2021 was another challenging year for New Zealand’s export and trade sector. However, despite Covid-19 there were some remarkable achievements and positive outcomes. Here we highlight some of those major milestones including a review of the recently signed FTA between the UK and New Zealand.
Looking back over the past 12 months, without doubt the highlight for New Zealand’s export businesses was the signing of the Free Trade Agreement with the UK on October 20th.
It will give Kiwi exporters real opportunities for growth, investment and diversification, and post-Brexit, the FTA will finally allow them to compete on a level playing field.
In the past New Zealand has faced high tariffs and restricted quota access on a number of goods when exporting to the UK – notably honey, seafood products, wine, onions, kiwifruit, apples and sheep meat. In other cases trade in products of global export interest to New Zealand have been significantly constrained due to high tariff barriers – for example, beef and dairy exports.
But once the FTA is fully implemented, when the tariffs on 98 percent of New Zealand products entering the UK are eliminated, it will deliver an estimated NZ$37 million in tariff savings alone on current trade volumes. Trade is expected to be fully liberalised after 15 years.
New Zealand has also secured the removal of other significant, administratively burdensome non-tariff barriers.
The UK-NZ FTA will provide new guarantees of market access and more certainty in-market for New Zealand’s services exporters, investors, and for Kiwi businesses wanting to access the UK’s government procurement market. There will also be increased cooperation and commitments in the area of digital trade to assist our growing tech sector.
Protecting and promoting Māori interests in this free trade agreement has been a priority for New Zealand throughout the negotiations too. This FTA recognises the unique status of Te Tiriti o Waitangi and includes New Zealand’s Treaty of Waitangi exception. It will include an indigenous chapter that will create a platform for cooperation on a range of issues important to Māori, and will reflect Māori interests in key areas across the agreement, such as in the intellectual property and trade and environment chapters.
However, the FTA is far from a one-way street when it comes to benefits.
British exporters will welcome the removal of tariffs of up to ten percent on goods such as chocolate, gin, buses, motorhomes, caravans and clothing. The UK’s Department of International Trade says the new trading terms could help British exporters gain an advantage over international rivals in New Zealand’s import market, which is expected to grow by 30 percent by 2030.
The deal will provide benefits for people and businesses right across the UK – from Edinburgh’s financial and insurance services companies, to Welsh auto companies that exported £3.4 million of road vehicles to New Zealand last year, and to Northern Ireland’s textile producers who will also benefit from the removal of tariffs of up to ten percent.
Not surprisingly, initial reaction in the UK was not totally favourable towards the FTA. Ashley Miln, associate director at the Rochester PR Group, headquartered in London, says there has been healthy debate in the British media.
“Dairy farmers as well as sheep and beef farmers, and those who support them, have been the most vocal about why they feel the deal is negative, with those from the Labour party and the National Farmers Union (NFU) saying that it has the potential to hurt UK farmers and lower food standards.
“There is also a worry that the volume of imports coming in will be too high, thereby causing increased competition for UK farmers, who could be undercut as a result.”
Other opinions put forward in the UK media is that the deal is unlikely to increase UK economic growth (GDP), with some people of the opinion that New Zealand is likely to fare slightly better given that it will be able to sell more products to the UK, such as lamb, says Miln.
“Answering the critics of the FTA, are those such as the International Trade Secretary Anne-Marie Trevelyan, who said that the FTA ‘affords opportunities in both directions for great sharing of produce, while stating that British farmers shouldn’t be worried,” adds Miln.
“Ministers also see it as a positive step towards joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).”
Back on these shores, the FTA is seen as mutually beneficial for both countries. Certainly, with the UK moving to join the CPTPP, it will indeed access some of the world’s biggest and fastest growing economies.
“There’s no doubt that the UK is a crucial market for some of our key exports, with two-way trade worth $6 billion pre-Covid, as well as being a significant source of, and destination for, New Zealand investment.”
There’s no doubt that the UK is a crucial market for some of our key exports, with two-way trade worth $6 billion pre-Covid, as well as being a significant source of, and destination for, New Zealand investment.
The market access commitments agreed in principle for New Zealand services exporters and investors are among the best the UK has agreed with any FTA partner.
