Submission to the Parliamentary Foreign Affairs, Defence and Trade Committee

by | Mar 15, 2022 | NZIBF, Submissions

INTERNATIONAL TREATY EXAMINATION OF THE
NEW ZEALAND UNITED KINGDOM FREE TRADE AGREEMENT

MARCH 2022

Introduction and Summary

1. This submission is made on behalf of the New Zealand International Business Forum (NZIBF) whose members are listed at Annex A 1 . NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global economy.

2. The NZIBF supports the early ratification and implementation of the New Zealand/United Kingdom Free Trade Agreement (“the Agreement”). The Agreement delivers unprecedented market access to the UK market for goods and services of export interest to New Zealand and opens further New Zealand’s market to goods, services, and investment from the UK. The Agreement includes ground-breaking and innovative rules in a number of key areas including digital trade, Māori economic co-operation, and sustainability. The Agreement is the most commercially significant free trade agreement (FTA) signed since New Zealand’s FTA with China and will likely make a material impact on the New Zealand economy beyond official estimates.

3. In this submission, we comment on matters of direct interest to NZIBF members. We regret, however, the short time frame which was available to develop our submission. While we applaud the desire to move quickly to implement the provisions of the Agreement, we believe a longer period should have been envisaged to enable the public to make submissions. This would also have assisted our own analysis of the Agreement.

About NZIBF

4. NZIBF provides a voice to articulate the needs and priorities of New Zealand’s international business community, and in particular the importance of open markets, to New Zealand Government and public stakeholders.  The NZIBF Board brings together leaders from amongst New Zealand’s largest internationally oriented companies and peak business organizations representing many exporters of all sizes. (A list of Board Members is in Annex A.)

5. Incorporated in May 2007, NZIBF works with companies, business organisations and government agencies to implement projects in the international trade and economic sphere, including working to develop New Zealand’s key international business relationships and conducting activities to promote New Zealand’s competitiveness. NZIBF receives no direct government funding for its operating budget, but from time to time receives funding for jointly funded projects. Funding in respect to the policy advice and support which NZIBF provides to the New Zealand members of the APEC Business Advisory Council (ABAC) is provided by both NZIBF and the Ministry of Foreign Affairs and Trade (MFAT).

NZIBF Supports Ratification of the NZ UK FTA

6. NZIBF has followed closely the negotiation of the NZ/UK FTA which arose from Britain’s decision to leave the European Union in 2016. In May 2018 we released a report “Old Friends, New Opportunities – a discussion paper on the potential for a UK/NZ FTA” 2.

At that time we said:

“A bilateral FTA should achieve both ambitious trade liberalisation and expanded cross-border investment in order to enhance productivity and innovation, generate dynamic gains and help to create jobs and raise living standards in both economies. Reflecting the nature of modern business, the FTA should include not just comprehensive new market access for goods and services (including by eliminating non-tariff barriers) but should also seek to facilitate trade and address ‘next generation’ issues such as intellectual property, government procurement, regulatory coherence and the digital economy. An FTA would at the same time help to ensure that the playing field remains level on both sides in light of new third-country trade deals.”

7. NZIBF believes the Agreement has delivered on these broad objectives.

Trade Benefits for New Zealand

8. We note the estimated trade benefits arising from the Agreement as set out in the National Interest Analysis, NIA, ($710-810 million) but have not in the time available been able to undertake our own analysis. The benefits may be understated, given the extent of the market liberalisation that is envisaged by the Agreement.

Goods Market Access

9. We agree with the NIA that the Agreement “contains some of the best market access outcomes of any of New Zealand’s FTAs”. The Agreement is comprehensive in terms of product coverage and will deliver commercially meaningful outcomes from day one as well as setting up pathways for tariff elimination which are superior to many of New Zealand’s other FTAs including the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP).

10. For dairy in particular elimination of tariffs after five years is unprecedented and a welcome improvement over other agreements. For meat, while the endpoint for tariff elimination after 15 years is lengthy, a significant new access for sheepmeat and beef, over and above existing arrangements, delivers more immediate benefits. NZIBF urges the Government to seek to reduce the 15-year timeframe as the Agreement is implemented and reviewed. It is to be hoped also that the safeguard mechanisms built into the agreement will not need to be used. For both dairy and beef, transitional quota arrangements, which will be managed at the New Zealand end, are highly satisfactory.

11. NZIBF members welcome the inclusion of a standalone animal welfare chapter in the Agreement, which recognises that while New Zealand and the UK’s production practices are substantively different, each country accords a high priority to animal welfare in those practices, which provide largely comparable outcomes and welfare protection.

12. For a range of other products including wine, apples, kiwifruit other fruit and vegetables, honey and seafood, the elimination of tariffs on entry-into-force will make a material difference to exporters to the UK, providing them with new options for market development and growth.

13. NZIBF welcomes the side letter on oenological (winemaking) practices, which recognises specified winemaking practices used in New Zealand.

14. We are pleased that the Agreement contains enhanced trade facilitation measures and other provisions that address non-tariff barriers impacting trade as well as undertakings in a range of technical areas affecting goods market access including rules of origin, customs procedures, standards, technical regulations and conformity assessment procedures, and sanitary and phytosanitary requirements. The Agreement offers the opportunity for the UK to join New Zealand in developing new and innovative thinking about how supply chains can be made work faster, more cheaply and more securely, including by the adoption of digital technologies (see further below). The Agreement also contains new provisions providing for temporary entry of business people which will also support market development initiatives.

