NZ trade deal: AHDB explores the impact on UK farmers

Working with Harper Adams University, AHDB used a trade network model to assess the impact of the UK’s new free trade agreement (FTA) with New Zealand.

The New Zealand deal is the second major FTA to be agreed since Brexit, after the one signed with Australia last year. Both are major agricultural exporting nations.

AHDB’s analysis is aimed at farmers, growers, policy makers, supply chain businesses and other agri-food stakeholders.

It revealed limited opportunities for UK producers to export product to New Zealand, and a limited threat to the supply to our domestic market in the short term, as New Zealand focuses its attention on lucrative existing markets such as China.

The analysis does, however, highlight the potential longer-term risks to the UK agricultural supply chain when potential future political relationships are factored in.

• For lamb, New Zealand will increase its exports by diverting some of its existing exports (notably from China), coupled with a small increase in production. A reduction of the current level of non-tariff barriers, in both directions will lead to reduced costs for New Zealand exporters supplying the UK market. If China banned New Zealand lamb imports, New Zealand lamb exports to the UK would increase by 29,000 tonnes (69%)
• For beef, New Zealand would have to increase output and reduce the amount exported to the EU and the US in order to send more to the UK. If China banned New Zealand beef imports, New Zealand exports to the UK would increase by 7,000 tonnes (830%)
• For dairy, the potential impact on the cheese and butter trade is much more subdued, compared with the beef and lamb results. From 2018 to 2020 only an average 0.1% of the UK’s dairy imports came from New Zealand
• For pork, New Zealand and the UK are both net importers, although the UK does export some pork products to New Zealand, the EU and China. The EU and USA are significant global exporters and the model suggests that any changes to trade flows for pork as a result of the trade deal will be minimal.

David Swales, AHDB head of strategic insight, said: “Inevitably, these deals prompt debate in the industry, with farmers wondering whether this presents yet another headache in the form of cheap imports to the UK market.

“With this very much in mind, we at AHDB have again taken a deep dive into the intricacies of the deal and produced evidence-based analysis of just what the opportunities and risks are for the agri-food sector.

“It’s clear that New Zealand farmers will benefit from this trade deal with UK farmers negatively impacted. Our analysis shows that the impact should be modest, but there are risks of a more substantive impact in scenarios where New Zealand’s trade with China is disrupted.”

Mr Swales added: “While FTAs create opportunities by lowering barriers to trade, it’s important to remember they don’t immediately create new demand or supply. While our analysis does highlight that the benefits to New Zealand farmers will far outweigh those for UK farmers, it’s important to remember implementation of FTAs takes time. As a result it is unlikely New Zealand red meat, for example, will start to flood UK supermarket shelves.”