Story: Overseas trade policy

Page 4. New Zealand, Britain and the EEC

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Britain looks to join the EEC

In 1961 Britain announced that it was seeking to join the European Economic Community (EEC). It was a logical move for Britain, but in New Zealand it was greeted with dismay. The founding EEC nations had agreed on a ‘common agricultural policy,’ which effectively excluded outside producers from the European market. They justified this by arguing the need to secure food supply in the event of war or other disruption, and to sustain rural communities. If Britain joined the EEC it would have to sign up to the policy, and that would mean an end to New Zealand being able to export agricultural products to Britain.

Fight for life

What followed over the next 10 years was a trade policy coup. A country of less than 3 million people negotiated concessions (in the form of access quota rights to the British and European markets) from a powerful group of countries with a population of over 200 million.

To do this New Zealand needed Britain’s support. It was gained by playing on New Zealand’s wartime contribution, the strong cultural ties between the two countries, and the impact on the British consumer – New Zealand was a low-cost producer, so food prices in the UK were likely to rise if New Zealand produce was excluded from the market.

In mid-1961 the British government agreed that it would not enter the EEC unless New Zealand’s ‘vital interests’ were protected. But what those vital interests were was yet to be agreed. Negotiations started and stopped throughout the 1960s. Britain’s third application to join the EEC was submitted in 1969.

Luxembourg agreement

Agreement with the EEC was reached in 1971, but only after Britain had secured a special arrangement (the Luxembourg agreement) for New Zealand’s butter, cheese and lamb trades. The deal was for a limited period, and had to be revisited regularly over coming years, but it gave New Zealand time to diversify after Britain became a full member of the community in 1973.

In 1970 Britain took more than 90% of New Zealand’s butter exports and 75% of cheese exports. The Luxembourg agreement reduced the butter quota by roughly 17% and the cheese quota by roughly 68% over 5 years. Quantities were reduced further after 1977, to about half the 1973 levels. New Zealand continued to have butter quotas in the 1980s and 1990s – although at much reduced levels.

British exports to New Zealand

Britain had long been New Zealand’s main supplier of imports, but this was slowly declining – from 48% in the late 1930s, to 43% in 1960, and down to 30% in 1970. This was due partly to the recovery of other economies after the war, and their ability to compete on price and quality with British exporters. But it was also a by-product of Britain’s EEC membership. When Britain entered the EEC all bilateral agreements between New Zealand and Britain had to be terminated. Preferential treatment of British imports into New Zealand ended in 1977.

In 1980 imports from Britain had fallen to 14.5%. In 2007 they were less than 3%. In the late 1930s Britain took more than 80% of New Zealand exports. By 1960 it took 53%, which reduced to 36% in 1970, and 5% in 2007.

How to cite this page:

Chris Nixon and John Yeabsley, 'Overseas trade policy - New Zealand, Britain and the EEC', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/overseas-trade-policy/page-4 (accessed 20 October 2018)

Story by Chris Nixon and John Yeabsley, published 11 Mar 2010