Stephen Jacobi, NZIBF Executive Director, speaks to the Confederation of Indian Industry Partnership Summit in New Delhi about The Future of Multilateralism.
The (UK) Winter of our Discontent: Making sense of NZ-UK-EU trade and Brexit
A mere 64 days before the UK is due to leave the European Union, the UK-EU-NZ trade picture remains shrouded in the chill mists of confusion. During her visit to London this week, the Prime Minister announced two welcome new UK-NZ agreements on aspects of our trade relationship, which will certainly help to minimise future compliance costs for New Zealand exporters to the UK market – but the risk of a catastrophic no-deal looms large, and important issues of agriculture market access have yet to be resolved. It would seem that the ‘glorious summer’ of Global Britain has yet to arrive.
There was at long last some good news out of the UK this week: the Prime Minister’s mid-winter visit to London included the announcement of two new bilateral UK-NZ agreements on aspects of our trade relationship. Both deals will (if and when the UK leaves the EU) help to reduce future compliance costs for New Zealand exporters to the UK. The first is a UK-specific retooling of the NZ-EU ‘Vet Agreement’, a highly valued, world-leading set of rules for trade-related quarantine requirements on meat, dairy and other agriculture products, reflecting both sides’ high standards in this area. The other, a ‘Mutual Recognition Agreement’ is likewise a UK replica of an EU-NZ arrangement that reduces compliance costs for exporters in meeting technical standards in a handful of sectors (electronics, machinery, medical devices and others).
Wintry winds of uncertainty
But while this positive news may suggest that the sun has at last broken through the clouds, in fact the wintry winds of uncertainty continue to blow. As our blog last week reported, the risk of a no-deal British exit from the EU is high and growing, being the default option which will come to pass on 29 March unless deliberate action is taken in another direction. Current UK Parliamentary chaos suggests that deliberate action may be some way off. (If PM May’s Withdrawal Agreement is approved at the last minute, which is still a possibility, this will in effect give a two-year stay of execution, since a transition provision is included which preserves the status quo for all trade for that period.)
Absent an exit deal, however, New Zealand exporters may potentially face severe disruption in the market from 30 March – notwithstanding the welcome agreements mentioned above. It is only possible to speculate at this stage on whether there will be a no-deal exit or what it might mean in practical terms, but at the least there could be procedural complications at the border (notwithstanding obviously well-disposed UK authorities and our new deals) and disarray in the market.
NZ-UK-EU trade complications
A further complication which remains unresolved is the terms of access that the UK will offer to New Zealand meat and dairy products – something that the UK is clearly finding difficult to clarify without having itself resolved the terms on which it leaves the EU. As we have previously reported, in 2017 the UK and EU struck a deal between themselves to divide up various ‘tariff rate quotas’ (TRQs) laid down in the EU’s WTO market access ‘Schedule of Commitments’. These include several New Zealand-specific TRQs for butter, cheeses, sheepmeat and beef, along with TRQs for the US, Brazil, Australia, Canada, China, Thailand and a host of others. These TRQs were part of the finely-tuned balance of legally-binding commitments that was negotiated among WTO members (including the UK and other EU member states) in the 1995 Uruguay Round.
TRQs provide an access opportunity for a fixed, often small, quantity of agricultural products to enter the EU at a lower-than-normal tariff rate – sometimes zero to create a truly level playing field, as is the case for New Zealand sheepmeat. In other cases, in the in-quota tariff is set at levels that remain high enough to make the trade uneconomic, as for the New Zealand butter TRQ, where relative tariff protection has actually risen as internal European prices have fallen since 1995. Tariffs outside of those TRQ volumes are normally prohibitively high and have the effect of preventing trade.
The current WTO commitments provide TRQ access to any or all of the 28 EU members on an unrestricted basis, provided that the total volume is not exceeded. The UK-EU27 deal would simply divide up the TRQs based on historical patterns of trade – in effect imposing two separate caps. This does not, however, take account of commercial realities in which product may be placed in one market or another over time in response to consumer demand or logistical considerations. In effect, this approach would represent a reduction in both the quality and quantity of access.
The EU and UK have presented their proposed deal to WTO colleagues, but it has been resoundingly rejected. The EU27 and UK are obliged to ensure that trading partners are “no worse off”, and many, including New Zealand, do not consider the proposal to meet this benchmark – while also being clear that we are not seeking any windfall gains out of the situation. Both the EU and UK are now undertaking so-called Article XXVIII negotiations with affected trading partners, to seek a compromise outcome.
The UK has a continuing obligation to respect its existing WTO commitments, including for market access for New Zealand, come what may on 29 March. We can probably assume that the UK would prefer to implement its own preferred approach to the TRQs – but of course one would hope it would also have in mind establishing its credentials as a principled, rule-following independent WTO member. While this remains unresolved, however, the gloomy picture of a chaotic next two months is all the more worrying for New Zealand and other exporters.
This post was prepared by Stephanie Honey, Associate Director of the NZIBF
REGISTER WITH TRADE WORKS
Register to stay up to date with latest news, as well as saving and discussing articles you’re interested in.
