been published and still needs to be scrutinised; however, we do now have a good sense of the direction of travel and businesses can begin to consider how to benefit from the new terms of trade.
Whether you’re in goods or services, large or small, you should evaluate your operations, supply chain and investment decisions with respect to the UK-New Zealand trade corridor. The UK is only going to become more deeply integrated with this region over the coming years, so there is no time like the present to find out where the opportunities might lie for you.
For support in assessing your trade and investment priorities, Deloitte’s specialists are on hand to help.
Key contacts
Amanda Tickel
Amanda is Head of Tax & Trade Policy for Deloitte UK. She leads a team undertaking analysis and preparing insights across the spectrum of tax and trade matters including Budgets, technical consultations, trade negotiations and post-Brexit border rules. Amanda has held a wide number of roles during her career including leading client relationships, global representative to the OECD, mentoring and non-executive board roles. As well as previously being a partner at another Big 4 firm, she was in industry at Vodafone plc as global head of indirect taxes and responsible for managing tax value chain and centralisation initiatives. Amanda has an active home life with four children and is also passionate about horses, riding whenever free time permits and supporting the charity World Horse Welfare including volunteering as Trustee and Treasurer for 7 years.
James Caldecourt
James is a Director and Head of International Trade at Deloitte UK. James works with clients from all sectors to help them understand the UK’s evolving economic, foreign and trade policy agenda and what it means for their decision-making. James was previously an Adviser to Deloitte, working with the global Brexit team. He has wide-ranging experience in Westminster politics, including as a government Special Adviser, an adviser to a political party, a Director of a political consultancy and at the UK Parliament. He has a master’s degree in public policy and is a Policy Fellow at the University of Cambridge.