Story: Britain, Europe and New Zealand

Page 3. Trade

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Until the development of refrigeration in the 1880s, New Zealand’s isolation and limited range of goods restricted trade with Britain and Europe. Wool, tallow, timber and gold were sent overseas, but anything that would rot could not travel. Once meat and dairy products could be transported, Britain became New Zealand’s dominant customer for several decades.

The ships that carried refrigerated meat and butter returned bringing British manufactured goods of all kinds. Many of New Zealand’s needs were met this way, with Britain supplying up to 70% of New Zealand’s imports in the years from European settlement to 1920. There was also a thriving market in the Pacific for manufactured items, which New Zealand helped satisfy by on-selling British goods.

Trade agreements with countries outside the Commonwealth were arranged on New Zealand’s behalf by Britain until the 1920s. The second such New Zealand-negotiated trade relationship was with Belgium in 1933 (the first had been with Japan).

Although Britain took all of New Zealand’s meat and dairy products during the Second World War and for several years after, trade had started to diversify. This gathered pace in the 1960s, including trade with the countries of the European Economic Community (EEC). At the start of the decade, Britain was taking just over half of New Zealand’s exports. By the early 1970s this had dropped to just over a third, and the continued fall was swift.

Britain joins the EEC

Although New Zealand’s strong attachment to the UK had begun to weaken by the 1960s, it was still a shock to New Zealanders when ‘mother Britain’ announced its intention to join the newly formed EEC in 1961. Until this time, Britain had not joined because of its trade agreements with Commonwealth countries. When European economies began to do better than the Commonwealth, British policy changed.

Britain’s farm

New Zealand was ‘an English farm in the Pacific,’1 said Harold Macmillan, the British prime minister who began negotiations to join the EEC in the 1960s. New Zealand politicians agreed – Prime Minister Keith Holyoake had warned Macmillan that ‘New Zealand would be ruined’2 when Britain joined the EEC if safeguards were not provided for its exports.

The British government acknowledged that New Zealand was the most vulnerable of its Commonwealth trading partners. Because of this, New Zealand was given what was effectively a veto over British membership with the EEC if it found the terms negotiated unacceptable. Instead, it chose to focus on achieving a favourable outcome for its exports under the Luxembourg agreement of 1971.

Butter or meat?

New Zealand concentrated on gaining adequate access for its dairy exports at the expense of other products, such as sheep meat and wool. The result was special treatment for New Zealand butter exports, although they were required to drop to 71% of the pre-1971 level by 1977. Although the export of sheep meat was important for the New Zealand economy, the focus on dairy products meant that European tariffs on meat remained rather high at 20%.

Trading relations since 1973

After 1973 trading relations between New Zealand and the EU were sometimes difficult. Access to the European markets for New Zealand cheese and milk powder remained limited. There was talk in the 1980s of raising tariffs on meat further due to the low cost of New Zealand meat. British Prime Minister Margaret Thatcher took up the cause for New Zealand, with the result that tariffs were reduced in return for a quota system limiting meat exports.

From the 1990s New Zealand sold value-added meat to Europe, pre-packed and chilled rather than frozen. This moved lamb into the luxury market. In France, Germany and Belgium, chilled lamb earned double the dollars paid for the frozen variety in Britain. In the 2000s the European Union was one of two key export markets for New Zealand meat (the other was the United States) which together took 50% of exports by volume.

Tough as old boots

Persuading Germans to eat New Zealand lamb was difficult – they had been sent old, badly stored mutton as food aid after the Second World War. Older Germans didn’t want to try it again. The French were also a challenge. French protectionism and the sinking of the Greenpeace protest ship Rainbow Warrior by French government agents made marketing New Zealand lamb a complicated matter.

An inevitable decline?

Britain joining the EEC may have masked an inevitable decline in New Zealand’s agricultural exports to Britain. More dairy farms, agricultural subsidies and protectionism, along with a wider range of meats other than sheep and beef, and of oils other than butter, might have led in any case to a fall in dairy and meat buying in Britain. In the case of wool the impact of the development of synthetic fibres for carpet manufacture was clear. In 1966, well before Britain joined the EEC, wool prices dropped by 40% and never recovered.

Footnotes:
  1. Harold Macmillan, At the end of the day, 1961–1963. London: Macmillan, 1973, p. 349. Back
  2. At the end of the day, p. 131. Back
How to cite this page:

Martin Holland and Serena Kelly, 'Britain, Europe and New Zealand - Trade', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/britain-europe-and-new-zealand/page-3 (accessed 13 December 2018)

Story by Martin Holland and Serena Kelly, published 20 Jun 2012