Initial UK modelling conducted pre-Covid predicted New Zealand exports could rise by up to 40 percent at full implementation of an FTA with the UK – an estimated increase in New Zealand GDP of $970 million.
On the other hand, UK exports to New Zealand are also predicted to grow by approximately 7.3 percent. Services exports are also significant with £673 million in services sold to New Zealand in 2019, 40 percent of which were delivered digitally.
The right timing
Achieving such a far-ranging agreement between the UK and New Zealand may have seemed impossible during all those years when the UK was part of the EU. But with Brexit, the FTA was only a matter of time.
The agreement to launch negotiations reflects the closeness of the two nations, the deep historic ties as well as the fact that both are committed to supporting open rules-based trade.
The agreement in principle also reflects that our values are well-aligned, including our commitment to best-practice trade rules on emerging and increasingly important issues, a focus on sustainable and inclusive trade, and shared ambition in leading the global fight against climate change.
The FTA negotiations were also a priority for both countries as the agreement will play an important role in our Covid-19 economic recovery strategies.
Other trade milestones
It hasn’t all been about the UK-NZ FTA in 2021. After a period of relatively restricted travel during the previous 12 months, the Government’s ‘Reconnecting New Zealand’ strategy launched in mid-2021 is intended to give businesses greater ability to progress trade opportunities and relationships.
With 193 countries participating, including all of New Zealand’s major trade partners, Expo 2020 Dubai was set to be a milestone event for New Zealand even pre-pandemic. It is the country’s first large-scale presence at a World Expo since Shanghai 2010 and takes place in a gateway location for both established and emerging world markets. With Covid-19 causing the Expo to be postponed for a year, the event gained added importance in bringing a global audience together.
The New Zealand presence at the Expo offers a platform for businesses to leverage for long-term growth opportunities in the Gulf region and beyond.
Meanwhile, negotiations to modernise New Zealand and Australia’s free trade agreement with South East Asia (the ASEAN-Australia-New Zealand Free Trade Agreement or AANZFTA) have also been progressing well, with expectations that negotiations will be concluded in September 2022.
Another development in late 2021 was the Regional Comprehensive Economic Partnership (RCEP), which took effect on 1 January 2022 between New Zealand and nine other RCEP partners. As more of these partners officially join, RCEP will see New Zealand connected with Australia, China, Japan, South Korea and the ten ASEAN member nations through the world’s largest trade pact, covering around 30 percent of both world population and worldwide GDP.
Supply chain disruption
The past two years have seen significant and ongoing disruption to global supply chains, leading to the breakdown of traditional ‘just-in-time’ approaches to inventory, stock and product management and impacting the procurement of essential supplies for countries.
Government monitoring over 2021 showed international sea freight congestion continuing to take a toll on global trade, with Covid-19 magnifying longer-standing problems in global maritime supply chains.
An NZTE survey revealed that almost 40 percent of export businesses experienced strong or critical adverse effects from sea freight issues.
The relaxing of many Covid-19 restrictions in Europe in late 2021 saw air traffic start to increase, unlocking some airfreight capacity. However, this may change as pandemic conditions continue to evolve. 2022 may also see a reduction in available air capacity on Asia-Pacific routes where travel restrictions remain, as airlines re-focus on passenger routes elsewhere.
Ongoing pressure on global sea freight is expected to continue as consumer demand remains elevated from pre-pandemic levels.
Assuming that leisure travel returns on a wider scale in 2022, New Zealand may see consumer spending shift to reduce some demand-side pressure on sea freight, while supply-side pressures on ports may also reduce as the government continues to focus less on lockdowns, more on vaccine coverage.
At the same time, some systemic constraints remain for shipping to and from New Zealand, including global shortages of specific vessel types (with long lead times for building) and higher volumes and profits for global shippers in servicing routes directly between China and the US.
The Government’s Freight and Supply Chain Strategy, led by the Ministry of Transport, was launched in mid-2021 with a focus on optimising New Zealand’s supply chain for added resilience, and to accommodate growing trade with the world while reducing emissions and maintaining productivity and wellbeing.
An issues paper and public consultation in 2022 will give exporters an opportunity to help shape the process and address supply chain issues for the longer term.
Meanwhile, geopolitical factors and trade tensions will continue to be part of exporters’ context through 2022, and these might in turn interact with responses to the pandemic and global supply chain issues.
