This is a House of Commons Committee Special Report.
UK trade negotiations: Agreement with New Zealand
Date Published: 24 January 2023
The International Trade Committee published its Third Report of Session 2022–23, UK trade negotiations: Agreement with New Zealand (HC 78), on 24 October 2022. The response from the Government, and an accompanying letter from Rt Hon Kemi Badenoch MP, were received on 5 January 2023 and are appended below.
Thank you for your Committee’s report entitled, ‘UK Trade Negotiations: Agreement with New Zealand’. I am writing to offer a response to the recommendations raised by your Committee.
The UK-New Zealand Free Trade Agreement (FTA) is estimated to increase trade with New Zealand by almost 60%, boost the UK economy by £800 million and increase UK household wages by £200 million in the long run. Together with the deal with Australia, it paves the way for UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. I am pleased that the Committee supports the ratification of this Agreement, which will deliver multiple benefits across our country – for our people, businesses, and economy.
I have attached an annex to this letter that addresses the substantial points made in the Committee’s report. I would also like to flag an inaccuracy in the report. In Paragraph 186, the Committee references that the UK ‘acknowledges the value of Māori IP and traditional knowledge, and will work with New Zealand to identify appropriate ways to advance recognition and protection of the Haka Ka Mate.’ I would like to emphasise that the reference to the Haka Ka Mate in this context falls under the scope of Traditional Knowledge and Traditional Cultural Expressions and is in the Māori and Economic Trade Chapter which includes a carve out to intellectual property (IP). The carve out ensures that IP is not brought into the context of the Haka Ka Mate obligation. This is explained further in the attached annex and my officials would be happy to discuss this distinction in more detail.
I am copying this letter to the Chair of the International Agreements Committee.
Paragraph 11: We acknowledge the hard work undertaken by the Government to negotiate this free trade agreement. However, we have heard concerns about some of the provisions in the Agreement, and the impact that these might have. While, on balance, we believe that ratification of the Agreement should not be delayed, we expect that the House will wish to explore these issues further during the CRaG period.
Paragraph 12: We are resolved that each new trade agreement should be debated on a substantive motion in the House of Commons during the period of 21 sitting days provided for under Section 20 of the Constitutional Reform and Governance Act 2010 (CRaG) so that Members of Parliament have the opportunity to fully discuss the agreement and clearly express their support or otherwise. We recommend that the House should be given the opportunity to debate the UK-New Zealand Agreement during the CRaG period, and that this must be on a substantive motion so that Members can scrutinise the Agreement thoroughly and demonstrate their support, or otherwise, for it.
Paragraph 32: We acknowledge that the process was slightly smoother for the scrutiny of this Agreement than previously and welcome the former Secretary of State’s additional commitments in relation to timings. While the process was not without some issues, we welcome the direction of travel and look forward to building on this with the new Secretary of State.
We welcome the Committee’s advice that ratification should proceed without delay – the UK-New Zealand FTA is a world-class agreement, and we want businesses to be able to access the benefits as soon as possible.
At the same time, we are committed to ensuring ample time for scrutiny of the FTA by Parliament and from the outset, the Government has gone above and beyond the statutory requirements in this area.
The Government values parliamentary debate of FTAs and has committed to ensure a debate can take place during CRaG for any FTA if one is requested and subject to parliamentary time being available. We were pleased to be able to hold a general debate in the House of Commons on both the UK-New Zealand FTA and the UK-Australia FTA during the UK-New Zealand CRaG period.
A general debate is the most appropriate mechanism, ensuring that Parliament can have its say whilst respecting our constitutional framework which makes clear that treaty-making is a function of the Government, exercised under the Royal Prerogative.
The current practice is flexible enough to ensure that Government can continue the important business of doing deals in the national interest whilst providing a mechanism for Parliament to oppose if the strength of feeling is there - but an automatic binding vote would not be appropriate.
Where legislation, such as the Trade (Australia and New Zealand) Bill, is required in specific areas to bring an FTA into force Parliament continues to have the opportunity to consider it in the usual way.
We are continuously reviewing our working practices and lessons learned. We will continue to work in partnership with the ITSC and IAC to this end and ensure they can conduct their vital scrutiny work.
Paragraph 25: Despite the former Secretary of State’s comments about the Government’s strategic approach to trade, and the Government’s response to our previous recommendation on this issue, we remain concerned about the absence of a single, clear trade strategy. Without a trade strategy there is no marker against which we, stakeholders or the public can assess how far trade agreements, individually and collectively, help to deliver the UK’s strategic requirements. We are also concerned that the Government’s approach to negotiating new FTAs is reactive and hasty, and that it is not joined-up across each department.
Paragraph 26: We ask the Government to reconsider its approach and publish a trade strategy which clearly sets out its vision for trade and explains how the Government will achieve it. The trade strategy should also explain the Government’s approach to selecting new FTA partners and how it envisions that future trade agreements will benefit different sectors of the economy.
The Government has a trade strategy and is delivering it to drive prosperity, alongside taking action to support wider objectives through trade, such as the environment and labour standards.
We already openly communicate our approach to trade, and so we do not plan to publish any further material. The Government has been clear that our focus is building a fair and open global trading environment that supports jobs and higher wages and raises living standards.
Our policy objectives are published in the Department for International Trade (DIT)’s Outcome Delivery Plan (ODP). They are to secure world-class free trade agreements, to reduce market access barriers and to champion the rules-based international trading system, ensuring it is fit for a modern, global economy. We use preferential agreements and bilateral trade relationships to promote liberalisation, driving prosperity through opening markets and increasing opportunities for UK businesses.
Multiple factors are considered when weighing whether a trade agreement will benefit UK businesses, consumers, and the economy. These include economic value, negotiability, readiness of counterparts to engage, and the wider state of the bilateral relationship and our foreign policy objectives. The Government publishes strategic cases for each FTA setting out how the trade agreement fits within our wider strategy approach and will continue to do so.
