UK turns to NZ for free trade advice

UK international trade secretary Dr Liam Fox is in New Zealand, and in an interview with TVNZ1’s Corin Dann, he revealed the UK is looking to New Zealand with its “greater global significance” for ways to form trade deals in a post-Brexit environment.

“We got a lot of help from New Zealand when we were setting up our new department for international trade – how were things operating? How did the mechanics actually work? And that’s been very helpful to us,” said Dr Fox. When asked about the potential of a trade deal between the UK and NZ, Dr Fox pointed to the fact that UK exports to NZ are up 27% in the last year, but fell short of a commitment, saying, “We’ll wait to see, as we leave the EU, what freedom we have and what timescale to make those agreements.”

Mr Fox assured New Zealanders that although one of the reasons many voted in favour of Brexit was to gain “control over our own borders so that we would determine who came to Britain”, he says any deal with New Zealand would not close the door to New Zealanders living there. “We want to make sure there’s certainly not less access than there is today,” he said.

Q + A
Episode 38
LIAM FOX
Interviewed by Corin Dann

CORIN Welcome back, and good morning to Dr Liam Fox, the UK’s international trade secretary. And welcome to you. Thank you very much for joining us on Q+A. Great to have you here.

LIAM Thank you very much.

CORIN A lot of talk coming out of your government recently as it enters into some pretty hard negotiations over Brexit that there is a possibility that no deal is done, that you literally are out, no trade deal. How realistic is that?

LIAM Well, in the UK at the moment, you get every possible scenario being played out in the media, understandably. We want there to be a deal with the European Union. We think that’s in our mutual interest to do so. But of course we’re not afraid if there’s no deal and we have to operate on WTO terms. We do that with most of the trade that we see in the world, and that’s not anything that would come as a surprise. But we think that we need to get into the discussions about end-state with the European Union, not just for Britain and not just for Europe, but for our trading partners round the world and for investors round the world who will want to get some certainty about what the European market will look like. For example, in a world where we’re trying to turn back the tide of protectionism, to see Europe introduce impediments to trade and investment that don’t exist today would send the wrong signal to the global market.

CORIN The problem you’ve got is that you may have to pay them – I think I’ve seen £40 billion – in a divorce settlement. Is that palatable to the British public?

LIAM Well, there can’t be a divorce settlement until we see what the full package looks like. To be a British politician and say to UK voters, ‘You’re going to have to pay just to get into the negotiations that we all have a right to have under Article 50,’ wouldn’t be acceptable. And in any case, whatever we decide to do in terms of the payments that we make because we believe that we had obligations that we entered into, will be dependent on that final solution that would be quite unreasonable for anyone to expect taxpayers to stump up the money, not knowing what they’re going to get for it.

CORIN There are implications in all this for New Zealand. At the moment we obviously have a quota with the EU in terms of our agricultural products, in particular meat. Now, I understand the EU and the UK are dividing that up. And certainly, our meat producers, and I know Australia is the same, is not happy with that arrangement. Can you give an assurance that we’re not going to be worse off?

LIAM Yes. We have a process which is being played out in Geneva at the World Trade Organisation, where we have to separate ourselves out from the European Union. Clearly, there is, as you say, an EU quota. The question is, how much does Britain take of that? And we want to be fair to those who are currently exporting to the UK, including New Zealand, and to be fair to our own producers and to be fair to our own consumers. And the best way to do that was to keep the market stable as it is now. And remember, this is a two-way process. First of all, we want to get stability as we leave the EU. And secondly, we’ve got the possibility of looking to a more liberal trading relationship through a new free trade agreement later on. So the way that we did that was to say, ‘Well, let’s look at what has actually happened in the UK market for a range of commodities and a range of countries. How much have they actually sold into the UK over the last three years?’ And even if that’s a very high proportion of the EU quota, we will call that our baseline quota.

CORIN Will New Zealand producers get to choose where their product goes? Because if the demand is stronger in Europe and their quota is full, yet it doesn’t get filled up in the UK, we would be at a disadvantage.

LIAM Well, that is a question, really, that the EU27 have to ask later, because in terms of the food quota, countries have said to the European Union, ‘Well, we didn’t get a bigger quota after countries joined after the UK; why should we get less of an EU quota after Britain leaves?’ Now, that’s an issue that needs to be dealt with between those countries at the EU27. We have said that we will share our methodology with the European Union, because we want there to be a fair settlement overall.

CORIN Is there a danger here? I mean, obviously, there’s a possibility that you’re relying on the World Trade Organisation rules post-Brexit if it doesn’t go how you want, that you could in fact find yourself in a dispute over WTO rules with this quota arrangement.

