Free Trade Agreement: New Zealand

Lord Purvis of Tweed Excerpts

Monday 25th October 2021 Lords Chamber

[Lord Grantchester (Lab)]

I am grateful to the Minister for presenting to your Lordships’ House the Government’s Statement from last Thursday on the agreement in principle reached between the UK and New Zealand on the proposed trade agreement. I declare my interest as stated in the register that I have a dairy farm.

On its own merits, this trade agreement adds a further 0.19% of UK trade towards the 80% threshold the Government committed to in their election manifesto. This is not that magnificent but it contains some sensitive elements that are a major concern to our important agriculture industry; these give widespread access to huge quantities of food of varying quality to the UK’s 60 million population in return for some potential opportunities for exports to a population of a mere 4.8 million New Zealanders—somewhat fewer than Scotland’s 5.5 million population. New Zealand ranks 53rd in size in terms of the trade it conducts against the UK’s other trading partners; this was worth £2.3 billion last year. The Statement says that tariffs as high as 10% will be removed. Can the Minister clarify whether the Government expect both imports and exports to grow by 30% in tandem by 2030 as stated in the Statement, or is this figure merely a reflection of the growth the Government expect the New Zealand economy to achieve? What figures have the Government estimated for the beneficial growth for the UK from this trade deal?

The Government try immediately in the Statement to play up the strategic importance of this deal as a significant step towards their aim to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—CPTPP. Somehow it is meant to add momentum for accession to a partnership fraught with doubt at the moment since the USA pulled out of the deal as to whether it might rejoin and on what terms. There is also the question surrounding China: whether it may be invited to join and on what terms. Does the Minister expect the UK’s accession to take precedence over these two important trading nations?

The Government state that they believe that this region will form the basis for massive economic growth, with trading opportunities to a growing middle class of the future. While this may prove to be correct, does the Minister recognise that the region will become ever more dominated by China and how it will operate throughout the region? Are the Government prepared to change their stated position of not entering into a trading relationship with China?

Returning to the specifics of this agreement in principle, its main effects could be severely felt throughout the agricultural industry, especially sheepmeat and dairy. New Zealand has a climate much like the United Kingdom’s. This agreement seems to be a cut and paste from the Australian agreement in principle in that it opens wide the UK food market to huge increases in volumes without any quota restrictions to immediate access. New Zealand can on agreement export four times the quantity of lamb to the UK than it did last year, as much butter next year as it exported to the UK over the last six years, and 25 times more beef, all in year one. What effect does the Minister expect this to have on the UK market and its prices? The National Farmers’ Union commented that the UK will be made available for

“significant extra volumes of imported food—whether or not produced to our own high standards—while securing almost nothing in return for UK farmers.”

Although it may be said to be of huge benefit to consumers, and I do not doubt that it is a great opportunity, there is huge doubt over the standard of food in relation to the high standards currently in operation here. To allay the deep concern expressed far and wide by many organisations towards the Government’s lack of commitment to high standards, shown by their not enacting them on a statutory basis during the passage of the then Agriculture Bill last year and the then Trade Bill this year, the Government have set up the Trade and Agriculture Commission to report on setting up a framework for government trade policy. The noble Lord, Lord Grimstone, announced last Thursday that, at long last, the Government’s response to the report has now been published. Although I have not been able to study it in depth for tonight’s Statement, I welcome that the Government have now finally published this response. My quick reading of it is that the Government do not spell out how these two agreements in principle and how future new trade deals will be assessed by the TAC regarding checks on the standards of imported food.

Are the Government committed through their response to take on board the depth of concern regarding the quantities being imported that might be below the level of UK standards, which it would be illegal for farmers in this country to market? How will the 50% of food sold through catering, restaurants and food services be assessed? Does being consistent with the UK statutory protections mentioned in the Statement really measure up to being equivalent to the standards put on the table by UK producers? Can the Minister confirm that the new statutory TAC, which was also set up last week, will see the texts of these two new agreements in principle from Australia and New Zealand, and be able to report to your Lordships’ International Agreements Committee in time for the deals to be reported to Parliament?

The Government’s response also mentioned that they would respond in due course to the Dimbleby report and set up a White Paper for a future food strategy. Although this is ongoing, I very much welcome the stance the Government have taken on this and look forward to further developments.

[Lord Purvis of Tweed (LD)]

My Lords, I also welcome the Statement. The Minister’s noble friend Lord Grimstone is assiduous in maintaining contact with the Front Benches and keeping us informed. That is great, and I am grateful for it. I would be grateful if the Minister passed that on.

