Empowering the ‘tilt’: The impact of free trade agreements

On 28th February, the United Kingdom (UK) and New Zealand signed an agreement in principle[↗] for a brand new free trade agreement (FTA). The agreement will scarcely impact either economy, and may even be a net-negative[↗] for particular areas of the UK. It is, however, positive for British objectives in the Indo-Pacific, as it furthers the economic integration of ‘Global Britain’ into the region. It also strengthens bilateral relations with New Zealand, a partner who in recent times has conducted shrewd diplomacy in managing regional affairs. As the UK becomes more involved in the Indo-Pacific, it may need to navigate certain political issues differently, and can learn from New Zealand’s approach.

Trade between the UK and New Zealand is not insignificant, but it is small in comparison to each respective nation’s trade with their major partners. According to data[↗] provided by the Office for National Statistics, the UK exported £1.2 billion worth of goods and services to New Zealand in 2020, and imported £1.0 billion in the same period. This sees New Zealand account for 0.2% of Britain’s total import and export value in 2020, and the UK 2.5% of New Zealand’s export value and 3.5% of its import value for the same period.

When the agreement comes into force, it will not have much of an impact on the UK and New Zealand’s respective economies. It is predicted[↗] that the trade deal will have little impact on Britain’s Gross Domestic Product (GDP) and increase[↗] New Zealand’s GDP by roughly 0.3% over the course of 15 years. These numbers are hardly exciting, and if anything, there are concerns[↗] that the agreement may have negative effects on Britain’s economy, particularly the agricultural sector. New Zealand has lower animal welfare standards[↗] than the UK, and the gradual liberalisation of meat imports threatens cheaper Kiwi meat entering the British market and undercutting local suppliers. Similar fears[↗] have arisen from the FTA between the UK and Australia. 

The FTA becomes more significant, however, when viewed through the lens of the UK’s Indo-Pacific ‘tilt’ – outlined in the 2021 Integrated Review[↗]. Drafted from scratch, and underscoring Britain’s ability to strike trade deals, and subsequently enhancing bilateral relations with Indo-Pacific nations, the FTA was compiled relatively quickly – negotiations begun in June 2020. The UK’s desire to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is also furthered. New Zealand’s approval is one of the many prerequisites for British membership, and Britain’s agreement on quotas and the removal of tariffs for certain Kiwi products in the agreement has secured it. The UK now has trade agreements in place[↗] with nine out of the 11 members of the CPTPP and is in the final stages[↗] of membership negotiations.

CPTPP membership is important for the UK’s Indo-Pacific interests as it will further integrate the country economically in the region through a more flexible trade policy. Membership of the CPTPP also has geopolitical implications as it somewhat reflects the changing power structure of the Indo-Pacific. The People’s Republic of China (PRC) also seeks membership, but human rights abuses and the use of coercive economic statecraft have complicated the Chinese membership bid. If the UK were to join, it could push the PRC to end the use of coercive economic policies (as seen in Australia and Lithuania) as a condition for British support for the Chinese CPTPP bid. This, in turn, could aid in resolving some of the issues that currently plague bilateral relations between the UK and PRC.

The agreement is also important in the context of strengthening UK-New Zealand relations. In fact, New Zealand is an Indo-Pacific partner that the UK can learn from. As the UK becomes more economically integrated in the Indo-Pacific, it will need to become more aware of the language it uses around regional politics to not isolate or complicate relations with potential regional partners. New Zealand has proven to be adept at this, avoiding sensationalist language around, and the politicisation of issues in, its bilateral relations with the PRC. New Zealand has also cultivated a close set of relationships with South Pacific island states.

In this respect, the UK would be wise to learn from New Zealand, and should continue to think critically about its relationship with, and understanding of, various Indo-Pacific powers at the domestic level, whilst simultaneously attempting to craft appropriate strategies for engagement or competition. In the future, this will allow for more comprehensive engagement with politically sensitive Indo-Pacific partners such as India and the Association of Southeast Asian Nations (ASEAN), as well as the island nations of the South Pacific, identified as priorities[↗] by the UK and with which New Zealand maintains close relations.

The FTA between the UK and New Zealand may be economically insignificant, but strengthening the bilateral relationship remains important for Britain’s Indo-Pacific goals. New Zealand is a valuable Indo-Pacific partner with a high degree of strategic autonomy, and the UK should look to import not just its products, but aspects of its diplomacy.

Patrick Triglavcanin is a Research Assistant at the Council on Geostrategy.