There is a clear and effective process for reaching a collective cross Whitehall approach to trade agreements and the Government uses the full breadth of expertise and experience across the different departments to support decision making and deliver the UK’s trade priorities.
The Integrated Review, which sets out the Government’s foreign policy approach and the strategic context in which we work, informs our trade policy. We will refresh this shortly.
Paragraph 46: We are disappointed that Government has told us that it is not able to include more qualitative information—either in its modelling or as additional evidence—in its Impact Assessments. We ask the Government to reconsider its position on qualitative evidence and how it can better incorporate qualitative information into its Impact Assessments so that it, Parliament and people across the UK better understand how each Agreement will affect them.
As we have set out previously, we are constantly reviewing and improving our methodologies to ensure our impact assessments meet the Government’s objectives of informing policy and the public. We will continue to review the feasibility of including more qualitative evidence, subject to timing and resource constraints.
Paragraph 54: The Impact Assessment does not sufficiently assess the impacts of the Agreement across the UK’s nations and regions. The Government must set out the steps it is taking to ensure that modelling in future Impact Assessments is able to distinguish, with greater specificity, between the impacts on each nation within the UK.
Paragraph 55: We acknowledge the difficulties of modelling the impacts of the Northern Ireland Protocol due to the dynamic nature of the issue. However, it is shocking that the Government has signed trade agreements without a thorough understanding of the impact they will have on Northern Ireland because of the Protocol. We welcome the willingness to look again at this issue that the former Secretary of State showed, and note that the Government has said it will develop a workplan in order to do so. In light of this, we ask the Government to tell us what the workplan involves and whether it will be in place in time to inform the Impact Assessments for the trade agreements the Government is currently negotiating.
The Government works to ensure that the whole of the UK benefits from its new FTAs. All nations and regions of the UK are expected to grow as a result of the deal, with the West Midlands, the North East, North West, and South East set to see the biggest proportional gains. All impact assessments DIT publishes for the UK’s new FTAs include a regional and national breakdown of the Gross Value Added (GVA) impacts.
DIT regularly examines its approach to analysis and considers opportunities to refine it. Following the Trade Modelling Review’s recommendations set out earlier this year, DIT is developing a workplan – as the Committee’s report notes – to better understand how trade impacts differ across parts of the UK, using alternative approaches. DIT is preparing an official response to the Trade Modelling Review and will publish this before the end of this calendar year.
As part of this, we are considering how the wider modelling developments can be extended to try and incorporate intra-regional supply-chain-linkages that will support improved sub- national modelling. Further data development would also be required to incorporate inter- regional trade flows for the UK. This requires significant model and data development to estimate sub-national social accounting matrices for all UK regions and intra-UK trade, utilising various methods of estimation and will therefore take some time. At present, data on intra-UK trade and investment flows is sparse with existing estimates being highly inferred.
Such improvements to sub-national modelling, which are also necessary to effectively model the impact of the Northern Ireland Protocol, will take time to develop. Until we have such modelling operational, DIT will continue to be transparent about the approach used to assess the impact on nations and regions, using publicly available data and the core CGE model results.
The ITSC is right to note the challenges of modelling around the Northern Ireland Protocol because of the dynamic nature of the issues. The Government’s position remains that the Protocol is causing real problems in Northern Ireland and these require changes to the Protocol. The ultimate impact of the Protocol will depend on any potential negotiated outcome, the progression of the Northern Ireland Protocol Bill and the experiences of individual stakeholders.
Paragraph 56: The Government must clarify how the UK-New Zealand Agreement, the Northern Ireland Protocol and the EU-New Zealand Agreement will interact so that people in Northern Ireland can benefit from trade with New Zealand. The Government should also explain what steps it is taking to make it clear to businesses in Northern Ireland how they can make use of this Agreement.
The Government is committed to ensuring Northern Ireland and its businesses benefit from FTAs. When we negotiate FTAs with a new partner, we make clear the Protocol co-exists with our FTAs.
Once in force, businesses in Northern Ireland will be able to export their goods under the UK-New Zealand FTA in the same way as businesses from North Yorkshire, benefiting from 100% tariff liberalisation on goods exported to New Zealand. For all the benefits of digital and services and intellectual property measures in our FTAs the Protocol is largely irrelevant, because the Protocol principally concerns the movement of goods into Northern Ireland.
The Protocol sets out that goods being imported into Northern Ireland that are deemed to be “at risk” of moving into the EU should pay the EU tariff, as exists under the EU-New Zealand FTA once in force, and the rest can pay the UK tariff. Businesses importing directly into Northern Ireland from New Zealand can also benefit from agreed UK-New Zealand FTA tariffs where that tariff is up to 3% lower than the EU tariff. The Government has also introduced the Customs Duty Waiver Scheme, which allows traders to claim tariff waivers of up to €200,000 every three years for goods deemed to be “at risk” of onward movement in the EU. The Government has also committed to establishing a reimbursement scheme for goods that attract a tariff, but which can subsequently be shown to have remained in the UK, on which further details will be brought forward in due course. We want more goods coming into Northern Ireland paying UK tariffs and complying with UK regulations, for the benefit of businesses and consumers. This is being pursued as part of this Government’s work to change the Protocol, whether through a negotiated solution or, if necessary, through the Northern Ireland Protocol Bill.
The Government is working to ensure business across the UK, including in Northern Ireland, feel confident in accessing the benefits provided for under the FTA. For example, Northern Ireland’s machinery manufacturers exported £11.4m of goods to New Zealand in 2021, and will benefit from tariffs being cut to 0%.
Additional support includes:
Paragraph 60: The Government’s Impact Assessments for the Australia and New Zealand agreements provide a snapshot of what the broad economic impacts of an FTA might be, but not enough detail about the consequences for sub-sectors such as beef and sheep farmers or dairy producers. The Government must revise its modelling to ensure that it is able to provide more granularity on how trade agreements will affect different sectors of the UK’s economy.