LIAM Well, it’d be quite difficult to go into a dispute with the UK on the basis that harm has been caused, because if the access is what’s been enjoyed in recent years and the UK producers are getting the same entry into the market as we had before, it’s hard to say that people have been harmed. And of course, as I say, from the UK’s point of view, it’s the beginning of a two-stage process, because we will want to get our own established trading relationships with countries outside the EU when we leave. And so there’s the basis for a further discussion. As for what happens between New Zealand and the European Union 27, when Britain leaves, that obviously is a separate discussion.
CORIN Let’s move to that issue of a free trade agreement potentially between the UK and New Zealand. You say we won’t be any worse off with the Brexit situation – how would we be better off under a free trade agreement, given your farmers, your agricultural sector is already pretty hostile to the likes of New Zealand Lamb and those sorts of things?

LIAM Well, one of the things we have to do is to learn from New Zealand and how you take an agricultural economy, you know, of less than 5 million people and turn it into an ability to feed 40 million. And I’ve been very focused on looking for UK farmers getting better access to export markets abroad, because that’s really where the future prosperity for the agricultural sector will lie. And the big emerging economies, and not just emerging economies, but emerging middle classes in places like China and India, who are going to have to have a big increase in the protein that they import to feed their people. The UK has enormous potential to do that. And there’s a lot that we can learn from New Zealand.

CORIN You can learn, but we don’t have a great market for you here. I’m just wondering what we can offer the UK in terms of market and what we might get in return.

LIAM Well, actually, UK exports to New Zealand are up 27% in the last year – things like cars and so on. But what we have in common is that we both believe in free and open global trade. And that’s very important. People may say, ‘Well, why are you spending so much time with New Zealand? They’re a relatively small economy.’ It’s because it has much greater global significance than just the size of its economy. New Zealand has been out there leading the charge for global free trade, and that’s what we believe…

CORIN So you can test things out a bit with us, do you think?

LIAM I think there are things that we can learn on how trade agreements were done. We got a lot of help from New Zealand when we were setting up our new department for international trade – how were things operating? How did the mechanics actually work? And that’s been very helpful to us. And the British government wants to champion global free trade. We have set a billion people free from abject poverty in the last generation because we believed in free trade. And we owe it to future generations to carry those gains with us. And New Zealand will be a very key strategic partner in that battle for global free trade.

CORIN Would you look to do a deal with Australia at the same time? Is an ANZAC deal a possibility? You’ve talked about it being basically the next two countries after the US in the list. Could it be done at the same time?

LIAM Well, there are all sorts of possibilities that are open in terms of where we might want to do our future trade agreements, and the geometry of all that is moving at the moment. We don’t know where TPP will end up, for example. And we’ll wait to see, as we leave the EU, what freedom we have and what timescale to make those agreements. But what’s absolutely clear is the direction of travel, that we see a number of countries round the world as being good partners for the UK in trade but also globally in terms of how we see that trading environment develop. And it’s extremely key for all of us that we stand up to some of the voices of protectionism and that we’re making that case for free and open global trade. And we’ve got not just that trading relationship, not even our ties of heritage, but we share those values. We’ve got the FPDA, the defence relationship that we’re involved in. We have a strategic voice in Asia-Pacific, and for us, Australia and New Zealand are countries that are key to getting the development of the Asia-Pacific.

CORIN And one of the big concerns, I guess, from New Zealanders, is the movement of people. I know it’s a very big issue in the UK with Brexit. But is the UK likely to keep those doors open to New Zealanders going in? Would that be part of a free trade agreement, part of the negotiations?

LIAM It would certainly be one of the elements that we would look at, but you need to remember there are 50% more Australians and Kiwis in Britain than there were 20 years ago. The visa capability’s not fully met yet. And yes, we’ve always had a distortion in our immigration and people movement issues, because we have compulsory free movement of people while we’re in the European Union. Now, that’s not going to happen post-Brexit, because that’s one of the reasons that the British people, I think, voted to leave the European Union – to get control. When we get control, we can make sure there’s a better balance between EU citizens and those from other parts of the world. One of the key reasons that I voted to leave the European Union was to get control over our own borders so that we would determine who came to Britain.

CORIN And better balance – does that mean more or less from countries like New Zealand?

LIAM Well, we want to see what the overall envelope is that we set, but we want to make sure there’s certainly not less access than there is today.

CORIN Just one very quick question – New Zealand has put a stake in the ground, this government, on trade deals – investor-state dispute settlements, the ISDS, a controversial clause in terms of the TPP. When you do future trade deals – you’re going around the world trying to do many of them – will you have that clause there? Are you open to that being gone?

LIAM Well, how we protect investors is very key. And if we’re in a global trading environment where we want investment to move from one country to another, we want wealth funds to move into countries to provide capital for infrastructure and so on, it’s quite reasonable that those investors want proper protection in any relationship that they have. How we do that I think is the question, not if. And I think that that’s a really big debate that we will be having in Argentina at the trade ministers’ meeting next month. But hopefully we’ll get a chance to get some of our UK and New Zealand lines straight for that debate over the next few days.

CORIN Dr Liam Fox, thank you very much for your time. We appreciate it very much. Thank you.

LIAM Thank you.

ENDS

Please find attached the full transcript and the link to the interview

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