Prime Minister Boris Johnson said the deal will cut costs for exporters and open up New Zealand’s job market to UK professionals.
The government hopes it is a step towards joining a trade club with the likes of Canada and Japan.
The New Zealand deal itself is unlikely to boost UK growth, according to the government’s own estimates.
Overall, only a tiny proportion of UK trade is done with New Zealand, less than 0.2%.
Labour and the National Farmers Union (NFU) said the deal could hurt UK farmers and lower food standards.
But International Trade Secretary Anne-Marie Trevelyan said it “affords opportunities in both directions for great sharing of produce” and British farmers should not be worried.
Mr Johnson and New Zealand’s Prime Minister, Jacinda Ardern, agreed the pact in a video call on Wednesday after 16 months of negotiations.
Tariffs will be removed on UK goods including clothing, ships and bulldozers, and on New Zealand goods including wine, honey and kiwi fruits.
Professionals such as lawyers and architects will be able to work in New Zealand more easily, the government said.
Step to bigger trade deal?
However, the deal is not likely to increase UK economic growth – or GDP – according to the UK government’s own assessments. New Zealand will fare slightly better as it may be able to sell more lamb to the UK.
But, like the trade deal recently struck with Australia, the UK hopes this is a step towards joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a trade bloc that includes Australasia, Canada, Mexico and Japan among others.
The UK already has deals with many of the members, rolled over from when it was in the EU. But CPTPP membership would give it more access in terms of services and digital trade.
Ms Ardern said: “I loved your use of rugby metaphors, but if we were going to continue that on, then naturally it would conclude with the All Blacks winning.
“And I know that New Zealand feels that way with this free trade agreement, but actually, it’s good for both of us, as it happens.”
‘Nothing for farmers’
The NFU said the deal, like the one with Australia, could have a “huge downside”, especially for UK dairy and meat farmers.
Its president, Minette Batters, said the Australia and New Zealand deals mean “we will be opening our doors to significant extra volumes of imported food – whether or not produced to our own high standards – while securing almost nothing in return for UK farmers”.
“The fact is that UK farm businesses face significantly higher costs of production than farmers in New Zealand and Australia, and it’s worth remembering that margins are already tight here due to ongoing labour shortages and rising costs on farm,” she said.
“The government is now asking British farmers to go toe-to-toe with some of the most export-orientated farmers in the world, without the serious, long-term and properly funded investment in UK agriculture that can enable us to do so.
Emily Thornberry, shadow trade secretary, said the government’s own figures showed the deal would “cut employment in our farming communities, produce zero additional growth, and generate just £112m in additional exports for UK firms compared to pre-pandemic levels”.
She added that the only winners were “the mega-corporations who run New Zealand’s meat and dairy farms”.
“As our economy recovers from the pandemic, we need trade deals that will boost jobs and growth, open up big new markets for UK exporters, and support our objectives to buy, make and sell more in Britain. This trade deal with New Zealand fails on every count,” she said.
The international trade secretary said British farmers should not be concerned about increased lamb imports because the lambing seasons were different in the UK and New Zealand.
Anne-Marie Trevelyan said: “I’m very comfortable it’s a complimentary – because of the seasons… consumers will have more choice.”
She said trade with New Zealand was currently worth £2.3bn a year but had the potential to increase by up to 30% by 2030.