Public Affairs & Government Relations

FTI Consulting International Trade Bulletin – 28th October

This Week In Trade

This week’s bulletin discusses the New Zealand trade deal, and how it fits into the UK’s broader Indo-Pacific objectives. We also dissect the Chancellors latest budget announcements, and their implications for trade.

FTI’s Key Headlines

Trevelyan’s first try 

Last week, the UK agreed to a Free Trade Agreement with New Zealand, the first under the UK’s new Trade Secretary, Anne Marie Trevelyan. The deal contains many provisions, including protecting the All Blacks’ ‘Ka Mate’ Haka with the UK committing to cooperating with New Zealand to identify appropriate ways to “advance recognition and protection of the haka Ka Mate”.

The rugby chat didn’t stop there. Announcing the deal, Prime Minister Boris Johnson said “We’ve scrummed down, we’ve packed tight, and together we’ve got the ball over the line and we have a deal. And I think it’s a great deal.” However, his enthusiasm was not shared by the opposite team. Emily Thornberry, shadow Trade Secretary, said the deal would “cut employment in our farming communities, produce zero additional growth, and generate just £112m in additional exports for UK firms compared to pre-pandemic levels”.

Thornberry isn’t entirely mistaken. Figures released by the Department for International Trade suggest that the deal might boost GDP by as little as 0.01%. By trade deals standards, £112m isn’t a large amount. What is at play here, however, is momentum. The UK is in free trade season. And Trevelyan has just come off the bench.  A ‘Global Britain’ is central to this Government’s gameplan, placing the UK at the heart of a network of free trading economies. The Australia deal, the Japan deal, the Norway, Iceland and Liechtenstein deals, are all about establishing the UK on the global stage. The deal with New Zealand is a continuation of this trend, with the Government betting that improving relations with the Kiwis will help speed up the UK’s entry to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Pivoting to the Pacific

The New Zealand deal demonstrates the increasing UK interest in the Indo-Pacific. In March, the Integrated Review hinted the UK would ’tilt to the Indo-Pacific.’ New Zealand and its’ Antipodean neighbour, Australia are key Indo-Pacific powers, and the UK is keen to keep them firmly inside the Western orbit, away from the influence of China. Since the Chinese ban on Australian coal, Australia has actively sought to reiterate and strengthen its relations with long-term western partners, most notably, in the form of the AUKUS defence deal in September.

New Zealand, however, is a little more difficult to convince. It was perceived as slow to speak out on alleged human rights abuses in China, and some suggest that New Zealand is unwilling to take tough stances on Beijing due to its trade dependency. This is mainly because China is by far and away New Zealand’s largest trading partner. According to the New Zealand China Council, exports to China last year were $16.7bn, more than New Zealand’s trade with Australia, the US and Japan – its next three largest trade partners – combined.

Despite the challenges posed by an increasingly aggressive China, the UK continues to move forward with its CPTPP ambitions. The CPTPP has 11 members, and the UK has recently done deals with several members, including Australia, New Zealand, and Canada. The scoreboard, so far, is looking good. With both China and Taiwan also seeking CPTPP membership it appears there is going to be a real scrum to get in there.

Taxes and Trade

Yesterday’s budget arrived to the sound of popping corks, with cuts to tax on alcohol for weaker drinks, and rises for stronger ones, as alcohol taxes were simplified across the board. A pint in the pub will cost a full 3p less, while prosecco drinkers rejoiced at the news that they are set to save almost 90p on every bottle. Sherry, though, loses its previously advantageous tax position, and faces an extra 50p in tax per bottle.

Beyond booze, the Chancellor announced two new fiscal rules, saying that public sector net debt, excluding Bank of England borrowing, must continue to fall as a percentage of GDP, and that everyday spending (current expenditure) must be paid for out of taxation, and not borrowing.

The Department for International Trade will see an increase in its budget next year, with a £67.6 million cash boost over this Parliament. Its budget will rise to £552.8 million in 2024-25, including an extra £45m for export support services, something the Chancellor claims will be crucial to raising the UK’s trade performance. However, falling exports to the EU and the wider world paint a very different image of the Treasury’s plan for Global Britain. While global trade data shows a strong recovery in peer economies, the UK is lagging behind. Across goods and services exports, the UK has not recovered as fast as its G7 peers.

In the UK, lower Foreign Direct Investment from 2016-20 explains why the UK doesn’t have the productive capabilities of its neighbours. Many say this was caused by Brexit uncertainty, and the fact the almost half the of the UK’s exports are bound for EU ports, and now face extra costs and delays, cannot be ignored. DIT, therefore, have their work cut out for them. The refreshed Export Strategy is due soon, and in the New Year, the Government will consult businesses on customs processes. Investment in lorry park facilities, roads and railways will also ease logistical pressures across the UK.

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FTI Consulting’s UK Public Affairs team works with clients of all sizes, and in all sectors, to design and deliver bespoke programmes which strengthen reputation, protect and promote interests, and generate commercial and political capital. Our approach is underpinned by our unrivalled understanding of the public policy environment and thinking of senior decision-makers, combined with sector-specific expertise and experience in delivering integrated public affairs and communications strategies across international borders and party-political lines. We offer our clients a unique advisory experience, drawing not only on the expertise of the core Public Affairs team but also FTI Consulting’s broader experience as one of the world’s largest, independent global business advisory firms.

If you would like to understand more about how we can help you, please contact Alex Deane at [email protected], Josh Cameron at [email protected] or Ollie Welch at [email protected].


The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.

©2021 FTI Consulting, Inc. All rights reserved.

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