The need to get out of our comfort zone to hunt down trade opportunities

Tuesday, 25 June 2024

Tim Hurdle is a former trade policy adviser to the NZ, UK and EU governments. He was an economic adviser in two former National governments. He is a regular opinion contributor.

OPINION: The people who built New Zealand were brave enough to take a chance by going to the ends of the earth. A common thread to all our ancestors is they were not types to sit at home and accept their lot.

We need to take that lesson on board and start chasing trade and investment opportunities around the world.

We often hear a lament that we need to diversify our trade. Previous governments have engaged and established free trade agreements (FTAs) with target countries. FTAs create better access for exporters and importers by allowing trade to flow and now cover nearly 73% of New Zealand goods and services exports.

This approach has probably peaked and the International Monetary Fund has warned of “slowbalisation”. The rising political tensions and increasing protectionist tendencies since the Global Financial Crisis have brought a slowdown in trade reform. The World Trade Organisation is subject to undermining by global power rivalries.

Another problem is our key exports are commodity products, sold into the market where we get the highest price. One market will pay for fillet steak and another for mince. When we gained good access into the fast-growing, high-paying, Chinese market, we reduced the volume of our sales to Europe. Our trade with Europe had taken advantage of their artificially high prices and our special trade access negotiated after the UK joined the European Economic Community.

This has made us look at FTAs like Lotto wins. The latest ticket is to somehow overcome the literal “sacred cow” problem of trade with India and start selling our milk and beef products there.

Our ability to open new markets for our traditional products through FTAs is now constrained by our success and the slowbalisation. China is becoming a more challenging market to deal with, which might force a resurgence of our older markets under the new trade agreements. But the problem of chasing the highest dollar for the produce and only having so many units to sell, will remain.

We need to have a wider product range and a global focus. Achieving that, is easier said than done. Commerce is increasingly conducted through global value chains, which can stretch across many economies and geographies to generate wealth. An example is the way an Apple iPhone uses parts, materials and intellectual property from many corners of the globe to deliver the final device - which is also delivering services.

New Zealand must become more interlinked with the world economy to be part of those value creation chains. Business becomes integrated through investment and long-term partnerships.

A good case study is our strong two-way trade with Japan. The Japanese favour strong, personal ties and building value over decades, creating businesses like Anzco Foods, which started as a joint venture between both countries and is now a 40-year-old business. Products are carefully marketed around the world, not in a transactional or seasonal arrangement.

Building mutually beneficial relationships takes time and active engagement in the market. It means developing contacts and connections to create trust and friendships. Trying to hustle a sale after turning up from the airport does not give a sense of commitment to invest and develop.

Finding new opportunities requires us to start building new relationships with a wider range of markets. Trade relationships must work both ways and have a wider focus than the export of goods. The services sector is the fastest-growing part of the global economy.

The fast-growing economies of Africa and South America barely feature in our trade statistics. These economies have massive potential. We must be present in those markets to be part of their economy. We need to open our trade routes, making it easier to do commerce there.

The flat map of the world distorts the real distances. The actual distance between Christchurch and Cape Town is the same as between Sydney and Cape Town. Christchurch is 400 kilometres closer to Buenos Aires than Auckland. Flying into those airport hubs would make Christchurch unique in having direct connections to all continents, except Europe. Government can help airlines establish those direct routes with tourism promotion and incentives.

Our government could help business achieve new relationships by having a greater presence in the “frontier markets” – countries with massive populations like Nigeria, India and Pakistan. Often these countries have government regulations considered hard to navigate and contacts are scarce. These are places where the steady hand of a New Zealand government agent could help.

For example, Nigeria is the seventh most populated country on earth and projected to reach 400 million people in 2050. What could be the world’s fourth most populous country has no New Zealand government office.

Our ancestors got out of their comfort zone to find a better opportunity. Let us live up to that legacy.