We aim to include as much detail as possible in our Impact Assessments and will incorporate further sector disaggregation into our presentation of the analysis of future agreements where supported by the data and appropriate to the context of any given agreement. For the specific sub sectors the Committee flags, additional analysis was provided in ‘box 2’ of the impact assessment, which estimates relatively small impacts as a result of the FTA, including no significant impact to the sheepmeat or butter sectors and a 1% reduction in beef gross output.
Paragraph 64: We remain of the opinion that analyses of the cumulative impacts of FTAs is essential and should be included in each new FTA’s Impact Assessment. Without this information, it is impossible to understand how the Agreement’s provisions will add up and affect different sectors of the economy. We reiterate our view that the Government must undertake or commission an analysis of the cumulative impacts of the UK’s new trade agreements to date, across all sectors of the economy, to be laid before the House as part of the Impact Assessment.
The analysis presented in an impact assessment sets out the marginal impact on the UK of concluding a free trade agreement with a country or bloc concerned – the Government views this as the most effective way to estimate the future impact of FTAs. As part of this, DIT carefully considers and presents the individual effects of the agreement that we have negotiated to help inform Parliament and the public of its effects. This approach is in line with international best practice – in fact, it is not common for other countries that produce comparable FTA impact assessments to include the estimation of the ex-ante cumulative impacts of FTAs.
As set out above, DIT continually considers how to improve analysis. This continuous improvement means that that the estimated impacts from more recent analysis will not be directly comparable with previous published analyses.
Paragraph 69: We welcome the Government’s work to develop its approach to assessing the environmental impacts of new trade agreements. The Government should update us within the next three months about its progress in this area.
The UK always seeks to support our climate and environment objectives through our trade and international policy – and our FTA with New Zealand reflects this. We welcome the Committee’s interest in our approach to assessing the environmental impacts of our FTAs. We have developed our approach by procuring an extension to the core economic CGE model, which captures environmental impacts such as emissions. This builds on our previous methodology for estimating the emissions impacts of new trade agreements, for example as it includes emissions resulting from consumption changes. We are pleased to confirm that has been included for the first time in the Gulf Cooperation Council scoping assessment.1
Paragraph 91: We welcome the potential for greater choice and lower costs for consumers that this Agreement offers. However, the Government appears to have made significant concessions in terms of tariff liberalisation on agri-food products which, as it acknowledges in its Impact Assessment, are likely to create an economic contraction for some sectors. We recognise agri-food producers’ concerns about opening the UK market to cheaper imports without either more export opportunities or sufficient safeguards—particularly in light of the slower approach that the EU has negotiated with New Zealand. The Government must explain why it has chosen to liberalise tariffs on agri-food so quickly, as the Agreement appears to offer few new opportunities for UK producers.
We welcome the Committee’s acknowledgement of the benefits the FTA will provide to consumers. We have been clear that, while we recognise farmers’ concerns, we are confident that the UK market will not experience an influx of imports from New Zealand in the near future. Despite already having a significant volume of tariff-free access to the UK for sheepmeat, New Zealand used only a third of that quota in 2021. Take-up of its existing access has also fallen consistently over the last decade. Demand for beef and lamb is increasing in the Asia-Pacific and this trend is likely to continue, and we expect that New Zealand’s agricultural exports will likewise continue to be focused on these markets. In 2021, roughly two thirds (in kg terms) of New Zealand’s beef and sheepmeat exports were destined for markets in Asia and the Pacific. For beef, the UK already imports far more from the EU than it does New Zealand.
We also recognise the trend of consumers purchasing ‘Buy British’ to support British farmers, with 81% of retail sales of beef in the UK sold under the British logo. As set out above, our modelling estimates relatively small impacts to agriculture as a result of the FTA, including no impact to the sheepmeat sector and a 1% impact to beef gross output.
While we do not expect the FTA to result in surges of agri-food imports in, we have negotiated multiple protections for the unlikely event that they do occur. This includes Tariff Rate Quotas (TRQs) and product specific safeguards on a range of the most sensitive agricultural products such as beef, sheep, cheese, butter and apples. In the case of beef and sheepmeat, these measures will be in place for a total of 15 years. We have also agreed a general bilateral safeguard mechanism for all products.
For beef, this mechanism will be available for 15 years and for sheepmeat, it will be in place for 20 years. Each of these represents a considerable length of time for farmers to adjust to any changes in our trading relationship with New Zealand.
We are pleased that we were able to negotiate an ambitious agreement with New Zealand, that protects our agricultural sector. Our independent trade policy means that we can negotiate FTAs ahead of the EU as in this case and take decisions that are right for the UK.
Paragraph 92: We heard from agri-food producers during our inquiry but did not receive sufficient evidence from consumers about the potential benefits of this Agreement in terms of choice and cost-savings. In its response to this report, the Government must explain how it has balanced considerations around choice and costs for consumers against protections for UK agri-food producers.
As already outlined, we do not expect this FTA to result in UK producers competing with significantly larger quantities of produce such as beef and sheepmeat from New Zealand. Therefore, the impact on consumer prices in the UK for these products is likely to be relatively small.
Nonetheless, the FTA will support the UK’s ability to access a range of products that cannot be grown in the UK or cannot be grown year-round. It will also help to improve our access to more diverse sources of supply, a key contributor to long-term food security for consumers.
Paragraph 93: The Agreement also appears to offer few new opportunities to counterbalance the challenges that it creates for agri-food producers. Without a published trade strategy, it is unclear how the Government plans to create such opportunities in the future.
Paragraph 94: The Government must set out in the trade strategy we have called for it to produce what opportunities future trade agreements, including those it is currently negotiating, offer UK agri-food producers.
