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New Zealand trade deal could boost UK economy by between 0.01% and minus 0.01%

Boris Johnson has hailed a historic post-Brexit trade deal between the UK and New Zealand that will knock 20p off a bottle of wine. Government analysis though has suggested it might not have a massive impact on GDP…

Boris Johnson with New Zealand Prime Minister Jacinda Arden at the UN headquarters

Boris Johnson’s trade deal with New Zealand could either boost the economy by 0.01%… or cut it by 0.01%, analysis last year suggested.

The PM and Kiwi counterpart Jacinda Ardern sealed an agreement overnight after 16 months of talks in a major post-Brexit breakthrough.

The Department for International Trade (DIT) said the “groundbreaking” agreement will cut the price of New Zealand sauvignon blanc wine by 20p – which is its current tariff – and make Manuka honey and kiwi fruits cheaper.

It will also create more chances for Britons to live and work in New Zealand – and “deeper cooperation on digital trade and climate change”, the ministry said.

However, critics have pointed out DIT’s own 180-page analysis of its aims for a New Zealand free trade agreement produced in June 2020.

It said: “A trade agreement with New Zealand could have limited effects on UK GDP in the long run [15 years], with the estimated impact on GDP being close to zero under both scenarios compared to the UK not having a trade deal with New Zealand (between 0.00% and 0.01% in scenario 1 and -0.01% and 0.00% in scenario 2).”





It also suggested agriculture could see a reduction in output and employment, as “UK market access in these sectors increases and resources move towards the expanding sectors.”

The analysis did add that the economy would grow overall on a different measure known as “Gross Value Added (GVA)”, and “productivity gains are expected to drive increases in takehome pay for workers.”

But Shadow Trade Secretary Emily Thornberry questioned the benefits of the deal today in the House of Commons.

She asked: “Is it correct, as her department says … that New Zealand’s exports to the UK will increase by five times as much as UK exports to New Zealand?

“And that New Zealand’s GDP … will grow by half a billion pounds while the UK’s GDP will not increase by a single penny?”

Trade minister Penny Mordaunt replied: “Missing from the right honourable question was any timeframe.








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“What the opposition need to appreciate is that we are building these markets. We are increasing these markets and over time those numbers will go up.

“They will go up because we have given our businesses and our farmers the opportunity to do that.

“But they will also go up because we have faith in those businesses and farmers that if we give them those opportunities they will seize them.”

Asked if DIT was still forecasting a cut in “output and employment” for British farmers, International Trade Secretary Anne-Marie Trevelyan replied: “I am very confident that the deal we have struck will provide the opportunity for our wonderful food producers to continue to sell their goods across the world and, as we make more trade deals, creating new markets for them also.”

But she refused to be drawn on whether the June 2020 forecast was still correct.

UK-New Zealand trade was worth £2.3billion last year and is expected to grow under the deal.



Welsh farmers fear cheap lamb from Down Under on British supermarket shelves could hammer the UK industry
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Image:

Getty Images/iStockphoto)




However, it was unclear what the agreement means for imports of New Zealand lamb.

Welsh farmers fear cheap lamb from Down Under on British supermarket shelves could hammer the UK’s sheep farming industry.

International Trade Committee Chair, Angus Brendan MacNeil, said: “While the prospect of increased trade with our friends in New Zealand is welcome, the devil of this agreement will be in the detail.

“My Committee will be looking underneath the bonnet and kicking the tyres to find out how far the Government has achieved its stated ambitions, exploring whether this represents a good deal for all sectors of the UK economy and all parts of the country.”


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