New Zealand trade agreement: letter to the UK Government

Rt Hon Penny Mordaunt MP
Minister of State for Trade Policy
Department for International Trade
Old Admiralty Building
Admiralty Place
LONDON
SW1A 2BL

August 2022

Dear Penny

UK-New Zealand and EU-New Zealand Free Trade Agreements

Thank you for your letters of 21 July about the UK-New Zealand free trade agreement (FTA). In your letter addressed to us both, you enclosed a copy of the UK Government’s report on this FTA, produced in accordance with Section 42 of the Agriculture Act 2020. While we appreciate that the Trade and Agriculture Commission and your own Section 42 report conclude that the UK-New Zealand FTA is consistent with maintenance of UK statutory protections, our concerns with this agreement extend beyond this.

In previous correspondence we have highlighted our concerns about the significant additional market access that this agreement provides for New Zealand, in particular for beef and sheepmeat (lamb) and the potential damaging impact on Scottish farmers and food producers.

We have now seen the detail of the recently completed FTA between the EU and New Zealand. The difference in outcomes is stark. While the UK Government agreed to allow unlimited quantities of beef, tariff-free, into the UK after 15 years, the EU – New Zealand FTA will maintain quotas permanently and apply a 7.5% tariff. In addition the quotas that New Zealand has secured, in its FTA with the UK, are much higher than those in its agreement with the EU. In the first year of the FTA, the UK will allow 12,000 tonnes of New Zealand beef into the UK, while the EU will allow 3,333 tonnes – for the entire EU-27. By year 15, the UK Government will allow 60,000 tonnes of New Zealand beef into the UK, and after that an unlimited quantity, while the EU will cap imports at 10,000 tonnes, and still apply a 7.5% tariff.
We have consistently raised concerns at the lack of a level playing field between Scottish and New Zealand farmers, who can benefit from larger economies of scale. It is notable that the EU – New Zealand FTA specifically excludes beef that is produced on commercial feedlots from benefiting from the preferential terms of this agreement. As concerns about fair competition are well known, why could the UK Government not agree a similar condition with New Zealand as part of its FTA negotiations?

For sheepmeat, it is a similar story. The UK-New Zealand FTA allows 50,000 tonnes of sheepmeat into the UK by year 15, with no limit on imports after that. The EU-New Zealand FTA however allows a maximum of 38,000 tonnes. In both cases this is in addition to the current WTO country-specific quota for sheepmeat imports from New Zealand, which already provides significant market access for New Zealand producers.

For other agri-food imports such as butter and cheese, the EU has again secured a better deal than the UK. In both cases the EU has maintained import quotas, where the UK Government has abandoned them, and in the case of butter, the EU also retains an import tariff.

In return for this limited access to the EU market, New Zealand is offering the EU full tariff liberalisation on EU exports to New Zealand from day one, which is the same outcome as the UK Government secured for UK exports. So it seems clear that the EU has secured the same market access for its exporters at a much lower cost to its domestic producers.

It is telling to look at the industry reaction in New Zealand. The New Zealand Meat Industry Association has said in relation to the EU-New Zealand FTA: “We are extremely disappointed that this agreement does not deliver commercially meaningful access for our exporters, in particular for beef”.

In contrast they welcomed the UK-New Zealand FTA saying: “This deal will deliver a major boost for sheep and beef farmers and exporters”.

As you know geographical indications (GIs) are an area of considerable importance for Scotland as they protect the provenance of our world-renowned products, such as Scotch Beef and Scottish Farmed Salmon. The UK Government did not secure recognition of agri-food GIs in its agreement with New Zealand, however the EU has now succeeded in gaining recognition of its agri-food GIs in its FTA. This agreement should trigger the review clause on GIs in the UK-New Zealand FTA, which allowed for discussions on GIs to be reopened should New Zealand agree to changes to its GI scheme in an FTA with another party. This opens up the possibility that UK GIs will now be included in the UK-New Zealand FTA. We look forward to early engagement on this, to ensure that all Scottish GIs are put forward to be included in this FTA in future.

We support strong environmental provisions in all FTAs, in line with our Vision for Trade, and welcomed the specific references to the Paris Agreement temperature goals in the UK-New Zealand FTA. However we note that the EU-New Zealand FTA goes even further by ensuring that these are enforceable through trade sanctions.

It is clear from looking at the outcome of the EU – New Zealand negotiations that they have succeeded in getting an agreement that delivers a similar level of benefit to the UK – New Zealand FTA, while maintaining stronger controls on agri-food imports and protections for domestic producers. Given the EU’s size and negotiating strength, this is perhaps not surprising, but it emphasises the futility and economic self-harm of the UK Government leaving the EU, making its own trade agreements, and then ending up with a worse deal than if we had stayed in the EU.

We would be interested to know what lessons the UK Government will learn from this experience; whether it will pay more attention to the results of scoping assessments when they highlight that sectors stand to lose out as a result of an FTA; and what mitigations and compensation it will put in place for economic sectors and communities that suffer as a result of the UK Government’s trade deals.