British Trade Sovereignty

05 Feb 2020 British Trade Sovereignty image

This week we celebrate Waitangi Day, a day symbolic of our nation’s sovereignty. At the end of last month, Britain took back its sovereignty from the European Union with Brexit taking effect.

Two of the major effects of a nation’s sovereignty are: controlling the movement of people and trade. So, the irony of Britain leaving the European Union is that by the end of this year’s transition period, Britain wants a trade agreement with the European Union.

Nigel Jenney, Chief Executive of the Fresh Produce Consortium, is quoted as saying, when talking about a trade agreement with the European Union: “It would appear that it is not going to be the free and frictionless trade that many people would have wanted, so we can only hope for some kind of free trade agreement to keep additional administrative costs down.”

The concern is that one year will not be sufficient time to sort out Brexit trade arrangements with the European Union, let alone trade agreements with any other country. But British industry’s overriding concern is about the imposition and cost of the increased bureaucracy needed to run trade as a sovereign nation outside of the European Union.

One of the chief impediments to Britain doing trade deals with other countries, including the European Union, is trade quotas that these countries have with the European Union, and how these trade quotas can now be applied. This is because goods exported from countries outside of the European Union may have arrived at any sea port in the European Union. Those goods will need to be directed straight to Britain or in effect, be re-exported from the European Union, which will involve increased bureaucracy unless there can be a free trade agreement negotiated between Britain and the European Union in the next year.

For countries such as New Zealand, the time taken to sort out a trade agreement between Britain and the European Union will make getting a trade agreement with Britain even more difficult. It is important to note that New Zealand, like Australia, does not have a trade agreement with the European Union. What this means is, while we can continue to export produce to both Britain and European Union, there are no trade agreement advantages.

The European Union is one of horticulture’s largest markets after China, Japan and Australia. We have trade agreements with these three countries that benefit New Zealand’s economy through no tariffs or by reducing tariff rates. New Zealand produce exported to the European Union pays tariffs of $48 million. Apples however do have some tariff free windows during the year, but there are other non-tariff barriers restricting market access.

New Zealand’s goals for trade agreement negotiations with Britain and the European Union are first, to reduce tariffs and second, to improve access for our produce to these markets. There are also meat quotas to be negotiated that were put in place when Britain joined the European Union many years ago to compensate for our loss of access to the British market.

So, although we will continue to have access to these markets, we do so at a disadvantage. Those countries that already have trade deals with the European Union and pay no tariffs such as Chile, one of our main horticulture competitors for fruit and berries, have massive trading advantages.

Our horticulture trade with Britain is estimated to be a modest $86 million, or about 11% of our trade with the European Union. A free trade agreement would be the impetus to increase both volume and value.

I would like to think that in negotiations with Britain, our long relationship and Commonwealth membership will mean that we get an early trade agreement that improves our access and competitiveness so that our trade with Britain grows.

Mike Chapman, Chief Executive