Amidst the political topsy turvy of recent weeks came the news that the Government has refreshed its Trade Recovery Strategy.  That’s good news because, for exporters and the global economy as a whole, it’s tough out there.

The pandemic is by no means over, there is war in Europe, supply chain bottlenecks are disrupting markets, inflation and protectionism are taking their toll.

We need to look no further than Putin’s abominable war in Ukraine to see why the chances of an early recovery in the global economy have been wrecked.

The better news is that New Zealand’s exports are continuing to flow to global consumers. As it did at the height of the pandemic, trade is upholding the New Zealand economy.

Last year New Zealand’s exports grew by 6%.

Both exports and imports remain hampered by an exponential rise in shipping rates which makes getting products to and from market exceptionally difficult and expensive.

One market stands out from the rest in terms of growth: exports to China grew 21% in 2021 and China now takes 32% of New Zealand’s exports.

While other countries like Australia and Chile have an even larger exposure to China, New Zealand’s trade with China is growing very rapidly – eleven years ago, the figure was only 12.8%.

This has led to growing debate about whether this trade concentration on China poses risks and whether New Zealand should be taking steps to “diversify”.

In fact this concern about trade with China is not just to do with economics, but with geo-politics, and the unhealthy competition that exists today between the world’s largest and second-largest economies.

Dragons are back on our screens at present, but the rise of the Chinese dragon

has been a game-changer in the first quarter of the 21^st century.

It is sometimes claimed that New Zealand risks being forced to choose between China and our more traditional allies.

In fact, New Zealand chose a long time ago to be an open, liberal, market  democracy, which naturally leads us to identify with others sharing similar values.

A growing economic relationship with China need not change that, nor has it done so to date.

It does however require New Zealand, particularly in these difficult economic times, to manage carefully our relationship with China, particularly as Chinese consumers show no sign of wanting to stop buying the things we have to sell.

Diversifying New Zealand’s export profile is frustrated by the lack of access to alternative markets.

The recent NZ UK FTA a very good agreement from New Zealand’s point of view – one of the best we have ever negotiated.

The agreement delivers for New Zealand commercially meaningful outcomes for all items of export interest from day one, backed up by world-class trade facilitation and co-operation mechanisms that can address any problems that might arise.

The Agreement includes the first ever stand-alone chapter on Indigenous co-operation we have put into an FTA.

In some key areas like the environment, climate change and the digital economy the FTA goes much further than previously.

The news is not nearly as good with the EU, where agreement on an FTA was reached in the context of the Prime Minister’s June visit to Europe.

This was a long and arduous negotiation with a 450-million strong consumer market, ranking as our third-largest export destination.

It was always going to be hard to secure ambitious outcomes for dairy and meat and so it proved.

Agricultural protectionism is still alive and well in Europe.

On the positive side the FTA delivers valuable tariff free access for a range of important sectors including apples, kiwifruit, other horticulture, honey, fish and wine, as well as better access for services and manufactured products.

There are a range of other positives too – including another chapter on Māori economic co-operation, enhanced and enforceable provisions on sustainability and climate change and the digital economy.

Unfortunately, despite the best efforts of negotiators, the agreement in principle does not deliver commercially meaningful outcomes for our largest exporters, dairy and meat.

Even after full implementation, the dairy and beef sectors will face small quotas and high tariffs, restricting their ability to grow the market in a commercially meaningful way. 

That means that the agreement’s usefulness in terms of trade diversification will be limited.

There’s no doubt that turbulence in world trade is causing problems for our trade recovery.

New Zealand’s free trade agreements – when they address our key interests – can provide some mitigation against the worst effects of economic disruption.

Opening new markets, keeping them open and putting in place effective rules which allow trade to flow and minimise costs are of vital interest to the country as a whole.

The complex geo-politics are far from easy to manage, but manage them we must.

In a world full of turbulence and risk, our exporters need all the help they can get.

This post was originally published by NZ Herald, and written by Stephen Jacobi, Executive Director, NZ International Business Forum