Cattle photographed in New Zealand. Agriculture plays an important role in New Zealand's economy, especially when it comes to exports.
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New Zealand's prime minister told CNBC the country must look beyond 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, formally known as the Comprehensive Economic Partnership Agreement (CEPA), Prime Minister Christopher Luxon sees as an opportunity to expand bilateral trade between countries and makes the United Arab Emirates one of the island's largest markets in the Middle East.
“We have a long-standing relationship, over 40 years of diplomatic recognition, and now our opportunity is really to deepen and expand economic relations,” Luxon told CNBC on Monday.
“That's why signing CEPA, as well as the bilateral investment treaty, is really important because these are actually two small, advanced economies in the world that actually have a lot in common and
we share a lot of common values and we want to be able to collaborate and build those relationships.”
New Zealand's key exports to the UAE include dairy, industrial products, meat, horticultural products and tourism services, – said the government, announcing the conclusion of the agreement. The agreement, which is to enter into force later this year, was concluded in connection with the government's intention to double the value of exports within 10 years. It said CEPA would mean 99% of New Zealand goods exporters 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 comes into force,” it noted.
“A quarter of our jobs in New Zealand are highly trade-related,” Luxon, head of the center-right New Zealand National Party, which has been in power since late 2023, told CNBC's Dan Murphy on Monday in Abu Dhabi.
“When you see a New Zealand company that exports around the world, they are able to pay their employees
7% higher salaries and wages, and these are often our more productive companies. The message to the people of the country is that they understand that we are a trading nation. We don't get rich just by selling things to each other in the South Pacific or New Zealand,” he said.
“We actually need to put great products and services out into the world that are in huge demand, and make sure that we open up new markets like the Middle East to actually get those products. By doing this we bring more money home and of course this way we can afford better public services such as health care and education,” Luxon added.
New Zealand needs an economic recovery after its economy contracted last year and entered a recession zone in the third quarter. The economy contracted by 1% in the July-September quarter, data published in December showed.
The decline followed a 1.1% decline in the previous quarter. Two quarters in a row of negative growth is generally considered a technical recession.
WELLINGTON, NEW ZEALAND – NOVEMBER 03: Future Prime Minister and National Party leader Christopher Luxon speaks during a media appearance at Parliament on November 3, 2023 in Wellington, New Zealand. Special overseas and postal votes were certified on Friday, ultimately sealing the results of New Zealand's general election. The Labor Party was decisively defeated by the National Party, led by Christopher Luxon, winning the most votes. However, National will need the support of both ACT and the NZ First party to form the next coalition government. (Photo: Hagen Hopkins/Getty Images)
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Luxon said there was no doubt the last three years had been a “very difficult period” for the country, but said inflation in October to 2.2%.was under control and interest rates were falling. The country's central bank has signaled that further easing of monetary policy is to take place at its next meeting on February 19.
“Entrepreneurs' trust is the highest in 10 years. Consumer confidence is the highest in three years. We have Farmers' trust is the highest since 2017 so we know we have conditions where people believe there is a better future,” he added.
“Now we need to convert and really position ourselves for growth, and that's where stronger international trade links are, but also encouraging inward investment into New Zealand.”
When asked about his feelings about Donald Trump's return to power in the US and the possibility of tariffs on exports to the US, as the president-elect has broadly signaled (with a potential across-the-board tariff of 10% or 20% on all goods imported into the US) , USA), Luxon said it was in a “wait and see” mode.
“We will work well with whatever administration the American people choose, and we have
chose Donald Trump and the Republican administration. I am sure that we will cooperate with them very constructively. “We'll have to wait and see what the tariff policy will be in terms of how it actually plays out or what it plays out,” he said.