What hard Brexit could mean for NZ-UK trade
Officials say quick push for FTA vital if new PM Johnson gets his wish
The rise and rise of Britain’s new prime minister Boris Johnson has added more uncertainty to the mix for New Zealand’s trade with Britain, making swift negotiation of a free trade agreement between the two countries all the more important, special agricultural trade envoy Mike Petersen said.
Johnson, the former mayor of London, was elevated to the top job this week after winning 66 per cent of the Conservative Party members’ votes to defeat Jeremy Hunt.
But with a wafer-thin majority in the House of Commons, Johnson still faces a challenge to see Brexit — Britain’s exit from the European Union trading bloc — through.
Johnson favours a “hard Brexit” that will completely cut the United Kingdom out of the EU and take it out of the single market.
New Zealand and Britain have committed to launching negotiations on a Free Trade Agreement as soon as Britain is in a position to do so after Brexit.
The United Kingdom is New Zealand’s fifth-largest trading partner, with two-way trade worth almost $6 billion.
Prime Minister Jacinda Ardern said she had congratulated Johnson via text message and is sure he will want to discuss the trade negotiations.
Ardern said New Zealand’s
relationship with Britain was important and would remain so, irrespective of the outcome of Brexit.
Petersen, whose role is to advocate for New Zealand’s agriculture trade interests from the perspective of a practising farmer, told the Herald that with Johnson as prime minister the chances of a “no-deal” Brexit had risen significantly.
“If a no-deal exit does happen, then that is quite problematic — not just for us but for the EU as well,” he said.
“It will be disruptive, there is no doubt about that,” he said.
An orderly transition would be better for New Zealand, Petersen said.
“On the plus side, if there is a nodeal Brexit then yes, it will be messy, but it will increase the urgency for us to negotiate our Free Trade Agreement with Britain.
“It will allow us to immediately start negotiating with Britain,” Petersen said.
For New Zealand’s sheepmeat trade, Brexit is a potential risk to an otherwise strong export sector, Rabobank animal proteins analyst Blake Holgate said.
“US demand for sheepmeat should remain firm off the back of a prolonged period of US economic expansion which has led to increased rates of red meat consumption and more disposable income to spend on expensive products like red meat,” Holgate said.
A weaker New Zealand currency was another factor anticipated to play into the hands of New Zealand sheepmeat producers.
“Brexit is a further downside risk as it’s still unclear how this will play out and affect demand for New Zealand lamb over the coming 12 months,” he said in a mid-year commodities outlook.
New Zealand’s wine export trade to Britain has been strong but there was risk of becoming caught in the crossfire of any trade war between Britain and the EU, NZ Winegrowers chief executive Philip Gregan said.
“The interruption of trade potentially will be between Britain and the EU,” he said.
“As a third party, the risk for us is that we get caught up in any difficulties that could occur.”
Much depends on what happens in the lead-up to the October 31 Brexit deadline, Gregan said.
Britain remains an important export destination for sheepmeat, although its significance has diminished in recent years.
In the 2017/18 production year, New Zealand exported over $2b in sheep and beef products to the EU and Britain.
In sheepmeat alone, exports to Britain came to $472 million, or 12 per cent of the $3.8b in global sheepmeat exports.
For wine, Britain is New Zealand’s second biggest customer after the United States, taking $450m of product a year.
A no-deal exit . . . will be disruptive, there is no doubt about that. Mike Petersen, special agricultural trade envoy