Cattle photographed in New Zealand. Agriculture plays a large role in New Zealand’s economy, especially when it comes to exports.
David Clapp | Stone | Getty Images
New Zealand’s prime minister told CNBC that the country must look outside its own backyard for trade opportunities as the South Pacific island nation signs an economic partnership with the United Arab Emirates (UAE).
The free trade agreement, officially known as the Comprehensive Economic Partnership Agreement (CEPA), is seen by Prime Minister Christopher Luxon as an opportunity to expand bilateral trade between the countries and makes the UAE one of the island’s biggest markets in the Middle East.
“We’ve had a long-standing relationship over 40 years of diplomatic recognition, and now is a real opportunity for us to deepen and expand the economic relationship,” Luxon told CNBC on Monday.
“That is why the signing of CEPA, as well as the bilateral investment agreement, is very important, because in fact they are two small advanced economies in the world that actually have a lot in common and
a lot of shared values and we want to be able to work together and build that relationship.”
Key New Zealand exports to the UAE include dairy products, manufactured goods, meat, horticultural products and travel services, the government said in announcing the deal. The agreement, which is expected to take effect later this year, comes as the government aims to double the value of exports in 10 years. It said CEPA would mean 99% of New Zealand exporters of goods would be able to access the UAE market duty-free.
“This includes all New Zealand dairy, red meat, horticultural and industrial products immediately after the Agreement enters into force,” it said.
“One in four of our jobs in New Zealand is heavily related to trade,” Luxon, leader of New Zealand’s center-right National Party, which is in power until the end of 2023, told CNBC’s Dan Murphy on Monday in Abu Dhabi.
“When you see a New Zealand company exporting to the world, they are able to pay their workers
7% higher salaries and wages, and often these are our more productive companies. The message to people back home is to understand that we are a trading nation. We don’t get rich just by selling each other things in the South Pacific or New Zealand,” he said.
“We actually need to send great products and services out into the world, that are in high demand, and make sure we open up new markets like the Middle East to actually get those products as well. By doing that, we’re bringing in more money at home, which is, obviously, the way we can afford better public services like health and education,” added Luxon.
New Zealand needs an economic boost after its economy shrank last year and entered recession territory in the third quarter. The economy shrank by 1% in the July-September quarter, data published in December showed.
The decline followed a 1.1% contraction in the previous quarter. Two consecutive quarters of negative growth is generally considered a technical recession.
WELLINGTON, NEW ZEALAND – NOVEMBER 3: Future Prime Minister and National Party Leader Christopher Luxon speaks during a press conference in Parliament on November 3, 2023 in Wellington, New Zealand. Special votes cast overseas and by post were certified on Friday, finally sealing the results of New Zealand’s general election. The Labor Party was soundly defeated by the National Party, led by Christopher Luxon, who won the most votes. National will however need the support of both the ACT and NZ First parties to form the next coalition government. (Photo by Hagen Hopkins/Getty Images)
Hagen Hopkins | News Getty Images | Getty Images
Luxon said there was no doubt the last three years had been a “very challenging time” for the country, but he said inflation, to 2.2 percent in Octoberit was under control and interest rates were falling. The country’s central bank has indicated that further easing would follow at the next meeting on February 19.
“We have business confidence at the highest level in 10 years. We have consumer confidence at the highest level in three years. We have confidence of farmers the highest since 2017 so we know that we have the conditions for people to believe that there is a better future,” he added.
“Now we have to transform and really drive growth, and there’s those stronger international trade links, but also driving inward investment into New Zealand.”
Asked how he feels about Donald Trump’s return to power in the US and the possibility of tariffs on US exports as the president-elect has widely signaled (with a potential universal tariff of 10% or 20% on all goods imported into the US) , Luxon said it is in “wait and see” mode.
“We will work well with the administration that the Americans elect, and they have
elect Donald Trump and the Republican administration. And I have full confidence that we will cooperate very constructively with them. We’ll have to wait and see what the tariff policy is in terms of how it’s actually unfolding or what’s unfolding,” he said.
