The announcement of the Free Trade Agreement (FTA) in principle between Aotearoa New Zealand and the UK is a positive boost that many businesses operating within the export industry have been hanging out for, after a period of economic setbacks and disrupted supply chains impacted by COVID-19.
Glenn Fan-Robertson, Advisory & Audit Partner, BDO Hawke's Bay notes: ‘With the majority of businesses within the agriculture sector coming under the export umbrella, many are looking to see what pearls this announcement contains for their industry and how specific sectors can look to leverage the changes to this two-way $6 billion (pre-COVID-19) trade relationship.
With the new FTA coming into effect hopefully by next year, we expect to see those invested across the agricultural sector, from viticulture and horticulture to sheep, beef and dairy, revisiting their growth plans and modelling.’
Opportunities for agriculture
While the following are only agreed upon in principle so far, the agri sector looks to benefit from a number of the agreement’s key provisions. These include:
- New Zealand exporters will be able to compete on a level playing field in the UK, particularly against other global exporters who have already secured free trade deals with the UK.
- The most ambitious trade and environment provisions New Zealand has ever negotiated including commitments to eliminate fisheries subsidies, to take steps toward eliminating fossil fuel subsidies, and to promote sustainable agriculture.
- All customs duties on all products will be eliminated – and the vast majority of these will be removed the day the FTA comes into force, including for wine, honey, onions, a range of dairy products, and most industrial products.
- A small number of New Zealand products will be liberalised over a longer time frame of up to 15 years but with improved access offered from entry into force in all cases. This includes beef and sheep meat (15 years), cheese and butter (5 years), apples and some other dairy (3 years).
The Free Trade Agreement provides opportunities for businesses large and small to grow, invest and diversify. However, one of the biggest barriers businesses will experience in taking full advantage of the above is the current skilled labour shortage across a range of industries and sectors - something that agriculture has borne the brunt of.
Frazer Weir, BDO Agribusiness Sector Lead, adds: “For industries such as agriculture to capitalise on the FTA opportunities in the short to medium term, a clearly structured and forward-thinking plan for reopening borders to skilled immigrants will be vital. Sector leads and the Government need to start having these discussions now to sure up our economy in the wake of COVID-19.”
With many of the key Free Trade Agreement changes for the farming industry not coming into full effect for a number of years, now is the time to put plans in place to fill skill gaps, either through further training or sharing available resources where possible. It is also an excellent time to start reviewing your wider business and farm strategy – reach out to your local BDO Agribusiness adviser to ensure you can make the most of the opportunities arising from the UK Free Trade Agreement.