As well as immediately removing all tariffs on UK exports on entry into force, allowing UK exporters to sell their goods including agri-food into New Zealand tariff free, the agreement also prioritises helping businesses sell their goods to New Zealand for the first time. The deal will ease customs processes and could help resolve the barriers frequently cited by food and drink exporters, such as complex labelling and sanitary and phytosanitary requirements. Import demand for New Zealand is expected to grow by 41% in real terms between 2019 and 2035.2
When considering future export opportunities, it is important not to view this FTA in isolation. The FTA is a gateway to joining CPTPP and will provide a stepping-stone to more opportunities for British exports to those markets. Around half of the world’s 2.3 billion middle class consumers are expected to be in the Indo-Pacific region by 2030 and this is where future opportunities lie for our farmers.
The Government coordinates its activity to ensure we maximise the use of all our levers and that UK businesses in the UK agri-food sector can take full advantage of trade opportunities.
We work with business to resolve market access barriers, ensure trade agreements reflect UK industry interests, and support businesses to secure export opportunities. Over the last two years, we have resolved around 400 market access barriers across more than 70 countries.
To target our valuable agri-food sector specifically, we are establishing a new Food and Drink Export Council which will bring together the UK Government, the Devolved Administrations and industry to harness our collective capability and build ambitious export plans for Australia and the wider world.
We offer a wide range of support for exporters in the agriculture, food and drink sector who are looking to increase their exports to Australia, including the Export Support Service, the digital GREAT.gov.uk platform, the Export Academy, UK Export Finance, the network of International Trade Advisers (ITAs) across England and new DIT teams in Scotland, Wales and Northern Ireland.
The response to paragraph 292 sets out how the Government is supporting, and communicating future opportunities to, the UK agri-food sector.
Paragraph 99: We recognise that New Zealand agri-food imports, which may be cheaper than UK produce, may benefit consumers, particularly during the cost of living crisis, and that the relatively low carbon intensity of New Zealand’s production methods may be beneficial to the environment. However, we are concerned that the Government has not adequately considered the longer-term food security risks that the Agreement may present.
We appreciate the Committee’s recognition of the multiple benefits of New Zealand agri- food imports to the economy and the environment. It is also the case that the UK’s high level of food security is contingent on a balance between strong domestic production and diverse and stable supply from overseas. It is inherently difficult to predict how disruptions to our food supply may manifest in the long-term. However, having access to a diverse range of international sources makes the food chain more resilient - and our FTA with New Zealand supports this. Diverse supply means that we are more easily able to meet demand in the case of disruption to production or output of one source. By progressively liberalising trade, our FTA with New Zealand can help contribute to overall resilience. Moreover, seasonality of agricultural produce is complex and product specific, and New Zealand plays an important role in meeting UK demand for out-of-season products throughout the year.
In the domestic context, a wholesale outsourcing of production to other countries would undermine UK food security. However, as already outlined above, there is no indication that the liberalisation we have agreed will lead to a long-term overreliance on overseas imports or materially impact food security.
Paragraph 100: The Government should publish an analysis of the risks to the UK’s food security arising from the Agreement and how these can be mitigated. It should also include an analysis of any additional risks to UK food security, explaining how these are balanced against other considerations, such as cost and the environment, in future FTA Impact Assessments.
The published New Zealand Impact Assessment includes a detailed assessment of potential impacts on UK agri-food sectors. Where appropriate and data is available, agri-food impacts will also feature in future monitoring reports and evaluation of the agreement.
Paragraph 106: The Government must keep this Committee and stakeholders updated about its progress in agreeing new GIs with New Zealand.
The Government will keep both the Committee and stakeholders updated if any changes are made in relation to GIs. New Zealand do not currently have a Geographical Indications (GI) scheme for agri-food. However, the UK negotiated an agreement that should New Zealand introduce a scheme for the protection of GIs (as part of an international agreement) we will be able to amend our agreement to include references to their GI scheme. We are currently working towards engaging New Zealand on any developments in their approach as we implement this FTA.
Paragraph 117: We welcome the inclusion of provisions on cooperation on antimicrobial resistance in this FTA, although we note they are non-binding. The Government should explain why some provisions in this Agreement are subject to dispute settlement and others are not, and its reasons for negotiating this. The Government should also ensure that provisions on antimicrobial resistance are included in future FTAs, with binding commitments.
Not being subject to dispute settlement does not mean a provision is non- binding. The provisions on antimicrobial resistance use clear and precise language and we have no concerns with New Zealand compliance with the ambitious commitments we have negotiated.
Wider than this, the UK prohibits the use of antibiotics for growth promotion in domestic production and is determined to sustain its efforts in combatting antimicrobial resistance (AMR) working in line with global ambition and in collaboration with other nations, partners, and the international community.
The UK Government has negotiated a bespoke trade deal with New Zealand which will further push our commitments to combat AMR and advance the prudent and responsible use of antimicrobial agents in both animal production and health, and in crop production. The UK and New Zealand have the ability to establish a technical working group on AMR as a forum to cooperate on combatting AMR and make recommendations on key issues relating to AMR.
The Government will continue to seek to include commitments on tackling AMR, facilitating bilateral cooperation, and raise awareness on combatting AMR in the published negotiating objectives of all our future independent trade agreements, but recognises that not all countries share a likeminded approach to the inclusion of AMR obligations within FTAs.
Paragraph 125: We welcome the inclusion of an animal welfare chapter in this Agreement and the commitment towards high animal welfare standards that this demonstrates. The Government should ensure that similar provisions are included in all FTAs it negotiates in the future.
The Government is committed to the highest standards of animal welfare. That is why we made clear in our manifesto that in all our trade negotiations, we will not compromise on our high environmental protection, animal welfare and food standards.
Our deals, such as that with New Zealand, reflect this. We are proud to be global leaders on animal welfare and the UK will continue to use the full range of tools at its disposal to uphold our commitment to high animal welfare standards, as well as to protecting our farmers from unfair competition.