I also welcome an agreement that will reduce tariff barriers on trade with one of our closest allies, and which will allow those delivering services easier recognition of their qualifications and their ability to work across the two friendly countries, making it easier for businesses to invest in new technologies and recognise intellectual property, investment and digital. But, as the noble Lord, Lord Grantchester, indicated, there are elements of concern, some of which are in the agricultural sector. Can the Minister confirm that the statutory TAC will see the texts of these agreements before the conclusion of the legal scrubbing and the formal approval, and before they are presented to Parliament for ratification? There are important consequences for our agriculture sectors that need deep scrutiny.

Although I welcome some of these elements, there is little doubt that the New Zealand Government have welcomed them even more. The Government have negotiated an agreement that provides very considerably greater competitive advantage to our friends. On their own assessment of the economic impact, the Government suggest that the agreement could actually reduce UK GDP over 15 years. The Prime Minister of Australia called this an “All-Black victory”. Coming from a rugby-mad area of the Scottish Borders, it is painful to hear our competitors say that it is yet another All-Black victory.

Over the weekend I looked at the New Zealand negotiating objectives for the UK and the EU. The EU completed its 11th round of negotiations in July. The New Zealanders were asking the same of the EU as they have asked for us. It seems we have given them all that they wanted and the EU is holding out on certain areas. The assessment from this Government suggests that, over 15 years, this agreement could represent a mid-range of 0.00% for UK GDP. For the EU, the mid-range was 0.01%. I would be very interested if the Minister could answer this question: what and where is the Brexit dividend for our trade with Australia and New Zealand if we are negotiating agreements that have resulted in the UK potentially benefiting less than we would have done if we were still part of the customs union and the single market?

It might be that the Government’s position is a cunning loss leader. As the noble Lord, Lord Grantchester, indicated, the Government seem to see this a gateway to the CPTPP. Can the Minister state what the Government’s position is with regard to China’s application? Does the UK support China acceding to the CPTPP?

I see the noble Lord, Lord Deben, in his seat, which has prompted me to ask a question regarding the Agreement on Climate Change, Trade and Sustainability, which New Zealand launched with Costa Rica, Fiji, Iceland, Norway and Switzerland. Will elements of this agreement allow for that agreement on trade and stability to be widened? The UK now has an agreement with four of those six countries, so what is the Government’s position on these negotiations?

We recently debated the UK’s significant trading power with Norway, which represents 10 times the size of trade with New Zealand. In that debate it was startling to find out that the UK had not secured any protection for geographical indicators for our produce. Can the Minister confirm, because it is hard to see it in the documentation that been presented, that the UK has secured protection of geographical indicators with New Zealand? This is one of the sticking points I referred to. It would be very interesting to know whether we have given way on this or whether we have asked for it.

My final question relates to the fact that we now have agreements in principle with Australia and with New Zealand, and we have a continuity agreement with Canada and negotiations advanced for discussion with it, but at no stage in any of those discussions have the Government suggested trade with the Commonwealth as an opportunity we could expand. Our relationship with Australia, Canada and New Zealand—the richest countries in the Commonwealth—is a platform for wider intra-Commonwealth trade. This is very close to my heart, having chaired a commission on Commonwealth trade with the Nigerian Trade Minister. It is a continuing disappointment that before the referendum we heard that Brexit would be an opportunity to widen Commonwealth trade, but in these key agreements with the richest countries in the Commonwealth we have heard nothing. What is the Brexit dividend for trade in the Commonwealth? Will we see a chapter in the New Zealand agreement looking at the expansion of wider Commonwealth trade?

[Viscount Younger of Leckie (Con)]

I am grateful for the comments made by the noble Lords, Lord Grantchester and Lord Purvis, on this deal. I am very pleased to have the opportunity to discuss the proposed deal in this House. I will certainly pass on the compliments of the noble Lord, Lord Purvis, to my noble friend Lord Grimstone for keeping us all in touch with what is going on.

As the House will know, on 20 October 2021 the Government agreed the main details of the deal. The leaders reaffirmed the enduring partnership between the UK and New Zealand during their discussion and agreed to work closely together on important areas of mutual interest such as defence, technology collaboration and tackling climate change, including through a clean tech partnership. But, as the House will know, this is in effect an agreement in principle, not dissimilar to the Australia deal. The AIP document reflects what the UK and New Zealand negotiating teams have jointly decided as of 20 October should be included in the agreement.