Sound business strategies and diversification will give exporters and trading businesses the best foundations for responding to change, managing risk, and moving quickly to capture opportunities.
The future for dairy and meat
New Zealand’s brand and reputation has remained strong through the past two challenging years, and high commodity demand particularly in the food sector has bolstered the economy. Export prices are the highest they’ve been in ten years. Continued demand for our high quality and counter-seasonal dairy and meat exports are expected for 2022, 2023 and beyond.
Environmental outcomes remain a key focus for the sector, and climate change is increasingly featuring as a business consideration across the entire primary sector value chain.
New Zealand’s natural advantage for agriculture leaves the sector well-placed to demonstrate global leadership in addressing climate change concerns, while continuing to produce and export high-quality food.
Also, recent life-cycle analysis studies suggest that the emissions footprint of exported New Zealand dairy and meat products compare favourably against their domestically-produced alternatives in major markets, even when distance-to-market considerations are taken into account.
A Climate Action Partnership entitled He Waka Eke Noa, launched in 2020, is designed to equip farmers and growers with the information, tools and support needed to reduce emissions and build resilience to climate change. This five-year programme is designed to identify practical solutions to reduce New Zealand’s agricultural greenhouse gas emissions, recognise on-farm sequestration, and adapt to climate change.
The world-leading action that New Zealand agriculture producers are taking to improve and account for environmental performance sets us up well to deal with, and ideally benefit from, growing international efforts to better inform consumers of the environmental credentials of their food choices. Concerted effort is required in 2022 and 2023 to build and maintain an international playing field on which New Zealand’s domestic efforts are recognised internationally, including front-footing any potential headwinds in the area of trade and climate change.
Without doubt, close collaboration between exporters and government will be key to success.
The past two years have seen shifts in the way the global economy and community behaves. We’ve seen the emergence of new high-value niches, strongly aligned with the high-quality, ethical, sustainable and premium position of many Kiwi exporters, particularly in food and beverage. This will be an ongoing opportunity for New Zealand.
Setting up for a successful UK launch
The UK-NZ FTA is likely to result in a wealth of Kiwi brands and businesses new to the UK and looking to allocate marketing spend to ensure that they have a strong in-market presence. But where should NZ brands start when targeting an unfamiliar market?
If you’re unfamiliar with the UK media landscape, do your research well in advance. It can be beneficial to seek the advice of UK-based marketing and/or PR agencies who are experts in navigating the local landscape, and have the contacts to help fledgling brands be heard in what is a very competitive marketplace.
To prepare for the UK market, first get to know the trade media. They are very influential and an essential element of a successful marketing strategy. They provide an invaluable source of information and a good overview of your industry, while allowing you to identify key trends, follow industry specific news, and learn who your key competitors are.
Trade media can help you find the key events in your sector, many of which have moved online, making them even more accessible to offshore companies. Although trade shows are now re-appearing, and they are a great way of getting exposure for your brand and showcasing your products to a captive audience of buyers that simply can’t be replicated in a virtual setting.
With regular, ongoing reading, you’ll discover the key opinion formers in your industry, the trends and key topics. All of this will help you fine-tune your messaging and offering for the UK market and make you much more knowledgeable when speaking to your first key customers.
By being featured in influential trade publications, you can start to establish your brand’s identity and position yourself as a thought leader. It will also help you to gain respect amongst your peers within your industry. Additionally, trade coverage can bolster the credibility and value of further stories when you pitch to mainstream media.
Perhaps one of the most common mistakes companies make is not getting to know the competition well enough before launching in the UK. There’s the obvious starting point of a competitor’s website, but also start following them on social media and watch what they say and do in the media.
It’s very important to do the legwork first (or get a local agency to do it for you) to ensure that your UK launch is as successful as possible. Consider a range of tactics across paid, owner, earned and shared channels – such as launch events (in person or virtual), media relations, social media, influencer marketing and webinars.
Source: Ashley Miln, associate director, Asia Pacific, Rochester PR Group.
This chapter was originally published in the 2022 NZ Export & Trade Handbook. It was compiled by editor Glenn Baker with the assistance of New Zealand Trade and Enterprise (NZTE) and the Ministry for Foreign Affairs and Trade; and with input from UK-based market entry specialist Rochester PR Group.