Remarks to Confederation of Indian Industry Partnership Summit, New Delhi, 15 March 2023
"The Future of Multilateralism" by Stephen Jacobi, NZIBF Executive Director Namaskar Tēnā koutou katoa – greetings to you all in the language of the Māori people of Aotearoa New Zealand. It is an honour for me to speak to such a distinguished gathering today....
AMIDST THE STORM: ABAC MEETS IN AUCKLAND
Perhaps a cyclone was after all a fitting backdrop for the meeting of the APEC Business Advisory Council (ABAC) which was held in Auckland on 12-14 February – the global environment against which the meeting took place is decidedly stormy. In the event the wind...
Asia-Pacific business leaders call for action on climate and economic inclusion
APEC NEWS RELEASE Issued by The APEC Business Advisory Council (ABAC) Auckland, 14 February 2023 - Members of the APEC Business Advisory Council (ABAC) met in Auckland, New Zealand this week to develop a work plan that calls on policymakers to leverage trade and...
ASIA-PACIFIC BUSINESS LEADERS GATHERING IN AUCKLAND, 12-14 FEBRUARY 2023
Media Release - 8 February 2023 Equity, sustainability and opportunity are key themes of one of the largest gatherings of senior Asia-Pacific business leaders held in New Zealand for some time. The APEC Business Advisory Council (ABAC) is due to meet in Tāmaki...
A YEAR FOR RECONNECTING
As I write this end of year dispatch, NZIBF is preparing to host the first meeting for 2023 of the APEC Business Advisory Council (ABAC). We are looking forward to welcoming the 200 or so business leaders and senior officials from APEC member economies across the...
MAJOR GATHERING OF ASIA-PACIFIC BUSINESS LEADERS TO BE HELD IN AUCKLAND, 12-14 FEBRUARY 2023
Media Release - 14 December 2022 Sustainability, digitalisation and resilient, inclusive trade will be key themes of a major gathering of senior Asia-Pacific business leaders to be held in Auckland early next year – the first such event to be held in New Zealand...
NZ Herald: Time to lift our game in India
Following his recent visit to India our Executive Director Stephen Jacobi penned this article advocating a more strategic approach to the further development of the relationship. The article was published by the NZ Herald on 9 December.
APEC Rolls out Priorities for 2023
Issued by the Informal Senior Officials’ Meeting - Honolulu, The United States, 13 December 2022 Aiming to provide tailwinds for member economies to strengthen recovery and resilience, as well as advance broad-based economic growth, the United States rolled out its...
NZIBF 2022 Chair Report
ANNUAL GENERAL MEETING 2022 CHAIR’S REPORT I am pleased to present my second report on the activities and achievements of the NZ International Business Forum (NZIBF) for 2022-23, our fifteenth year of operations. At the outset I would like to thank Members for...
APEC Leaders Issue 2022 Declaration and the Bangkok Goals on the Bio-Circular-Green Economy
Issued by the APEC Economic Leaders' Meeting Bangkok, Thailand, 19 November 2022 The Leaders of the 21 APEC member economies issued the 2022 Leaders’ Declaration following the 29th APEC Economic Leaders’ Meeting chaired by the Prime Minister of Thailand,...
NZ BUSINESS LEADERS AT APEC 2022
New Zealand business will be represented at the APEC Leaders’ Week in Bangkok, commencing 13 November, by members of the APEC Business Advisory Council (ABAC). New Zealand’s three members – Rachel Taulelei, Malcolm Johns and Anna Curzon – supported by Stephen Jacobi...
Submission to the Ministry of Foreign Affairs and Trade: Re-Development of the Framework for Integrating Labour Standards and Trade Agreements
Submission by NZIBF – October 2022 This submission is made on behalf of the NZ International Business Forum (NZIBF), whose members are listed at Annex A. NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global...
Address to the 51st One Stop Update for The Accountant In Business, 25 October 2022
ADDRESS TO THE 51st ONE STOP UPDATE FOR THE ACCOUNTANT IN BUSINESS AUCKLAND, 25 OCTOBER 2022 STEPHEN JACOBI EXECUTIVE DIRECTOR NZ INTERNATIONAL BUSINESS FORUM GLOBAL ECONOMIC UPDATE Thanks to Brightstar for inviting me back to address this conference once again. When...
Submission to MPI on Modernising Our Export Assurances Systems: Legislative Options
Submission by Export NZ and NZIBF - 29 September 2022 1.0 INTRODUCTION 1.1 Export New Zealand (ExportNZ) and the New Zealand International Business Forum (NZIBF) welcome the opportunity to comment on the Ministry for Primary Industries’ (MPI) Modernising Our Export...
Submission to MFAT for CPTPP Review
30 September 2022 Phil Mellor Economic Division, Ministry of Foreign Affairs and Trade, Wellington (By email) Dear Phil, Thank you for your email of 1 September, seeking our comments on the three year review of the Comprehensive and Progressive Agreement for Trans...