NZ International Business
New Zealand's place in the world has changed dramatically over the last two centuries, from a trade perspective.
- New Zealand economy post colonisation
- The introduction of refrigeration
- New Zealand reacts to globalisation
- Major economic reforms
New Zealand economy post colonisation
Prior to the introduction of refrigeration into New Zealand in 1882, the country was developing a broad set of export products and markets to pay for the increasing development needs (imports and investment goods) of our colonial period. Much of this export trade was based on unreformed natural resources but there were efforts to increase value added products, e.g. in the form of Tainui's wheat exports from the Waikato to Australia.
The world economy was in a major globalisation phase and this aided our trade development efforts. New Zealand was turning outwards and looking beyond Australia, the United States and Britain to the world as a whole.
This period comprises the end of a globalisation era in 1914 and a period of anti-globalisation from 1914 to 1945.
The introduction of refrigeration
The period around the introduction of refrigeration into New Zealand in 1882 was one of a number of factors that changed our focus back to Britain in a major way.
From a trade policy perspective, two important trends emerged. New Zealand's export orientation rapidly swung towards the middle class consumers of South Eastern England. New Zealand's comparative advantages became concentrated into animal products for a single market. Furthermore, the prices New Zealand received were often set by inter-governmental agreement at high levels as a result of the two world wars. Our living standards rose to be the third highest amongst nations. They remained there for over 70 years, until the early 1950s.
The rich guaranteed export market in the UK enabled New Zealand to get away with high levels of import protection over this period, though the country may have begun to pay the price for this inward looking strategy almost as soon as it reached its peak in 1938. Nevertheless, living standards remained at relatively high levels until the early 1950s.
The other trend concerns import policy. Increasingly New Zealand stimulated the import competing sector of the economy through tight import controls and high tariffs. The objective was to broaden the base of jobs available in the economy which had become narrowly focused in the animal protein sector for export.
New Zealand reacts to globalisation
At the end of World War II New Zealand entered a new phase of economic development. These developments coincided with a new period of globalisation. New Zealand was slow to react to emerging world market opportunities outside Britain. The first signs appeared that New Zealand would have to develop the export market in earnest for the first time since 1882.
British guaranteed export prices stopped in 1955 and Western Europe began to draw together under the very restrictive Common Market (now EU) from 1958. The final adjustment in this phase came in 1973 when Britain joined the EEC and New Zealand's exports prospects plummeted.
New Zealand's living standards had begun slipping badly in the 1950s and 1960s as the export sector was unable to pay for the increasing imports for consumption and investment. In 1966 the World Bank advised the New Zealand Government to revise its entire trade policy stance, in particular protecting the import competing sector in the way, or to the extent, it had. New Zealand was losing its 'cash cow' for exports. Import protection was taxing export production, slowing down technological advances and impeding growth. It wasn't long before some of the highly protected sectors, like clothing, were actually shedding labour even though import protection had not been reduced. They had simply become very inefficient.
Import policy changes came slowly and sporadically over the next 30 years. This is perhaps not surprising given the conjunction of other bad luck that accompanied Britain's entry to the EEC - two major oil shocks (1974 and 1979) and slow world growth. By 1978 New Zealand's living standards had sunk from third in 1953 to 22nd place.
Major economic reforms
Early in the 1980s, the Muldoon Government began to take some major steps. A free trade agreement (CER) was signed with Australia in 1983 and a process of removing import licensing was introduced. The fourth Labour government accelerated the removal of import protection and tariff reductions after 1984. This gradual liberalisation of New Zealand's trade has continued to date.
These unilateral trade policy changes became incorporated into New Zealand's official position on Trade Policy published in 1992 and enunciated in the multi-track approach of the Ministry of Foreign Affairs and Trade:
Track 1: unilateral trade policy changes to enhance domestic competitiveness.
Track 2: multilateral trade liberalisation via the WTO (which was the GATT at the time).
Track 3: regional trade liberalisation particularly through APEC in support of the multilateral approach.
Track 4: bilateral trade liberalisation building on CER with Australia, with further agreements with New Zealand's trading partners where appropriate.
On the export side, bilateral, regional and multilateral efforts have been made to expand markets for New Zealand exports. The Uruguay Round included some agricultural trade liberalisation in 1994 - the first concerted effort at the multilateral liberalisation of agricultural trade. As part of the Uruguay Round's outcomes, the EU, Canada, the US and others have been persuaded to continue country specific tariff quotas for New Zealand.
In December 2001 the WTO launched another multilateral round of trade negotiations known as the Doha Development Agenda. The round remains to be concluded.