UK-New Zealand Free Trade Agreement

The UK’s second ‘new’ trade agreement

The UK and New Zealand signed a free trade agreement (FTA) in February 2022. This is the second FTA the UK has negotiated from scratch since leaving the EU. The first was with Australia.

What’s in the agreement?

The agreement aims to reduce barriers to trade between the UK and New Zealand. It removes tariffs on UK-New Zealand trade. UK tariffs on some sensitive agricultural products are reduced over a transitional period. It also removes barriers to trade in services and in a number of other areas. This briefing looks at some of the main issues but does not cover all of the agreement’s 33 chapters. The Government’s material on the agreement is available at: UK-New Zealand Free Trade Agreement.

Very small economic effect

The economic effect of the agreement is likely to be very small. According to the Government’s Impact Assessment, GDP will be 0.03% higher in 2035 as a result of the agreement, although this is subject to considerable uncertainty. The small economic effect is unsurprising given the relatively small amount of trade the UK does with New Zealand and the fact that barriers to trade with New Zealand are generally fairly low.

Concerns about effects on agriculture

Farming groups and others have raised concerns about the effect of the agreement on the agriculture sector. New Zealand is a competitive exporter of agricultural products. The National Farmers Union (NFU) has said that imports from New Zealand could undercut UK producers due to their cost advantages. The Government’s Impact Assessment shows a negative effect on the agriculture and semi-processed food sectors, which are also expected to be adversely affected by the trade agreement with Australia.

In response to these concerns, the Government has pointed to the safeguards in the agreement which limit imports of certain agricultural products for up to 15 years. The Government has also argued that UK consumers prefer British meat and that New Zealand has not filled its existing quota for sheep meat.

Trade and Agriculture Commission report

The Trade and Agriculture Commission (TAC) has examined the agreement and concluded that the FTA “does not require the UK to change its existing levels of statutory protection in relation to animal or plant life or health, animal welfare and environmental protection.” The Government has emphasised that the agreement does not change the rules on the kinds of food and drink which can be imported from New Zealand.

No ISDS

Investor-State Dispute Settlement (ISDS) provisions, which allow foreign investors to take legal action against governments, are not in the agreement.

Views of devolved administrations

The devolved administrations welcomed some aspects of the agreement but all had concerns over its effect on the agriculture industry.

Parliamentary scrutiny and entry into force

The agreement was laid before Parliament under the Constitutional Reform and Governance (CRAG) Act 2010 on 27 October 2022. The initial 21 day period for parliamentary scrutiny under CRAG ends on 1 December 2022.

The Commons International Trade Committee said that, “on balance”, the agreement should be ratified but called for a debate on a substantive motion to allow for thorough scrutiny. A general debate, rather than a debate on a substantive motion, took place in the House of Commons on 14 November 2022. The Lords International Agreements Committee welcomed the agreement but thought it could have gone further in some areas.  

The agreement is expected to enter into force at midnight on 31 May 2023.