I want to answer as many questions as I can. The noble Lord, Lord Grantchester, raised the subject of the accession to the CPTPP. As I think he and the noble Lord, Lord Purvis, acknowledged, this is an exciting opportunity for the UK. This agreement is a gateway into the CPTPP, which is a huge free trade area of 11 Pacific nations. Joining this group will mean more opportunities for British exports to those high-growth markets. Demand for beef and lamb is increasing in the Asian market, and CPTPP countries are estimated to account for 21% of global meat imports in 2030—which goes a little way to giving some statistics, particularly to the noble Lord, Lord Purvis.

I shall say a little more about this in a moment, but the deal does not undercut farmers. We have ensured that there will be protections for the industry, including staged tariff liberalisation to allow farmers sufficient time to adapt, as well as a general bilateral safeguard mechanism—I understand that, for certain sensitive goods, this will be up to 15 years. Goods that are exported to New Zealand are tariff-free, which I am sure noble Lords will know.

The concern about this deal being a threat to our farmers was, again, raised by the noble Lord, Lord Grantchester. New Zealand lamb complements British lamb. New Zealand and the UK have different lamb seasons—let us use the word counter-seasonality, which is the expression I have got used to. Our consumers have been buying high-standard, high-quality New Zealand lamb for years. The UK will not be flooded with Kiwi lamb. New Zealand already has tariff-free access through its WTO quota but in 2020 used less than half that quota, meaning that the Kiwis could already export more sheepmeat to us tariff-free but, interestingly, choose not to. I shall give some further statistics to the noble Lord: New Zealand sheepmeat exports to the UK have fallen by nearly half over the past decade, and New Zealand sheepmeat is already committed to the rapidly growing Asia-Pacific markets. In 2020, around half of its sheepmeat exports went to China, a country mentioned by the noble Lord, while 55% of beef exports went to Asia and the Pacific. In a nutshell, this is a great opportunity for UK farmers.

The opportunities for UK businesses are also worth mentioning. As I mentioned earlier, UK exporters will no longer have to pay tariffs on any goods. This means that they can do business at lower costs and gain an advantage over international rivals in the New Zealand import market, a market which is expected to grow, as was mentioned earlier, by around 30% by 2030. In addition, red tape will be cut for businesses which export to New Zealand, including 6,200 UK SMEs, opening up opportunities for more small businesses to grow their customer base abroad with the necessary online support. It is important to mention data. The free flow of trusted data, which is essential for modern businesses, will be guaranteed between the UK and New Zealand, making it easier for UK businesses trading digitally to break into the New Zealand market.

The noble Lord, Lord Grantchester, raised some questions about the National Farmers’ Union, which I am aware has expressed some concerns. I hope that I can reassure him and the NFU that we are carefully considering the individual combined effect of the agreements that we are negotiating, including enhanced export opportunities for UK agricultural producers. This agreement in principle with New Zealand is without prejudice to other trade deals, and we will consider each negotiation within the context of our trading relationship with that partner. There is no one-size-fits-all approach, which goes a little way to answering the question from the noble Lord, Lord Purvis, in relation to the EU. We are working closely across government to ensure that our trade policy does not undermine UK farmers and producers of agricultural goods and that any deal includes protections for the agricultural sector.

The noble Lord, Lord Grantchester, raised a point about standards. Perhaps I can give some reassurance by saying that, like the UK, New Zealand is a global leader in animal welfare, and both countries share a commitment to further improving and advancing our already high animal welfare standards. For example, the UK and New Zealand have both banned the use of sow stalls for pork production, and battery cages will be banned in New Zealand from 2022, having been banned in the UK from 2012.

The noble Lords, Lord Grantchester and Lord Purvis, raised a point about the TAC. We know that it has just been set up, but I give the reassurance that we believe that it has been appointed and set up at the right time. Free trade agreement negotiations continue up until the moment of signature, and the commission will have ample time to do its job and report on the final deal. However, the TAC’s role is not, and never has been, to advise on live negotiations; it is a bit a further down the line.

The noble Lord, Lord Purvis, asked about rules of origin—I think he mentioned geographical focus. The rules of origin should ensure that only products made in the UK and New Zealand benefit under the agreement in principle, create opportunities for UK and New Zealand businesses to source better and cheaper inputs than currently and provide modern and predictable rules, making it as simple as possible for businesses, particularly SMEs, to trade with New Zealand using the preferential tariffs.

I think that there were other questions raised. I hope that I have covered some of them, but I appreciate the points raised. I shall look at Hansard and make sure that I write if I have to.