Farming, International Trade and Brexit – A New Zealand Perspective

Posted 7 March 2017

New Zealand High Commissioner Sir Lockwood Smith visited Harper Adams University today, and gave a lecture on “Farming, International Trade and Brexit – A New Zealand Perspective”.

Sir Lockwood had toured the university campus and farm and enjoyed lunch with students before he addressed a full house in the Regional Food Academy.

Introducing the speaker, University Vice-Chancellor Dr David Llewellyn said: “Amongst other appointments, Sir Lockwood has served as New Zealand’s Minister for Education, Minister for Agriculture and Minister for International Trade, as well as Speaker in the House of Representatives. He also runs a beef farming operation in Ruawai, North Island, and is therefore ideally placed to provide a unique insight into the industry in New Zealand.”

Sir Lockwood began by outlining how New Zealand had turned around its economy over the last 30 years through a reduction in both regulation and protectionism and then shared seven lessons for the UK as it prepares to leave the European Union.

1. Don’t waste an opportunity for change – Sir Lockwood explained that New Zealand wasted an opportunity in 1973, when the UK joined the EEC and removed itself as New Zealand’s primary market for exports. He said: “The UK agriculture system has the opportunity now with Brexit to change – don’t waste it! We were finally forced to take the opportunity when we became almost bankrupt in the mid-1980s. You are different from New Zealand. The UK is not broke. We were. Your economy is doing quite well and Brexit does provide a chance to re-look at the way you are doing things for the future.”

2. Subsidies or direct payments protectionism ultimately damage an industry.
“I don’t care what industry it is, I promise you subsidies or direct support payments will damage an industry. Why? Because they reduce the responsiveness of that industry to the market place. They limit the uptake of science and technology. They restrain innovation and they hamper productivity growth. All essential things for a modern, dynamic industry.”

3. Opening up to global competition doesn't necessarily lead to a race to the bottom
“In the 1980s in the middle of the financial crisis, New Zealand had a wine industry that was also in crisis. It was protected by a 40 per cent tariff on imported wine. But New Zealand made cheap wine. You could not export the stuff; no self-respecting person would drink it. So we had an industry in absolute crisis. In 1985, when the subsidies and tariffs were all wiped, that 40 per cent tariff was wiped. Today, 32 years later, we earn twice as much from wine exports as we do from wool exports. Now that our wine faces open global competition, it commands the highest price of any country in this sophisticated market in the UK. Opening up to competition didn’t lead to a race to the bottom, it led to a race to the top, by improving quality.”

4. Free trade agreements deliver far greater benefits than any economic analysis would predict. “The growth in our trade with China following our free-trade agreement has not just exceeded our Treasury’s analysis by 100 per cent, it has exceeded it 11-fold. In opening up free trade routes you are not just opening up markets but also opening people’s minds. It’s how you alter the mind-set of your industries and businesses that makes the real, big difference.”

5. You need sound wider economic policies.
“In NZ when our economy opened up, over the next decade we radically reformed public sector policy, public finance policy, employment law… all those sorts of laws were all significantly reformed to remove impediments to our ability to compete globally.

6. Governments must invest in research and development and skills development.
“Far greater benefit will come from tax-payers’ money going into research and development, and skills development – what is happening in this institution [Harper Adams] – than direct payments.”

7. Skill development systems need to be flexible.
“In New Zealand we now have a very flexible up-skilling system right across the country so you don’t get the problem where people in areas with old industries that are struggling to compete are stuck in those industries and can’t upskill to move.”

After the lecture, Dr Llewellyn commented: “Sir Lockwood gave our students and staff much food for thought about the way in which we have to address the challenge of Brexit and the establishment of new trading arrangements with the EU and other parts of the world. His message was upbeat and welcome.

“He added that we are leaving the EU – not Europe – and that we will need to work closely with other nations on our doorstep, and they with us, to stand the best possible chance of economic success over the next few years. We were fortunate to be able to have a visitor with such a wealth of experience – not only in farming and in New Zealand’s political environment, but on the world stage in terms of international trade negotiations, and we are grateful to Sir Lockwood for the time he spent with us today, sharing his thoughts on these important issues.”