A NZ-UK trade agreement will be another – albeit small – step in the re-ordering of global trade

There is increasing chatter in London that the NZ-UK trade deal will be announced in days, with invitations to briefings being diaried for Tuesday.

But it’s worth noting that the UK commentators seem to be excising the prefix ‘free’ from the ‘trade agreement’, perhaps reflecting better understanding that these days there is no free trade without a substantial regulatory component.

While NZ’s producers will no doubt be grateful if they get an Australian-style phased reduction of tariffs and quotas as has been briefed, the non-tariff/quota regulatory barriers will be just as important in the long run.

That at least would seem to be the view of the eminent organ, the Irish Farmers Journal, in its assessment of the currently-fraught implementation of free trade arrangements between the EU, Ireland, Northern Ireland and Great Britain (ie, the UK minus Northern Ireland).

While all farmers in the collective British Isles apparently fear “the saturation of the British market with southern hemisphere imports [in the] medium and longer term”, the Journal reckons the immediate problem for Irish farmers is the UK’s planned introduction of phytosanitary / sanitary controls on 1 October. 

“These will present to Irish farmers the non-tariff barriers that British exporters to the EU have been living with since the start of January, leading to a huge drop in export volumes from Britain to the continent”.

In his blog, Alan Matthews, formerly Professor of European Agricultural Policy at Trinity College Dublin, points out that agricultural trade is particularly vulnerable to disruption because it invariably faces “higher non-tariff barrier trade costs”.

So while the UK’s exports of goods to the EU this year are roughly back at pre-COVID levels, and its imports about 10% lower, the situation with agricultural trade is much worse.  The UK’s agricultural exports to the EU are 37% lower (although its agricultural imports are off by only 6%).

Now the current UK-EU trade figures are more than a little confused.  Not only have the UK and EU got different methodologies but pre-Brexit stockpiling and Covid have affected volumes.  But it is surely significant that the EU has been applying the full panoply of non-tariff barriers to the UK’s farm exports since the beginning of 2021 while the UK will only phase-in its equivalents from 1 October.

The trade figures may be a welcome sign that agricultural supply chains are responding even faster than expected, in some cases even before policy changes are implemented.

But they also remind us that barriers at the border are properly a subset of the domestic regulatory environment, and that the value of free trade is that it drives domestic investment and production into internationally competitive areas.  NZ farmers discovered this after Britain joined the European Economic Community way back in 1973.  There are hopeful signs that Britain’s trade negotiators understand it too.

While it worries the readers of the Irish Farmers Journal, the adoption of a more open trading stance by the UK post-Brexit has wider implications for Ireland.

It remains part of the European single market; sharing a common labour-and-services market and economic governance of Northern Ireland with its major trade partner (the UK); and has a privileged relationship with the US.  While management of this conjunction of relationships is challenging (some might even say impossible), it leaves Ireland uniquely placed as an entrepot to participate in the main global economic trends.  

One can’t help speculating if fully-committed membership of the EU will always serve Ireland’s interests, or whether some event (such as the loss of its privileged low-tax status) might prompt yet another change in the republic’s status.   With less ability to control circumstances, small countries must be both adaptable and astute in the management of their relationships.

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