The free trade agreement will eventually eliminate all tariffs on New Zealand exports to the UK, with 97 per cent of those tariffs being eliminated on the day the agreement comes into force. Video / Supplied
OPINION:
For New Zealand business the UK Free Trade deal the Government just signed means there are some big winners... and then there are some other winners.
In theory this was supposed to be a winners and losers article.
But there are no obvious losers in this deal. It isthat good.
For anyone who has followed the progress of New Zealand's international trade negotiations for the past few decades, this wildly surpasses what was once thought possible.
Traditionally agricultural products have been a sticking point in trade deals, particularly in Europe.
For that reason, deals with Europe and the UK have been less of a priority than deals in the Asia Pacific - without an easing of tariffs on meat, dairy and fruit they held marginal value.
But Brexit and the pandemic have changed that dynamic.
Untethered from Europe and the powerful French agricultural lobby, more open access for meat and dairy became possible.
Meanwhile, Brexit border issues have combined with global pandemic supply chain disruption to create a nightmare of product shortages for British consumers.
The UK is battling shortages of a wide range of goods that have seen supermarket shelves stripped bare and motorists queuing for petrol.
It is a temporary problem.
But with all the political pressure on the UK Government to ensure and maintain food security this was the perfect time for New Zealand to be negotiating a deal.
The UK is desperate to do trade deals and probably sees New Zealand as a potential ally in its efforts to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
New Zealand is a founding member of the CPTPP and this is likely to have given us extra clout in the negotiations.
The export big winners are those that will see an immediate reduction in tariffs.
The wine industry - which currently has a tariff of up to $50 per 100 litres - is already New Zealand's largest export to the UK, worth $436 million.
Honey, which has a tariff of 16 per cent.
Onions, which has a tariff of 8 per cent, and hoki, which has a tariff of 6 per cent.
Mussels, which face a tariff of 8 to 20 per cent, will have those tariffs removed in four instalments over four years.
The wine industry is already New Zealand's largest export to the UK, worth $436 million. Photo / 123RF
But the meat and dairy sectors aren't unhappy. They'll see tariffs removed progressively for the next 15 years.
Dairy tariffs will be reduced over five years on butter and cheese.
Quotas for duty free access will slowly increase until all tariffs are removed.
Tariffs on lamb come off most slowly - over 15 years.
Of course the economic significance of a trade deal with the UK has dwindled in the past few decades.
News in 1973 that the UK was joining the European Economic Community and putting up trade barriers was devastating to the New Zealand economy.
It could be argued that it took 20 years to recover from the shock.
Now the immediate benefits of around $38 million look like marginal stuff.
But trade deals are really all about the opportunity to develop and grow new markets.
Two-way trade is currently worth nearly $6 billion, pre-Covid estimates suggest New Zealand goods exports could increase by up to 40 per cent under the agreement.
That would translate to gains of more than $1b a year in time.
But in fact, if New Zealand exporters grab the opportunity - as they did in China - then there is every reason to assume the benefits will exceed that.
And what do we give up in return?
We will eliminate all remaining tariffs on British goods. These include some clothes, buses, ships and bulldozers - apparently.
But in any significant economic sense they are negligible in New Zealand's already open economy.
We may see copyright rules tweaked to offer greater protection to British artists and authors.
In terms of tangible trade-offs, this is a highly asymmetrical deal.
A headline in the UK's Guardian newspaper summed it up.
"UK strikes trade deal with New Zealand – but it may add nothing to GDP."
For the British Government this is a timely and symbolic win, for the British public it mostly just means a cheaper bottle of Kiwi Sav.
For New Zealand exporters it's also symbolic. It represents the opportunity for a triumphant return to our oldest market.