Paragraph 130: We heard that the delineation between goods and services in FTAs can be unhelpful because of the nature of manufactured goods exports today. In order to help UK manufactured goods exporters, the Government must explain how goods sold with services contracts are governed under the Agreement. It should also ensure that the cross-over between goods and services is reflected in future trade agreements so that UK manufacturers have greater certainty about the benefits that future FTAs offer.
The structure of the UK-New Zealand FTA reflects global best practice and is consistent with modern, comprehensive FTAs being agreed the world over. However, the architecture of the treaty text is the start – not the end – of the process and we are committed to working with businesses- including manufactured goods exporters – to ensure they feel confident in accessing the full range of benefits provided for by our FTAs.
Our FTA with New Zealand was negotiated with the UK’s modern businesses, who often trade in both goods and services, in mind – meaning many businesses will benefit from provisions across a full range of chapters, and we are committed to working with stakeholders to realise these benefits. The FTA contains world-class outcomes across both goods and service – removing 100% of tariffs on UK goods exports and guaranteeing that British service suppliers can compete in New Zealand on an equal footing. We have included dedicated SMEs chapters in order to house all of the relevant information for businesses in one place.
Paragraph 140: The Wine and Spirits Annex in the Technical Barriers to Trade Chapter is welcomed by stakeholders and is an improvement on the FTA with Australia. However, the potential rise in domestic duty on higher ABV alcoholic beverages could counter much of the reduction in cost for consumers. We are concerned that this suggests that the Government does not have a joined-up approach to trade across departments and has not effectively considered how it will balance trade with domestic policy. The Government must explain how DIT works with other departments before and during negotiations to ensure that each agreement reflects the Government’s wider policy objectives.
The Government’s guiding principle is to ensure a collaborative approach between departments to deliver successful outcomes from trade negotiations, to ensure coherence between domestic policy and international agreements. Before negotiations, departments and officials work collaboratively on the formulation of mandates, which capture cross- Government priorities. Departments continue to work hand-in-hand during negotiations, and final FTAs are then agreed across Government.
In this specific case, we are confident that our domestic policy changes and what we agreed in the FTA strike a good balance and mean that we are treating domestic and international producers equally, while reducing the barriers faced by New Zealand producers importing into UK through the FTA. Taxing all alcohol by strength reduces inconsistencies between categories whilst also fulfilling a common-sense principle that stronger alcohol should be taxed more to fulfil public health objectives. The changes will also help the alcohol duty system support innovation and modern drinking trends, particularly supporting lower alcohol products from both the UK and partner countries.
Paragraph 147: The Government appears to have negotiated rules of origin that are particularly beneficial for the UK’s car industry, although the UK sends relatively few cars to New Zealand. The lack of detailed information given about the negotiating objectives for the Agreement means that it is difficult to understand the weight that has been given to different industries during the negotiations. The Government must consider what further information it is able to provide to Parliament, to stakeholders and the public about each FTA negotiation in terms of its approach to the negotiations, and its offensive and defensive interests.
FTAs aim to open new markets and opportunities to UK businesses, not just support existing trade flows. Our FTA with New Zealand will enhance our trading relationship with New Zealand for years to come, and – paired with our export strategy – has the potential to increase trade and make it more competitive for businesses to trade in new areas, including the automobile industry.
Rules of origin under the FTA benefit a wide variety of UK sectors, from auto to apparel and biscuit industries. We have reduced burdens for UK business with the facilitative and flexible rules we have agreed. The FTA will ensure barriers and red tape UK exporters face when shipping products to New Zealand are minimised. The FTA ensures the rules are clear and facilitative, minimising costs and ensuring straightforward paperwork, whilst still protecting the UK from unfair practices.
Parliament and the public have clear opportunities to input into the UK’s trade policy, which we take forward on behalf of the UK. The public consultations for negotiations with Australia, New Zealand and accession to CPTPP were some of the largest ever undertaken by Government, attracting over 300,000 responses collectively. The Government publishes negotiating objectives prior to the start of talks, and these take into account the input from businesses.
Paragraph 161: We are concerned that the provisions on temporary mobility of people are too restrictive for small businesses. The Government must specify what steps it will take to listen to stakeholders effectively in the future, and how it will ensure that their needs are better reflected in future trade agreements.
We do not agree with the Committee’s assertion that the provisions on temporary mobility of people are too restrictive for small businesses. We have secured unprecedented commitments from New Zealand on Contractual Service Suppliers which allow UK businesses to compete for contracts to supply services in New Zealand.
These commitments are especially beneficial for SMEs, who may not have the resource to establish in New Zealand, but will be able to provide services in a number of different sectors in country. New Zealand will change its immigration rules to implement its commitment on Contractual Service Suppliers.
The UK has also secured ambitious commitments for business visitors. These commitments allow business visitors to travel between the UK and New Zealand and conduct activities such as attend meetings, negotiate agreements for the sale of goods or services, and undertake commercial transactions. Furthermore, the UK and New Zealand agreed commitments on transparency which ensures clearer and more accessible visa application processes for our business stakeholders. We expect that this will be particularly helpful for SMEs, who may have less resources to expend on managing such processes. It is important to note that the provisions detailed are all offered within the scope of the overall need for the UK to keep control of its borders.
Paragraph 165: Stakeholders have told us that the provisions on paperless trade and interoperability are welcomed by businesses, providing certainty and reducing costs. The Government should ensure that this provision is replicated in future FTAs.
We welcome the Committee’s recognition of our digital trade provisions. As set out in our Digital Trade Objectives, the Government places a high importance on securing commitments on paperless trading and the interoperability of digital trading systems. Such commitments are crucial to unlock the potential of digital technologies to make trade cheaper, easier, faster and more secure. This will continue to form part of our approach in future FTA negotiations.