Trade-in Services

15. NZIBF welcomes the provisions that liberalise trade in services according to a negative list so that all services trade will be on an equal footing with domestic suppliers and other international suppliers except where specified by an exception in a Member’s Schedule of Commitments. Commitments by the UK for market opening in the areas of aviation services and environmental consulting are also welcome.

16. Improved services commitments are valuable for goods exporters so that they can support their international business by establishing an in-market presence, form commercial partnerships and provide after-sales support services. In this context undertakings on licensing and recognition of professional qualifications will be particularly useful.

Investment

17. New Zealand has much to gain from increased foreign direct investment (FDI) from the UK into New Zealand and from New Zealand companies choosing to become closer to their customers by investing in the UK. The general investment provisions in this Agreement mirror New Zealand’s other FTAs. NZIBF welcomes that the Agreement will enable UK investors to benefit from the same screening threshold, NZ$200 million, applied to many of New Zealand’s other FTA partners, including CPTPP Parties, China, and Korea.

18. We note that there is no Investor State Dispute Settlement (ISDS) mechanism (which is separate from the State-to-State Dispute Settlement mechanism which is included) to protect New Zealand investments in the UK market (and vice-versa). While the NZ Government has reservations about ISDS, NZIBF does not share this view.

Intellectual Property

19. We note that the Agreement provides for an extension of copyright term applied in New Zealand by an additional 20 years within 15 years. This would align New Zealand with practice in several other jurisdictions including both the UK and the EU. While as the NIA notes this might imply additional costs, NZIBF believes these need to be set against the broader economic benefits arising from the Agreement.

20. NZIBF notes that the Agreement does not include any up-front commitments on the protection of Geographical Indications (“GIs”) but that New Zealand has agreed to review the GIs section in the future, including if New Zealand introduces a bespoke regime for the registration of GIs for agricultural products or foodstuffs (such as in the context of a future NZ/EU FTA).

Digital trade

21. The Agreement includes a wide-ranging digital trade chapter, as befits an FTA that seeks to strengthen and modernise the economic relationship. The emphasis throughout on adopting frameworks that promote consumer confidence, interoperability, the avoidance of unnecessary trade barriers and greater inclusion (spelled out explicitly in the Chapter’s objectives) should help to foster a more enabling environment not only for businesses in the technology sector, but also many others, including NZIBF members, that make use of digital services to facilitate goods trade or support business operations. The more forward-looking, cooperative provisions should boost innovation and new trade opportunities.

22. Specifically, we welcome the inclusion of trade- and trust-friendly commitments on the key issues of free data flows, data localisation and personal data protection, as well as practical provisions aimed at facilitating cross-border business and trade, including paperless trade, financial services and e-invoicing. Also useful are commitments to cooperate or work to develop greater interoperability or regulatory coherence in a number of commercially- relevant areas, such as digital identities, cybersecurity, Open Government Data and emerging technologies. We welcome the inclusion of novel areas that have not featured in prior agreements, such as e-contracts and e-authentication, which will benefit business.

Māori trade and economic co-operation

23. NZIBF is pleased that the Agreement speaks to the expression of Māori aspiration to grow the contribution of the Māori economy and to promote wellbeing. It does this primarily through a new chapter (Chapter 26) which is focused largely on best-endeavours collaboration between the two governments (since this chapter is not subject to dispute resolution). We note that the development of this Chapter was informed by an Indigenous Trade Reference Group and we look forward to increasing participation by Māori in trade initiatives. In future agreements, it would be preferable if such provisions were subject to dispute resolution.

Other benefits

Treaty of Waitangi, right to regulate

24. We are pleased that New Zealand has retained its standard Treaty of Waitangi exception so that the Government can continue to meet its obligations to Māori, as well as retaining the general right to regulate for legitimate public policy purposes.

Environment

25. NZIBF welcomes the Agreement’s provisions aimed at fostering environmental protection and promoting initiatives to promote sustainable agriculture and forest management and to address climate change including in relation to fossil fuel and fisheries subsidies and to tariff elimination for environmental goods and services.

Labour

26. We welcome the Agreement’s provisions aimed at enhancing labour standards and practices and good corporate governance.

Gender and SMEs

27. As NZIBF has made clear in its submission on the Government’s Trade for All initiative 3, NZIBF welcomes steps to address gaps in policy design and implementation which may contribute to unrealised potential or uneven outcomes among certain groups, including women and small and medium-sized enterprises (SMEs). NZIBF is pleased with the inclusion of these elements in the Agreement.

Commitments for New Zealand

28. NZIBF supports New Zealand taking a number of legislative steps to give effect to this Agreement, including, eliminating tariffs on a range of goods from the UK including vehicles, cosmetics, gin and chocolate, adopting rules of origin for goods originating from the UK, amending the Tariff Act to implement the bilateral safeguards mechanism, providing for a higher screening threshold for FDI from the UK and amending the Copyright Act. Tariff liberalisation in relation to goods of UK origin confers treatment similar to New Zealand’s other FTA partners. The loss of tariff revenue is minimal.

Conclusion

29. It is not an exaggeration to claim that the Agreement is historic. Not only does it confer unprecedented levels of market access, it clearly signals the beginning of a new partnership between the UK and New Zealand as champions of freer trade and investment globally. In NZIBF’s assessment, the Agreement positions well the UK for future membership of CPTPP, which would further strengthen the role that the UK can play internationally in respect to trade liberalisation.

Recommendations to the Committee

30. NZIBF recommends that the Committee:

  • note NZIBF’s support for ratification of the NZ/UK Free Trade Agreement,
  • note NZIBF’s support for Parliament to legislative amendments necessary to give effect to the Agreement
  • note NZIBF’s willingness to make an oral submission before the Select Committee.

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