UAE and New Zealand conclude Cepa talks to boost economic ties

The UAE and New Zealand have concluded negotiations on a comprehensive economic partnership agreement, which is expected to boost trade and strengthen economic ties between the two countries.

The trade deal, which was finalised a little more than four months after talks began in May, will remove duties on 98.5 per cent of New Zealand’s exports immediately after coming into effect, with that proportion rising to 99 per cent within three years, New Zealand’s Foreign Affairs and Trade Ministry said on Thursday.

It is not known when the deal will come into effect.

“Our Cepa with New Zealand will serve as a catalyst not only for bilateral trade but for greater exchange between the UAE and the high-growth Asia-Pacific region, underlining the scope and ambition of our foreign-trade agenda,” said Dr Thani Al Zeyoudi, Minister of State for Foreign Trade.

“The UAE is committed to expanding opportunity for our private sector by enhancing market access to key economies, and with its well-developed agriculture and food production sectors, New Zealand is a nation that holds outstanding potential across a number of industry verticals.”

Non-oil trade between the two countries in the first half of this year reached $460.3 million, up 11.5 per cent on a yearly basis.

The UAE is New Zealand’s largest trading partner in the Middle East, accounting for 50 per cent of its trade with the Mena region, and its 10th largest globally.

“This Cepa will enable New Zealand exporters to participate in the UAE’s growing and vibrant economy,” New Zealand Trade Minister Todd McClay said. “Our … agricultural goods, our strong manufacturing sector and our innovative services sector have a lot to offer to the UAE.”

New Zealand exports dairy products as well as industrial products, meat, horticulture and travel services to the UAE, while importing plastics, carpets, travel services and glass from the Gulf nation.

The announcement comes as the UAE continues to strengthen its trade ties with countries around the globe to boost non-oil foreign trade.

Earlier this month, the UAE concluded talks with Australia, and plans to hold negotiations with Japan to finalise a Cepa.

In addition to increased trade flows, the UAE-New Zealand Cepa is also projected to increase investment between the two countries.

The UAE’s investments in New Zealand passed $170.2 million in 2021, while foreign direct investment from New Zealand to the UAE rose to $74.2 million, according to the UAE's Ministry of Economy.

The latest trade deal also includes chapters on intellectual property, sustainable development, labour, sustainable agriculture, climate, and indigenous trade, according to New Zealand’s Foreign Affairs and Trade Ministry.

It also includes new commitments “which will provide greater certainty for New Zealand services exporters when operating in the UAE”, it said.

Cepas aim to reduce tariffs and remove bottlenecks that hamper trade with other countries.

The UAE is aiming to sign 26 Cepas, with deals reached with India, Turkey, Israel, Indonesia, Cambodia, Georgia, South Korea, Chile and Mauritius. Talks are under way with other countries, including Serbia and the Philippines.

Cepas are expected to add about 2.6 per cent to the UAE's economy by 2030, Dr Al Zeyoudi previously said.

In the first half of this year, the country’s non-oil foreign trade hit a record Dh1.4 trillion ($381.21 billion), up 11.2 per cent on an annual basis amid a 25 per cent surge in non-oil exports on new Cepas, the UAE Government Media Office said last month.

The UAE’s non-oil exports to its top 10 trade partners grew by 28.7 per cent during the period, while with all other nations it recorded a 12.6 per cent increase.

The country, as part of its national economic goals, is pursuing the aim of Dh4 trillion in foreign trade by 2031.

The new Cepas are also supporting the UAE's economy, which is expected to grow by 4 per cent this year, up from the previous estimate of 3.9 per cent in June, according to the latest report by the UAE Central Bank.

In the first quarter, the country's economy expanded by 3.4 per cent, with real gross domestic product reaching Dh430 billion, the Ministry of Economy said this month. The non-oil sector expanded by 4 per cent year on year during the quarter.

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Will the pound fall to parity with the dollar?

The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.

Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.

New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.

“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.

The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.

The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.

Bloomberg