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The UK has always maintained good relations with New Zealand (both political and economic), and no better example can be provided than our long history of trade.
In 1970, Britain was purchasing a vast majority of New Zealand exports, including cheese, wool, butter and meats, but everything was soon to change upon the UK’s entry into the European Economic Community in 1973. Membership of the powerful new club required cutting existing trade ties with countries of the Commonwealth, and like many nations loyal to the crown, New Zealand was left out in the cold.
Today, only 2.3% of New Zealand exported goods go to the United Kingdom. China buys five times as much, and Japan, Australia and the United States have all become more significant. The old UK/NZ trade deal, however successful, is nothing compared to what it was.
However, after 44 years of membership in what is now known as the European Union (EU), Britain is considering pulling out. The decision will go to a public referendum on June 23rd, and the latest polls indicate a split vote for the British public.
Last week, NZ First leader, Winston Peters, traveled to London to address the House of Lords in a speech backing “Vote Leave”. He said the Commonwealth was “a dynamic powerhouse” in contrast to the failing EU, and urged voters to ignore world leaders trying to pressure Britain to remain.
Peters sees Brexit as an opportunity, not just for New Zealand businesses, but to heal a rift dating back to 1973. He wants to model a new Commonwealth free trade deal on the successful New Zealand/Australia agreement, bringing in the likes of Canada, South Africa and India.
International Business Forum executive director, Stephen Jacobi, says the big issue is time. Complex trade agreements can take decades to negotiate from start to finish. A newly independent UK will have to renegotiate its relationship with the EU, which is by far its biggest market. But it will also have to start from scratch in rebuilding relationships with 53 other countries. Jacobi says there would be a long line to negotiate with Britain, and New Zealand wouldn’t be the only ones trying to leverage the “Commonwealth heritage” argument.
As it happens, New Zealand might have bigger fish to fry anyway. Trade Minister, Todd McClay, says our interests are best served by Britain remaining in the EU. That’s because free trade discussions with the entire EU are already in train, and New Zealand wants to forge a high quality deal with all 28 member states.
“Therefore our priority would be a negotiation with the European Union” McClay says.
The UK government knows this. It has pointed out that Brexit would only be the beginning of a long period of uncertainty. At least two years will be tied up in negotiating the exit itself, let alone coming up with a new deal with the EU or other trading partners.
Jonathan Sinclair, the British High Commissioner to New Zealand, says the UK government thinks the choice is between economic security and global influence on one hand, and “a leap in the dark” on the other.
“Those that say they want to leave have yet to explain what the alternative model would be, how they would negotiate a new deal, and how long it would take.”
Maintaining access to the single market would mean the UK would still have to abide by the bureaucracy and rules Brexiteers want to cast off, such as free movement of people.
“The one thing we all know markets hate is uncertainty,” says Sinclair. “It would be emphatically risky.”
With voting day rapidly approaching, world leaders are weighing in. US President, Barack Obama, flatly told Britain it would go to “the back of the queue” for a trade deal if it voted to leave. During a visit to London this month, Japanese Prime Minister, Shinzo Abe, warned the UK would become less attractive to investors, as many Japanese companies set up in the UK precisely because it was a gateway to the EU.
The same is true of New Zealand, with more companies established in Britain that anywhere else in Europe. There are, however, plenty of other options available. Fonterra’s European head office is in the Netherlands. Fisher & Paykel Healthcare and Icebreaker both have successful operations in Germany.
Monique Surges, chief executive of the NZ German Business Association, says lots of corporations are already talking about the need to look at alternative locations. While people assume there will be a language barrier outside of the UK, Surges says Germans speak very good English, belonging to a country that houses the largest economy in the EU, is centrally located and has a good legal structure.
“I guess Brexit will force New Zealand exporters to put their historical ties aside and consider a more strategic solution.”
Commenters stress that the decision is in the hands of the British public. But New Zealanders have a role to play too – Sinclair says there are about 100,000 expats in New Zealand who should be eligible to vote, and he urges them to register.
Having done their civic duty, all eyes will be turned to the referendum results next month. Jacobi says it’s hard to see how Brexit could possibly be positive. There will be significant disruption to the UK, and by extension, to New Zealand. But whatever happens, it’s not going to be the end of the world.
“Life’s going to continue – the sun will come up again.”
Ex-pat New Zealander and entrepreneur, Shane Frith, is part of the UK’s Vote Leave campaign.
The former National Party political hopeful from Auckland has lived in London for 12 years, where he has launched several businesses and is a member of the Kiwis for Britain movement.
He said a Brexit would benefit New Zealand in two ways: allowing a new, Free Trade Agreement to be drawn up between the two countries and improve the chances for New Zealanders to live and work in the UK for longer and without having to have close familial links.
“Young New Zealanders can have trouble securing a visa to stay on in the UK past two years, and that is a direct result of Britain being in the EU. We have a shared culture and language but we are in the foreigners queue. Don’t get me wrong, I love Europe and have many good friends in mainland countries, but those links do matter.” he said.
Frith, who spent two years in Brussels as the director of the think tank New Direction, said the remain campaign was the favourite position of big businesses.
“The bureacracy of Europe is a barrier to success for smaller firms. New Zealand is seen to be a great place to set up a business. In fact, I set one up in half a day and that included bank accounts, incorporation and GST numbers. London is nearly as good. In Europe however, the same process can be very complex indeed with multiple processes to go through. New Zealanders should not be afraid of a Brexit. I have been travelling on a New Zealand passport throughout Europe very easily. Threats the City of London will decamp to Frankfurt are groundless. Frankfurt is not London. London is still the greatest seat of capital in the world in my view.“