New Zealand wine industry turnaround held up as example of what UK can achieve post Brexit

With moves towards implementing Brexit under way shortly, Britain's farming sector has an opportunity to emulate New Zealand's dropping of subsidies and tariffs, and "race to the top", High Commissioner Sir Lockwood Smith argued during an address to Harper Adams University.

Image: Harper Adams University
Image: Harper Adams University

Smith, a farmer who has served as New Zealand’s minister for education, for agriculture and for international trade, said the country had turned around its economy over the last 30 years by eliminating regulation and protectionist measures.

Using the example of the New Zealand wine industry, which before trade liberalisation was protected by a 40% import tariff, he said: "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."

After three decades of tariff-free trade, "we earn twice as much from wine exports as we do from wool exports", he said. "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."

"The UK agriculture system has the opportunity now with Brexit to change – don’t waste it!" he told students at the specialist Shropshire university, explaining how New Zealand "wasted an opportunity" in 1973, when the UK, then the country's main food export market, joined the EEC.

"We were finally forced to take the opportunity when we became almost bankrupt in the mid-1980s," he said, leading to the country's farming sector becoming the least protected in the developed world.

Explaining the merits of this, he said: "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."

Free trade agreements deliver far greater benefits than any economic analysis would predict, he said. "The growth in our trade with China following our free-trade agreement has exceeded our Treasury’s analysis 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."

Rather than doling out subsidies, governments need to invest in skills, research and development, he added, saying: "In New Zealand we now have a very flexible up-skilling system so you don’t get people in areas with old industries that are struggling to compete, who can’t upskill to move."

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