Primary industries stakeholders are welcoming the new Free Trade Agreement (FTA) with the United Kingdom announced today.
But shibboleths are meant to be broken – as we have proven with our dear friend Australia over 40 years. You can have remarkably close economic relations with mates, and it can work. You have to have a unifying idea (in our cases, closer economic integration and freedom of movement) and the strength of relationship to say it like it is.
So, I believe it’s time to address the elephant in the trading room. The eye-watering gap between the UK’s rhetoric on free trade and its current approach to NZ.
One year ago, PM Boris Johnson outlined his Government’s vision for free trade in a speech to the Old Royal Naval College in Greenwich.
He stated the UK is “re-emerging after decades of hibernation as a campaigner for global free trade”, that the “global community are in danger of forgetting the key insight of those great Scottish thinkers, the invisible hand of Adam Smith, and of course David Ricardo’s more subtle but indispensable principle of comparative advantage, which teaches that if countries learn to specialise and exchange then overall wealth will increase, and productivity will increase”.
Johnson warned that “free trade is being choked” because of “politicians who are failing to lead”, that he sees the UK as “the supercharged champion of the right of the populations of the earth to buy and sell freely among each other”.
He spoke with urgency about the need to engage with old friends and partners listing New Zealand “on whom we deliberately turned our backs in the early 1970s” and suggesting that we “don’t just listen to what I say or what we say, look at what we do”.
Johnson stated the UK has now “embarked on a project to be open, outward-looking, generous, welcoming, engaged with the world championing global free trade – now when global free trade needs a global champion, I believe we can make a huge success of this venture, for Britain, for our European friends, and for the world.”
Well that certainly is a unifying idea and one NZ has quickly signed-up for because it talks to our nation’s approach to trade across successive governments. We have just started the third round of negotiations with the UK for a wider ranging and ambitious FTA between our two nations.
However, by all accounts, it’s tough going. One of the key negotiating points, as it is with all our export markets, is for our dairy, sheep and beef exporters to avoid paying huge tariffs to access British consumers.
Since 1973, we have had significant meat and dairy low tariff quotas for both the UK and the EU. Despite enormous protests, these have been split with the UK leaving Brexit thereby reducing the quota potential significantly.
Then there is the seismic gap between how the UK treats their farmers and how we support our own. According to the Economist, UK farmers get paid US$3.3 billion a year, simply to farm and can apply for another $750 million for worthy things like planting hedgerows. Additional schedules of payment for green activities are being worked on for 2024 introduction.
NZ farmers get minimal government support in underpinning research, drought relief and occasional water storage capital injections. But despite this, we can land product on the other side of the world with lower environmental impacts than our Northern Hemisphere competitors.
Our farmers produce the lowest carbon impacting beef and dairy in the world – besting anything the UK can achieve per kilo of product produced.
I have no visibility on the UK market access offer. But the initial smoke signals are not hopeful and do little to reduce the sense that Boris Johnson’s ambition for free trade is more fog like than the piercing light of freedom he purports it to be.
But there is still time to right the ship. Indeed, I had written off UK INEOS a few weeks ago and now look at them! And as Boris himself noted “this is the moment for us to think of our past and go up a gear again to recapture the spirit of those seafaring ancestors whose exploits brought not just riches but something even more important than that – and that was a global perspective. That is our ambition. There lies the port, the vessel puffs her sail…the wind sits in the mast”.
Indeed, Prime Minister, but it’s time to lift the anchor.
Todd Muller is the National Party's spokesman on trade.