Will the New Zealand trade deal help or hinder the UK?

It looks like 2022 will be a tough year for many families across Britain. The emerging cost-of-living crisis is set to be exacerbated by rising fuel bills and petrol prices linked to the Russian invasion of Ukraine.

The economic costs of Brexit will not magically disappear simply because another crisis has come along. Supply chain woes and the extra cost of doing business will continue to have an impact on prices at the supermarket.

Could some of the post-Brexit trade deals being forged by the Department for International Trade (DIT) help ease some of the economic pain?

The latest success trumpeted by Anne-Marie Trevelyan’s department is a free trade agreement with New Zealand – outlined in principle in October and hailed by Boris Johnson as a “great” deal for the UK.

It’s worth putting the importance of the deal in some perspective. New Zealand is a small, distant economy, and the overall economic impact of the agreement is expected to be negligible, according to the government’s own calculations.

In fact, by the government’s own calculations it’s possible that the deal with New Zealand could overall slightly reduce the size of the UK economy – potentially hindering GDP growth.

The government’s official strategic outline in 2020 found that its impact would likely have “limited effect … in the long run” – being between a positive growth of 0.01 per cent or negative growth of -0.01 per cent.

DIT ministers have been keen to talk up the benefits of the deal. Tariffs will be eliminated on all UK exports to New Zealand, including current tariffs of up to 10 per cent on clothing, and up to 5 per cent on many manufacturing products.

“Our trade with New Zealand will soar, benefiting businesses and consumers throughout the UK and helping level up the whole country,” said Trevelyan.

However, any gains from cheaper imports risk being offset by the potentially hefty damage done to British farming and food producers.

The deal allows New Zealand farmers to undercut British exports by shipping in meat produced to lower welfare standards, according to farming bodies and opposition parties.

Prime minister Jacinda Ardern’s government gains more from the deal that Britain. The deal may boost New Zealand’s growth by around 0.3 per cent, according to the UK government’s 2020 analysis.

While the UK could see a “long-run” increase in British exports to New Zealand of 7.3 per cent, the DIT also estimated 40.3 per cent growth for New Zealand’s exports to the UK.

So why is the New Zealand deal worth doing? Well, securing a deal could still be critical step in the UK’s effort to join a much larger trade bloc – the 11-member strong Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Trevelyan has said the latest post-Brexit pact was a chance to refocus Britain towards “the dynamic economies of Asia-Pacific”.

The biggest prize ahead, potentially, remains a free trade deal with the US. But it appears to be a long way off. The US president Joe Biden remains reluctant to enter talks because of his concerns about the UK-EU row over the Northern Ireland protocol.

In truth, Brexit trade deals are about making the best of a bad show. It’s worth remembering that analysis by trade academics published by The Independent in November found that trade losses from leaving the EU are around 178 times larger than expected gains from Brexit trade deals.

Even if the government strikes a series of new agreements, Britain is engaged in a salvage operation. For all the talk of “opportunities”, the post-Brexit era is an exercise in damage limitation, after putting up trade barriers to our closest and most important economic partner.