Read the information in Extracts 1, 2 and 3 concerning the 2021 trade agreement between the UK and New Zealand. Drawing on these extracts and the module materials, MUST CREATE OWN demand and supply diagram to assess the possible impact of a removal of tariffs on consumers, firms and government in the UK. In your answer, use this analysis to provide a discussion of the arguments for free trade between the UK and New Zealand, versus those for protectionism.
MUST CREATE A SUPPLY AND DEMAND DIAGRAM NOT ONE FROM THE INTERNET.
SOURCE LIST BELOW PLEASE USE ANY OF THESE SOURCES TO RFERENCE PLENTY OF CHOICE.
Extract 1
New Zealand–UK free trade agreement: agreement in principle
New Zealand Ministry of Foreign Affairs and Trade, 20 October 2021
New Zealand and the UK have reached agreement in principle on the key elements of a new high quality, comprehensive and progressive free trade agreement (FTA). These are set out below.
…
New Zealand and the UK commit to the removal of all customs duties on bilateral trade, with most tariff lines, covering the vast majority of current exports, being fully liberalised on entry into force of the agreement. Other mechanisms will facilitate trade and address non-tariff barriers between our two countries.
Key commitments include:
- New Zealand and the UK will remove customs duties on 100% of tariff lines for originating products, in line with the agreed treatments which will be set out in respective tariff schedules.
- The UK will eliminate tariffs on 96.7% of tariff lines on the day the FTA enters into force.
- New Zealand will eliminate tariffs on 100% of tariff lines on the day the FTA enters into force.
Extract 2
New Zealand trade deal: government ‘swerving’ concerns, claim MPs
Maria Gonçalves, 25 January 2023
The UK government is “swerving” concerns that a New Zealand trade deal would lead to unfair competition for local farmers, MPs have claimed.
A cross-party group of MPs called out the government this week for not addressing concerns that slashing tariffs on cheap NZ goods such as lamb and beef would lead to a contraction of the food sector.
On Tuesday, the government insisted the UK would not experience a “significant influx” of agri-foods imports as a result of the free trade agreement signed in February.
International trade secretary Kemi Badenoch said the deal would boost the UK economy and “deliver multiple benefits for our people, businesses, and economy”.
“The UK–New Zealand Free Trade Agreement (FTA) is estimated to increase trade with New Zealand by almost 60%, boost the UK economy by £800m and increase UK household wages by £200m in the long run,” she wrote in the government’s official response to the international trade committee’s inquiry into the NZ trade agreement.
However, the committee responded this week that the government failed to address its concerns that the “absence of a single, clear trade strategy” would negatively affect domestic suppliers in the long run.
“In its response, the government swerves the committee’s recommendation to publish an overarching trade strategy”, it said in a statement, which “leaves agricultural producers exposed to risk”.
“Some might go as far as to characterise this as playing fast and loose with agriculture in the UK,” said the committee’s chairman, Angus Brendan MacNeil MP.
The committee said it recognised that cheaper NZ imports “may benefit consumers particularly during the cost of living crisis”, but that it was concerned the government had not considered the full scale of the food security risks the deal brought in the long term.
MPs first warned the government the New Zealand Free Trade agreement would negatively affect the agricultural sector by opening UK markets to cheaper imports including beef, sheepmeat and dairy, in an October 2022 report following a six-month-long inquiry.
It questioned whether the pros and cons of tariff liberalisation had been fully considered by the government, claiming increased competition could lead to a contraction of the UK’s agriculture, forestry, fishing, and semi-processed food sectors.
“The government’s confidence that this will not be an unintended consequence of the New Zealand deal appears rooted in the belief that global affairs will continue as they have done in previous years.
“Time will tell, and for the sake of these already hard-pressed businesses and farmers, we hope the government’s analysis is proved correct, especially given ongoing geopolitical instability.”
The committee called for a debate and a vote in Parliament on the agreement. The government agreed Parliament should have an opportunity to debate similar post-Brexit agreements in the future. However, it disagreed that MPs should be able to vote on them.
Extract 3
UK-New Zealand trade deal a ‘great step forward’ for SMEs
GM Business Growth Hub, 15 March 2022
The newly-signed free trade deal between the UK and New Zealand, the UK’s latest in the targeted Asia-Pacific region, is expected to offer significant benefits for smaller exporters.
The free trade deal signed on 28 February will remove trade barriers on a wide range of UK goods and services. This includes the elimination of tariffs for goods in areas such as clothing and footwear, food and drink, furniture, machinery and chemicals.
The agreement is described as the most advanced New Zealand has signed with any nation bar Australia, and is part of the UK government’s wider plan to refocus trade on the Asia-Pacific region. It is also being hailed as one of the UK’s ‘greenest’ trade deals to-date, with low carbon services and technology subject to significant benefits.
According to the government, SMEs [small and medium-sized enterprises] will now find it easier to break into the New Zealand market as a result of “modernised customs procedures” such as digital documents and rapid customs clearance. A chapter devoted to SMEs in the agreement also sets a guarantee for small businesses to benefit from “practical advice and support” to find opportunities in New Zealand, including dedicated websites for small exporters.
In addition, flexible rules of origin mean that most UK manufacturers will be able to qualify for tariff-free trade whilst maintaining their existing supply chains.
Mike Cherry, National Chair of the Federation of Small Businesses (FSB), said:
“New Zealand is a key market for UK small businesses – close to a third of smaller exporters already have ties to the nation. As such, this deal marks a great step forward, and we are pleased to see inclusion of a dedicated SME chapter that will help more small businesses from both countries to take part in international trade and, in doing so, spur our global economic recovery.
“We also welcome the important additional measures outlined as part of the agreement, not least around the streamlining of self-declaration of origin procedures and bringing more small businesses into government supply chains.”
Around 5,900 UK SMEs currently export to New Zealand and manufacturing sector exports totalled £670 million in 2020. Recent research by Santander found that almost a quarter of British exporters forecast significant growth opportunities in Australia and New Zealand.
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