Paragraph 177: While we recognise that each FTA negotiation is unique, we are concerned that the differences in provisions between each Agreement—such as the inclusion of source code provisions in the Agreement with Australia but not New Zealand—could create confusion and uncertainty for businesses. The Government must provide clear messaging for businesses and consumers about what the provisions in each FTA mean, but also how the different FTAs interact with each other.
As the Committee recognises, each FTA is unique as a consequence of being a negotiated outcome between two Parties- and bespoke to the markets in question. To explain the benefits of each deal and give clarity to businesses on how the agreement may impact them we provide chapter summaries and policy explainers (https://www.gov.uk/government/collections/the-uks-trade-agreements).
As the agreement we have secured with New Zealand affects the bilateral trade relationship between the UK and New Zealand, it does not interact with the UK-Australia FTA and vice versa. The Government makes information available to support exporters in particular markets and does this by having dedicated pages in relation to that country, regardless of if there is a Free Trade Agreement or not. https://www.great.gov.uk/markets/new-zealand/
Paragraph 178: The Government told us that the UK will automatically benefit from the source code provisions that have been negotiated between the EU and New Zealand, even though they were not included in the UK-New Zealand Agreement. The Government must explain the mechanism through which the UK would benefit from source code provisions in Agreements made between third parties.
Where New Zealand have agreed source code commitments with other countries, such as the EU, New Zealand would not be able to bring in measures which breached those obligations. New Zealand and the UK have a good diplomatic relationship and that, together with real world practicalities, make it very difficult and just as unlikely that New Zealand would or could bring in measures that only discriminated against UK businesses without breaching their obligations with other partners.
Paragraph 186: In side letters, the UK acknowledges the value of Māori IP and traditional knowledge, and will work with New Zealand to identify appropriate ways to advance recognition and protection of the Haka Ka Mate.
The reference to ‘jointly endeavour to identify appropriate means to advance recognition and protection of Haka Ka Mate’ is included within Chapter 26: Māori Trade and Economic Cooperation, not within Chapter 17: Intellectual Property. The UK ensured that this reference would not bring IP into the context of these discussions due to the carve out agreed in Article 26, paragraph 10. The corresponding side letter was agreed to demonstrate NZ’s considerations while the UK solely acknowledged Ngāti Toa Rangatira’s guardianship of the Haka Ka Mate.
Paragraph 198: We again ask the Government to publish its assessment of each procuring entity under the Agreement to help UK suppliers assess the procurement opportunities presented. It must also commit to publishing equivalent details alongside all future trade agreements.
We are committed to working directly with UK businesses on the procurement opportunities made possible by the UK-New Zealand FTA. A designated team in DIT, complemented by staff in New Zealand, will deliver support to businesses including on the identification and assessment of New Zealand government procurement tender opportunities.
As with Australia, in New Zealand negotiations we conducted extensive research and engagement with stakeholders to determine sectors and entities of interest in the market. This included through the public consultation, forums run during negotiations and meetings with businesses operating in New Zealand. We are confident that what we have negotiated reflects the interest of UK suppliers.
We assessed each procuring entity for the potential value for British businesses and prioritised those that offered most economic gain and in areas of strategic interest to UK suppliers. The outcome balanced these goals with offensive interests across the FTA to ensure best value for UK businesses and consumers. We will use this approach to assessing market access value for entities in future trade deals. For New Zealand, this process resulted in complete coverage of central government bodies and coverage of nine further local health boards. We agreed to reopen negotiations to cover more local government should New Zealand’s procurement regulations change.
Māori trade and economic cooperation
Paragraph 210: The UK-New Zealand Agreement is the first to include a standalone chapter on the inclusion of Māori people in trade. The Government should explain whether this Chapter, and the provisions within it, set a blueprint for future Agreements.
The Government should also tell us which of the FTA negotiations it is currently undertaking include similar provisions, and the extent to which they will interact with the provisions on Māori inclusion throughout this Agreement.
The Māori Trade chapter reflects the unique relationship between the UK, New Zealand and Māori. This chapter provides opportunities to strengthen the trade relationships between UK, New Zealand and Māori enterprises and help Māori enterprises maximise the opportunities arising from the FTA, alongside New Zealand and UK enterprises. The chapter focuses solely on the unique UK-NZ-Māori relationship and is specific to this case.
As we have been clear, no single deal sets a blueprint for future deals. All trade deals are bespoke and different and are tailored to the relationships and markets of the countries involved.
The UK is not seeking to include similar provisions in other trade agreements and will only consider proposals from other partners based upon their merits. The UK is seeking to accede to CPTPP, which does make reference to related concepts in a limited number of provisions. As New Zealand is also a Party to CPTPP the UK would, on accession, observe its obligations in CPTPP with respect to New Zealand, alongside the obligations the UK holds towards New Zealand bilaterally in the UK-New Zealand Agreement.
Paragraph 218: The Government must explain which groups will be included in the advisory groups on the implementation of the environment chapter of this agreement, specifically whether consumer groups will be included.
The UK will ensure that it engages an independent advisory group, composed of a balanced representation of business, environmental and academic stakeholders, on the operation and implementation of the environment chapter in the UK-New Zealand FTA. The UK already has an existing advisory group covering environment matters in other trade agreements (further detail can be found at: https://www.gov.uk/government/publications/trade-and-sustainable-development-domestic-advisory-group-tsd-dag-meeting-agendas-and- minutes).
Paragraph 237: We welcome the inclusion of the Consumer Protection Chapter, and note that it is the first such standalone Chapter in an FTA. The Government should review the effectiveness of the implementation of the provisions in this Chapter after 3 years to ensure that lessons are learned and built upon in future agreements.
We welcome the Committee’s recognition of our world-leading Consumer Protection chapter, which enshrines protections for both UK and New Zealand consumers buying goods and services in each other’s markets. Whilst this is our first standalone chapter, the UK has agreed comparable provisions in Competition and Digital chapters in UK-Japan and UK-AUS.
