Brexit uncertainty bites Kiwi exporters
If there is a hard Brexit, will the UK be turning away our lamb and wine? talks to industries planning for the great unknown.
British Prime Minister Theresa May met a resounding defeat in the UK Parliament this week on her Brexit deal, which lost by a staggering 230 votes – the largest defeat ever of a piece of legislation for a government of that country. She then faced a vote of noconfidence from the leader of the opposition, Jeremy Corbyn, which she survived.
The outcome of the Brexit vote was largely expected, but now sharply brings into focus the possibility of a hard Brexit on March 29, giving New Zealand businesses that rely on trade with the UK more reason to worry.
The UK is New Zealand’s sixth largest export market, and a hard Brexit would have significant impacts. Potential border disruption, and reversion to World Trade Organisation ‘‘most favoured nation’’ terms, would likely cause a headache in the short term as Kiwi exporters and British customs officials get to grips with the new reality.
Agricultural and wine exports comprise the lion’s share of New Zealand product sold in the UK.
Although the New Zealand International Business Forum (NZIBF), which represents New Zealand’s export, manufacturing and service sectors, sees potential for a bilateral free-trade agreement in the event of a no-deal Brexit, there is still likely to be significant discomfort for Kiwi exporters.
‘‘This vote in the UK certainly raises the uncertainty stakes because it opens the possibility of a hard no-deal Brexit – the scenario everyone has been wanting to avoid,’’ NZIBF executive director Stephen Jacobi said.
‘‘The deal that was before the Parliament had its detractors, but it did give a two-year period to work out the detail.
‘‘If hard Brexit is to proceed then it’s going to change immediately and will be extremely difficult. Hardest hit will be Kiwi exporters – those who hold significant positions in the UK market. The meat industry will be gearing up for their high sales period over the Easter period.’’
Larger firms were likely to have contingency plans in place, Jacobi said, a sentiment that was echoed in a statement provided by New Zealand Winegrowers.
‘‘The simple answer is that we don’t know the outcome. The UK is New Zealand wine’s largest single market by volume, and we are planning for all contingencies by encouraging our members to talk with their UK distributors, to ensure they are as prepared as they can be for the unknown that is Brexit,’’ NZ Winegrowers chief executive Philip Gregan said.
Small to mediumsized businesses might not be so well prepared,
Jacobi said. Meat Industry Association chief executive Tim Ritchie echoed Jacobi, and said the uncertainty made it hard for meat exporters to plan ahead, especially for Easter, which was one of their key trading periods for exports to the UK.
‘‘March 29 is a critical time of year for us in terms of the EU and Britain and our chilled lamb trade,’’ Ritchie said.
‘‘There are two critical periods – the Easter and the Christmas markets. The processors and exporters will be planning their chilled shipments to meet the needs of the retailers they are servicing. March 29 could see disruption or congestion,’’ he said.
A hard Brexit could mean a lot of product the UK would normally take might not be accepted.
‘‘British sheep meat [producers] export around 65,000 tonnes to the EU every year,’’ Ritchie said.
‘‘And if suddenly they face high tariffs to get in, their product will stay at home and then we will have the political machinations that will flow out of that. UK farmers will say: ‘Redirect yourselves elsewhere so we can sell domestically.’
‘‘The great thing now is that we have access to so many new markets around the world. China has been a very important market in recent years. It’s not as if they won’t find a home for the product.’’
Ritchie said the UK was making contingency plans for storage at ports because the supermarkets are dependent on product coming from abroad, including high-quality New Zealand chilled leg meat.
Meat company Anzco, another large exporter of lamb with yearly sales of $1.45 billion, said the company was watching the current situation carefully.
‘‘We are working with customers to manage any potential risks, but at this stage . . . we are confident in our ability to continue to import product into the UK come April 1, leveraging our in-market team and experience,’’ Anzco’s general manager of sales and marketing, Rick Walker, said in a written statement.
‘‘The simple answer is that we don’t know the outcome. The UK is New Zealand wine’s largest single market by volume, and we are planning for all contingencies.’’ Philip Gregan, above left, of NZ Winegrowers
Contingency is on the Government’s mind too. Recently New Zealand Customs announced the appointment of a special Brexit counsellor, who will be stationed at the High Commission in London, tasked with working closely with officials ‘‘to help facilitate New Zealand trade with the United Kingdom during Brexit’’.
In any event, short of the UK remaining in the European Union, a post-brexit trade structure will need to be agreed.
The UK signalled in July last year that it would prioritise negotiating trade deals with New Zealand, Australia and the United States as quickly as possible after Brexit, as well as accession to the Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP).
And in November the Government called for submissions on a potential trade deal.
Trade and Export Growth Minister David Parker said in a press release that both nations have committed to launching negotiations once the UK is in a position to do so.
‘‘We want to reduce costs and barriers for New Zealand businesses operating with the UK. Our exports to the UK are already worth over $1.5 billion annually, and there is an opportunity to grow the links between our economies even further,’’ he said.
The NZIBF has also prepared a discussion paper on the issue, arguing that a bilateral trade deal between New Zealand and the UK could offer broad economic benefits, including ‘‘crossfertilisation of ideas, technology, people and capital’’, while creating opportunity to speak with a shared voice on issues such as sustainability and the environment.