Please note that this paper is based on the October 2021 ‘Agreement in Principle’ rather than the agreement signed in February 2022.
For more information on the signed agreement, see Commons Library, UK-New Zealand Free Trade Agreement.
The UK and New Zealand reached an ‘Agreement in Principle’ (AIP) for a new free trade agreement (FTA) in October 2021. This is the second post-Brexit trade agreement with a non-EU country negotiated from scratch by the UK. The first, with Australia, was announced in June 2021 and signed in December 2021.
Anne-Marie Trevelyan, the Secretary of State for International Trade, told the House of Commons on 21 October 2021 that this was "another major trade deal" and that it would "slash red tape and deepen access for our advanced tech and service companies."
What does the agreement cover?
The agreement removes all tariffs on trade in goods between the UK and New Zealand, subject to ‘rules of origin’ which determine where goods are deemed to come from. New Zealand will remove all tariffs on imports from the UK as soon as the agreement comes into force. The UK will eliminate around 97% of tariffs immediately. There will be transitional measures on certain sensitive agricultural products imported into the UK from New Zealand.
The agreement contains a range of other measures, including provisions to open up services markets, make business travel between New Zealand and the UK easier and increase digital trade. Controversial Investor-State Dispute Settlement (ISDS) provisions, which allow foreign investors to take legal action against governments, are not included in the agreement.
Negligible economic benefits
In 2020, the UK exported £1.2 billion of goods and services to New Zealand (0.2% of the UK total) and imported £1.0 billion (0.2% of the UK total).
The Government’s estimates indicate that the economic benefits of the agreement are likely to be very small. The Government’s scoping assessment, carried out before the negotiations started, showed a negligible (0.00%) impact on UK GDP. This assessment suggested that an agreement with New Zealand could have a negative impact on the agriculture and semi-processed food sectors and on Northern Ireland.
A further impact assessment, reflecting the details of the agreement, will be published when the agreement is signed.
Link to joining the CPTPP
The agreement should also be seen in the context of the UK’s bid to join the CPTPP – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This is a trade agreement between 11 countries (including New Zealand) in the Asia-Pacific region.
The Secretary of State told the House of Commons that the agreement with New Zealand marked a "significant step" towards the UK’s aim of joining the CPTPP.
How is agriculture affected?
Farming organisations and the devolved administrations are concerned that the agreement could have a detrimental impact on the agricultural sector.
Under the terms of the agreement, imports of beef and sheepmeat from New Zealand are gradually liberalised over a period of 15 years, butter and cheese over five years and fresh apples over three years. This liberalisation takes the form of a quota allowing a certain volume of tariff-free imports. These quotas increase over transitional periods before full tariff-free access is granted. The Government has pointed to a safeguard mechanism which could be applied if an industry suffered serious damage because of imports.
The National Farmers’ Union (NFU) has raised significant concerns about the agreement. It’s concerned that this agreement, combined with the Australia FTA, will lead to a substantial increase in imports which might not be produced to the standards which UK farmers have to meet. The NFU has said there could be "a huge downside to these deals".
How will Parliament scrutinise the agreement?
Select Committees carry out much of the detailed scrutiny. The House of Commons International Trade Committee and the House of Lords International Agreements Committee are examining the trade negotiations with New Zealand.
Parliament’s statutory role in relation to trade agreements is limited. There is no requirement for a debate or vote on the agreement.
Ratifying trade agreements
Parliament’s role in ratifying trade agreements is set out in the Constitutional Reform and Governance Act (CRAG) 2010. Under CRAG, the Government must lay the agreement and an explanatory memorandum before Parliament.
The Commons has the theoretical power to delay ratification indefinitely, but this has never been used. Parliament has no powers to amend a signed treaty. Any changes to legislation required to implement the agreement must be passed by Parliament in the normal way.
Government commitments
The Government has made commitments to help parliamentary scrutiny. Before laying it before Parliament, the Government will give the treaty text to the International Trade Committee and the International Agreements Committee confidentially.
To give committees more time to publish their reports, the Government has said that it expects there to be a period of at least three months between publication of the treaty text and laying it before Parliament under CRAG. The Government has also said it will seek to accommodate a parliamentary debate following a request from these committees.
When the treaty text is laid before Parliament, the Government will publish an independently verified impact assessment.
In addition, the Agriculture Act 2020 requires the Government to publish a report explaining whether certain trade agreements (including the agreement with New Zealand) are consistent with UK statutory protections relating to human, animal or plant life or health, animal welfare and the environment.
When preparing the report, the Secretary of State must ask the Trade and Agriculture Commission (TAC) for advice on animal or plant health, animal welfare and the environment (ie not human life or health). The TAC was launched in October 2021 with Professor Lorand Bartels as its chair.