Monitoring and evaluation activities which monitor the implementation and assess the impact of FTAs are crucial to ensuring that the benefits for businesses and consumers are maximised. Like the Committee, we recognise that they ensure new trade opportunities created by FTAs are fully grasped and that lessons are learnt which inform the design of our future trade policies.
We have therefore committed to publish a biennial FTA monitoring report, which will provide DIT’s analytical evidence base to inform Parliament, the public and interested stakeholders on progress with the implementation of agreements – including consumer protection provisions - their potential emerging impacts and whether utilisation can be enhanced.
We also committed to publish comprehensive ex-post evaluation reports for the UK-New Zealand FTA within five years of entry into force. These reports will aim to show how, why and for whom the FTA and its implementation has generated outcomes.
Paragraph 245: On the potential scope of this Chapter, Article 31.4(c) allows either Party to use the dispute settlement approach where a “benefit it could have reasonably expected to accrue” under parts of the Agreement is nullified or impaired. The UK-Australia FTA did not include equivalent provisions. We ask the Government to explain what potential disputes were contemplated that led to the inclusion of this provision.
As the Government has set out previously, each FTA is unique and the result of a negotiated outcome. We are confident that both the UK-New Zealand and UK-Australia FTAs provide opportunities for the UK. In the New Zealand FTA, we have agreed a Dispute Settlement Chapter which ensures that state-to-state disputes are dealt with consistently, fairly and in a cost-effective, transparent and timely manner.
On the Committee’s specific question on Article 31.4(1)(c), this article brings into the scope of Dispute Settlement cases where a party has been deprived of an expected benefit regardless of whether the agreement has been breached (a non-violation complaint or “NVC”). This applies to obligations under Chapter 2 (National Treatment and Market Access for Goods), Chapter 3 (Rules of Origin and Origin Procedures), Chapter 4 (Customs Procedures and Trade Facilitation), Chapter 9 (Cross-Border Trade in Services), or Chapter 16 (Government Procurement). NVC provisions feature in a number of modern trade agreements and are included at the WTO for disputes pertaining to goods and services.
Paragraph 255: In addition to the Explanatory Memorandum that it has committed to provide, we ask the Government to provide us, on a six-monthly basis, with a list of (a) EU legislation applying under the Protocol which has been amended or replaced and (b) new EU legislation which has been adopted which is within the scope of the Protocol, together with an explanation of any effects the legislation has on the operation of the FTA in relation to imports.
There are robust and extensive arrangements agreed with the Scrutiny Committees in both Houses concerning scrutiny of EU legislation with relevance to Northern Ireland. The central management of these arrangements rests with the Foreign, Commonwealth and Development Office, working with lead Government Departments to determine EU legislation which is subject to scrutiny.
Under these arrangements the lead Government policy-owning Department continues to submit Explanatory Memoranda (EMs) on EU proposals which amend or replace existing proposals that fall under scope of the Northern Ireland Protocol.
Following the agreement between the Foreign Secretary and the Chairs of the Parliamentary EU Select Committees on Government commitments to provide information to the Committees about legislation impacting on Northern Ireland and on the wider UK/EU relationship, officials will be discussing with the committees’ officials how the structure and content of Government EMs on EU legislation can be improved to ensure the information provided to the Committees meets their needs.
Paragraph 263: Most of those we heard from welcomed the Agreement, but we also heard that the engagement with the devolved nations and stakeholders outside the Government’s trade advisory groups consisted largely of information-sharing, rather than meaningful engagement with the negotiations. The Government must improve the engagement process to ensure that devolved nations and stakeholders feel more involved with the negotiations: that they feel confident that their concerns are considered; and that the final Agreement represents the interests of as many people as possible.
We are committed to broad and deep engagement with stakeholders across the nations and regions of the UK to inform our trade agenda. The Department operates 11 Trade Advisory Groups to engage with various business sectors across the whole of the UK – from whisky distillers in Scotland, to car manufacturers in the Midlands, to food producers in the North East. Confidential nature of TAGs helps safeguard the UK’s negotiating capital while gathering cross-sectoral feedback on live negotiations.
More broadly, the Department regularly engages with a wide range of stakeholders, through stakeholder briefings, bilateral engagement and roundtables. We want every business and region to feel engaged with our trade policy and this continues to be a key consideration of the current review of stakeholder engagement structures.
We have established new Nation Teams in Edinburgh, Cardiff and Belfast to help bring DIT’s support closer to businesses in Scotland, Wales and Northern Ireland. We work closely with the Devolved Administrations (DAs), business organisations, businesses and other key partners to improve the availability of support to businesses and ensuring they can feed in views.
DIT Nation Teams include specialists in those sectors of key strength to the economies of each nation. These specialists work with wider DIT sector focussed colleagues to ensure that new export and investment opportunities flowing from the UK’s global network and new FTAs are available to companies across the nations.
Each DIT nation team also has dedicated trade policy engagement resource. These roles were created to ensure that businesses and Business Representative Organisations in Scotland, Wales and Northern Ireland can engage with UK trade policymakers and ensure their priorities are heard. To date, they have organised events, webinars and round tables to discuss our current and future FTAs, as well as representing DIT at events and conferences our stakeholders have organised. We will use them to continuously increase our engagement with stakeholders in the nations on FTAs and further inform our wider trade policy work.
Paragraph 267: We reiterate our conclusions from our report on the UK-Australia Agreement, that advanced sight of implementing legislation for FTAs would enable us to consider it more fully during our inquiries. We again ask the Government not just to make a statement of compatibility but also to revise the Explanatory Notes on the Trade (Australia and New Zealand) Bill to include an explanation of that statement.
As the Government set out in our response to the Committee’s report on the UK-Australia FTA, the Government is committed to ensuring all legislation tabled is compatible with the European Convention on Human Rights. To that end, the Trade Secretary has signed the statement of the Bill’s compatibility with the European Convention on Human Rights. Any regulations made under the power in the Bill will also be made compatibly with the Convention.
