The deal announced on Thursday will remove tariffs on 97 per cent of goods once a final agreement is settled, with all tariffs removed within 15 years. That’s expected to save exporters $37.8 million a year.

The UK is New Zealand’s seventh largest trading partner, with two-way trade worth $6 billion in the year to March 2020. The Government estimates goods exports to the UK will increase as much as 40 per cent, and benefit the economy by $970m. Removing barriers to trade will also help exporters diversify away from markets like China, New Zealand’s biggest trading partner.

“It was crucial our agreement needed to provide comprehensive and commercially meaningful access for New Zealand exporters and businesses, and especially to those sectors that are the backbone of New Zealand’s economy such as our dairy and meat producers,” said Trade Minister Damien O’Connor. “This deal achieves that.”

For dairy products, New Zealand’s largest export commodity, the UK has committed to the removal of tariffs on all products over five years or less, with transitional quotas for butter and cheese. Prior to Covid-19, butter exports were worth $1.6m and cheese $500,000.

Fonterra welcomed the news with chief executive Miles Hurrell describing it as “a fantastic result for New Zealand”.

“We appreciate the hard work and effort that has gone into securing this high-quality outcome,” Hurrell said, noting the deal had been done in challenging conditions given travel restrictions during Covid-19.

“This is a historic outcome for New Zealand,” Hurrell said. “The UK is the second-largest importer of dairy by value, with customers and consumers in high value market segments who are willing to pay for New Zealand provenance, our sustainability credentials and our innovation.

“A high-quality comprehensive agreement which removes all tariffs creates new opportunities for exporters, helps deliver value back to our shareholders and communities, and ultimately benefits broader New Zealand,” he said.

The Dairy Companies Association of NZ noted the European Union had been the dominant source of UK dairy imports thanks to the duty-free status it secured when the UK joined the EU in 1973. In contrast New Zealand had faced out-of-quota tariffs of about 45 per cent on butter and cheese, and last year made up less than 1 per cent of UK dairy imports.

“This agreement will provide a long-awaited level playing field for New Zealand dairy exports to the UK market,” said association chairman Malcolm Bailey.

He said it contrasted starkly with the dairy tariff fortresses in the EU, United States, Japan and Canada.

For sheep and beef exports, quota volumes will increase over time, with all tariffs eliminated after 15 years. Prior to Covid-19, sheep meat exports were worth $366.1m and beef $4m.

The New Zealand red meat sector has not had quota-free access to the British market since 1973 and industry leaders said the agreement was a significant boost for the sector.

The UK’s exit from the EU saw New Zealand’s 1300 tonne beef quota split between the UK and the EU, leaving New Zealand with only 454 tonnes of beef access into the UK. Outside of this quota, New Zealand beef exports attracted tariffs of up to 70 per cent, meaning virtually no out-of-quota trade occurred.

“Improved access will allow companies to deepen and expand relationships, and crucially, compete on a level playing field with our international competitors,” said Meat Industry Association chief executive Sirma Karapeeva.

“While the red meat sector is disappointed in the length of the transition period, and quality of access is often in the detail of trade agreements, we recognise that this was a difficult negotiation and want to acknowledge the hard work of negotiators and the minister to achieve this result,” she said.

“With full tariff elimination after 15 years and quota volumes that grow until that time, companies will be able to build their interests in the United Kingdom market.”

Federated Farmers said the free trade deal was great news for consumers and farmers in both countries, with national president Andrew Hoggard describing the result as “impressive”.

Hoggard said there had been a worrying trend of growing protectionism for agricultural products since the outbreak of Covid-19, and the agreement showed trade liberalisation was the way forward.

He said the movement of goods and services from and into the country was vital to the country’s generally high standard of living.

“In the past two years we have all been starkly reminded of this as our country has lent heavily on our global exporters to maintain our economy,” he said.

Attention would now turn to securing an agreement with the European Union, he said.

National Māori Authority chairman Matthew Tūkākī said the deal would be a significant opportunity for Māori, from young entrepreneurs to those involved in agribusiness and food production.

For the seafood industry, tariffs will be eliminated on hoki when the deal comes into effect, removing a 6 per cent tariff. Tariffs on mussels, which ranged between 8 and 20 per cent, will be progressively removed over three years. Prior to Covid-19, hoki exports were worth $2.2m and mussels $6.4m.

Tariffs on wine, honey and onions will be removed from day one of the agreement. Prior to Covid-19, wine exports were worth $463.1m, honey $74.9m and onions $8m.

Onions NZ chief executive James Kuperus said the deal was “extremely positive” for the sector.

Tariffs would be reduced from 8 per cent to zero immediately, which would put New Zealand exporters on a level playing field with their competitors, he said.

“We’ll be able to supply onions into that market more competitively, counter-seasonally to their growers,” he said.

Diplomats had done well to reach an agreement given the inability to travel, Kuperus said.

NZ Winegrowers chief executive Philip Gregan said the agreement, which includes the removal of some technical barriers, was “very positive” for the industry in its second-largest export market.

Tariffs will be eliminated on apples after three years, with tariff-free access for off-season exports for the first three years. Prior to Covid-19, apple exports were worth $63.6m.

NZ Apples & Pears chief executive Alan Pollard said the UK was important for the industry, regularly featuring in the top two or three markets by volume.

Pollard said the deal was an “outstanding outcome”.

Beef and Lamb NZ, BusinessNZ, ExportNZ and the EMA all welcomed the announcement.