Paragraph 276: In light of the Government’s commitment to inform us of “significant amendments” to the Agreement, we ask the Government to confirm the basis on which it will determine what constitutes a significant amendment. The Government must also explain whether or not amendments to the Agreement will require relevant domestic procedures to come into force.
Given the nature and complexity of this Agreement, the Government will need to consider any amendment both in the terms of the area of the Agreement being amended, and the significance of the amendment itself, as well as the effect any amendment may have on other agreements, regardless of whether it would need to be implemented via primary or secondary legislation. The Government will carefully consider the Agreement and any amendments to it on a case-by-case basis and keep Parliament informed in the most transparent manner.
We are committed to keeping both the ITSC and IAC informed about any amendments and will ensure amendments are published via the Treaty Series after Entry into Force and on the Agreements GOV.UK landing page.
Paragraph 277: We ask the Government to confirm how Parliament will, in a timely manner, be made aware of and engaged in the UK’s consideration of proposed amendments where the Government intends not to require notification of completion of relevant domestic requirements.
Paragraph 283: We welcome the Government’s commitment to keep us updated about the decisions made by committees under this Agreement. We ask the Government to explain how it will also keep Parliament, and in particular this Committee, updated on the issues being considered and the wider body of work undertaken by the Joint Committee and other bodies established under the Agreement, before decisions are made.
The Government’s intention is that significant amendments to FTA treaties should be subject to ratification and therefore will be submitted to Parliament for scrutiny in accordance with CRaG. Moreover, all treaty amendments (whether subject to CRaG or not) are laid in Parliament as Command Papers and published in the United Kingdom Treaty Series.
As with other UK FTAs, all Joint Committee decisions made under this Agreement (including decisions which constitute treaty amendments) will be published on the same webpage as the FTA on GOV.UK. This will ensure a complete, up-to-date and easily accessible record of the FTA and related documents.
Alongside the reporting outlined above, we also intend to provide updates to your Committee and the International Agreements Committee regarding the implementation, and continued operation, of this FTA on a regular basis. We will continue to review and adopt best practices in this regard as the UK’s first ‘from scratch’ FTAs come into force, as it will with wider scrutiny arrangements.
Paragraph 284: We heard that regulatory dialogues can be very effective to resolve issues and overcome barriers to trade when they are properly resourced. The Government must detail how it will resource the regulatory dialogues that it has committed to, and how it will ensure that they have the power to represent UK businesses and consumers and to effect change where it is needed.
Under the FTA, we have established dialogues to foster collaboration between New Zealand and the UK, including to resolve issues and overcome future barriers – we agree with the Committee on their importance. The Professional Services Working Group and Legal Services Regulatory Dialogue are two platforms for regulatory discussion. The Professional Services Working Group is to be chaired by UK and New Zealand Governments, with regulators and relevant bodies also able to attend. These fora will support regulators in numerous ways, including by providing points of contact, facilitating meetings and providing information regarding regulation of professional services.
We will ensure our obligations under the FTA are fulfilled - and that we have the relevant resource to do this. As we prepare for Entry into Force of this FTA, we will be working with all stakeholders to ensure that dialogues are effectively used tackle barriers to trade.
We also recognise the importance of UK businesses and consumer representation across the different forums. DIT has established engagement mechanisms to allow stakeholders the opportunity to feed into trade policy, ensuring the UK position is well informed and reflects the interests of the whole of the UK. These include the Strategic Trade Advisory Group, Trade Advisory Groups, Civil Society Roundtables, Thematic Working Groups and the Board of Trade.
Paragraph 291: The Government must explain how it will make sure that businesses know about the Agreement and the opportunities it offers them.
We have continued to engage with businesses and other stakeholders throughout negotiations and since signature, both formally and informally, providing updates and highlighting opportunities. In addition, we have publicised the benefits to businesses through national, regional, trade and sector media, and DIT social media channels, and will continue to do so in coming months.
Ahead of Entry into Force, we are promoting the FTA through our communications and marketing campaigns, as well as working directly with stakeholders. We will provide practical explainers in plain English so that businesses are clear on the actions they need to take to use the FTA. After the FTA has entered into force, we will continue to promote the deal and upskill businesses on how they can take advantage of its provisions.
Once businesses decide to seize the new opportunities afforded by the deal, they can access dedicated DIT resources to help them every step of the way. This includes DIT’s comprehensive offer for businesses, featuring step-by-step guides on GREAT.GOV.UK, opportunities to learn through the experts via our Export Academy, and one-to-one support from our Export Support Service and International Trade Advisors.
Paragraph 292: In this report we have called on the Government to publish a trade strategy. In this trade strategy the Government must explain how it will better coordinate its activities so that UK businesses—whether agri-food producers, manufacturers or service providers— can compete in a global market.
The Government’s policy objectives are published in the Department for International Trade (DIT)’s Outcome Delivery Plan (ODP). As set out above, the Government does not have plans to publish anything further setting out our trade strategy.
The Government coordinates its activity to ensure we maximise the use of all our levers and that UK businesses can take full advantage of trade opportunities. We work with business to resolve market access barriers, ensure trade agreements reflect UK industry interests, and support businesses to secure export opportunities.
Over the last two years, we have resolved around 400 market access barriers across more than 70 countries. In June 2022 we announced plans to unlock export opportunities worth more than £20bn by resolving around 100 priority trade barriers.
We are also supporting UK businesses to export. Last year’s Export Strategy is a call to action for Government and business to reach £1 trillion of exports even faster than currently projected. We are transforming our support, reducing barriers, and through UK Export Finance, ensuring that UK businesses have the access to finance to export and enter new markets.
With the Government’s 12-point export strategy, we set a clear direction to ensure the UK’s support services for exporters meet a changing trading landscape. This plan supports UK businesses to seize the opportunities secured through our new FTAs and our broader efforts to remove market access barriers.