Nikkei Conference: NZ’s Response to the Trade Challenge
Hon Paul Goldsmith
Minister of Commerce and Consumer Affairs
Nikkei Conference: New Zealand’s Response to the Trade Challenge
Mr Chairman, thank you for your introduction and for the opportunity to be here today as the Government representative for New Zealand.
Like everyone in this room, New Zealand has a stake in the future of Asia.
In the past half-century, we have transitioned successfully from being an exporter of farm products dependent on European markets, to being a more diverse economy increasingly integrated into the dynamic Asia-Pacific region.
This transition would not have been possible without the growth and development of Asia over that period – in other words without the Asian miracle.
Today, seven of our top ten markets are in Asia; we host over three-quarters of a million Asian visitors every year; and almost one in eight New Zealanders can claim Asia as a place of birth or ancestry.
So the future of Asia is our future too.
Japan was our first major economic partner in Asia and that relationship remains strong and important to this day.
Today’s Asian headlines, of course, are dominated by less rapid growth in China and the impact that is having on many countries.
But Chinese growth even at lower levels continues to deliver huge increments in wealth.
And we are seeing other major economies, notably ASEAN and India, playing a larger part in Asia’s growth story.
The past five decades or so have seen Asia’s share of world GDP double.
Accompanying that is the rapid creation of a middle class - Kishore Mahbubani has spoken of a threefold increase between 2013 and 2020 to 1.75 billion.
At the same time hundreds of millions of people have been lifted from poverty.
We have seen the opening of Asia’s borders as never before. And, at the core of this wonderful transformation has been the decision of far-sighted leaders to embrace trade.
Trade in East Asia has more than doubled since 2000 and the region has become one of the most active players as a source and recipient of foreign investment.
Starting here in Japan, successful economic development strategies have without exception made use of the power of international trade to generate wealth at an unprecedented rate.
South Korea, Taiwan, ASEAN countries and of course China have emerged as players in the world economy.
Progress has never been smooth. The recent less-rapid growth in China is evidence that China is proceeding to the next step on the development ladder – where domestic consumption, productivity increases, a better educated workforce and more technology-intensive industries will drive growth at more modest, yet sustainable, rates.
Asia’s commitment to trade and openness is still strong.
But there will inevitably be those who argue for an inward-looking approach, where trade is portrayed as a threat, not the opportunity that it is.
We need to ensure that the openness on which the regional economy is based is strengthened and that arguments for protectionism are rebutted.
Like many countries in this region, New Zealand benefited from a policy of free trade as a path to prosperity.
In opening markets overseas, we have had to tackle agricultural protection, which penalises consumers where they can least afford it – the daily necessities of life - and shifts resources away from more productive uses.
We began that process of liberalisation with our near neighbour, Australia, and we now have free trade agreements in place or in prospect with all of our main East Asian partners.
The most recent achievement in this context is of course the Trans-Pacific Partnership.
When my colleague Nikki Kaye addressed this forum a year ago it was not yet clear whether TPP could be brought together.
The challenges still facing negotiators and ministers were immense.
But in Atlanta on 5 October, ministers from the 12 TPP countries came together to announce a deal, and the agreement was signed in Auckland, New Zealand, on 4 February this year.
TPP delivers a comprehensive agreement, with 21st century rules, high ambition and a truly regional vision, involving both the world’s largest and third-largest economies along with a cross-section of developed and developing economies from across the Asia-Pacific.
It seeks to give further momentum to investment flows and the development of production and supply chains that have already allowed the Asia-Pacific region to drive global growth.
TPP also seeks to promote greater integration of the economies of its very diverse member countries and become a pathway towards a future Free Trade Area of the Asia-Pacific.
New Zealand has played a leading role in the creation of TPP and we welcomed Japan joining the negotiation in 2013.
As the second-largest TPP member economy, representing over 20% of the TPP’s combined GDP, Japan’s involvement has great significance.
TPP will provide a modern free trade agreement under which we can develop Japan-New Zealand trade and investment and unlock further value in our long-standing relationship.
TPP will support a shift already under way from commodity-based trade between us towards trade in products and services with higher added-value, underpinned in many cases by investment.
In the food sector, our two Prime Ministers announced a Partnership in Food and Agriculture in 2014, reflecting the fact that both countries have a bright future as producers and exporters of premium food and agricultural products, backed by strong country brands and reputations for top quality and safety.
We are going to see more and more collaboration in this sector, taking advantage of our opposite growing seasons, and opening channels to consumers in third-country markets – exactly the sort of business TPP is designed to support.
In the investment area, Japan has long been active in developing export-oriented processing operations overseas in sectors such as forest products, food and beverage, which add value to New Zealand raw materials.
Under TPP, we hope to see more Japanese interest in investing in New Zealand.
There are also opportunities in the field of energy.
New Zealand has been remarkably successful in boosting utilisation of renewable energy. 80% of our electricity comes from renewable sources, and we are on track for 90%.
We are world leaders in geothermal energy.
As the Japanese government pushes ahead with reform of the energy sector we are seeking to bring together New Zealand geothermal technology and Japanese engineering capabilities here in Japan and across the region.
As a longer-term project we are also examining the feasibility of a hydrogen supply chain using “green hydrogen” sustainably produced in New Zealand.
But to return to trade for a moment: to better promote the free flow of trade in our region, not only do we need to look at market access issues for goods at the border, we also need to address behind-the-border barriers to the flow of people, services, capital, and ideas.
TPP, for instance, is an example of an agreement that seeks this kind of broad economic integration and includes obligations that aim to reduce non-tariff barriers.
Reducing non-tariff barriers is particularly relevant to exports by high-value, innovative firms, an area which New Zealand, like Japan, seeks to grow.
Over time our businesses will find it increasingly easy to operate in other TPP markets.
The New Zealand government has a range of work under way to address NTBs in our main export markets.
That includes developing a cross-government approach to addressing technical barriers to trade, improving standards and conformance infrastructure, and cooperating with our Asia-Pacific partners to lift the capability of policy makers and regulators in relation to international regulatory cooperation and good regulatory practice.
Regulatory approaches can also help facilitate investment in the region.
In this regard, I welcome the 28 April signing of the Asia Region Funds Passport’s Memorandum of Cooperation by the financial market regulators of New Zealand, Japan, Australia, and Korea.
The Asia Region Funds Passport aims to reduce incompatible or overlapping regulation that may hinder the marketing of managed funds between our economies.
Managed funds can facilitate the recycling of the region’s savings, making this growing the pool of funds available for investment in the region.
So the new scheme will open up the channels for international investment flows between participating economies in the Asia-Pacific region, including Japan and New Zealand.
It will give investors in our countries more choice about where to put their money, meaning they can diversify across funds in different markets.
This in turn will deepen our region’s capital markets and support the development and competitiveness of the region’s fund management industry.
With its strong regulatory framework and adherence to international principles, New Zealand has a great deal to offer investors.
While New Zealand continues to work multi-laterally to reduce non-tariff barriers, we are also conscious that there is plenty of work to do to reduce the trade barriers that have crept into our own domestic regulation over the years.
New Zealand needs to work at achieving healthy competition, because it doesn’t always occur naturally due to our small size and distance from world markets.
We do this because we want to remove barriers to entrants coming into our domestic markets, to increase competition for the benefit of domestic consumers.
In most industries one, two or three players dominate – and that’s often necessary to achieve scale.
Without a sustained commitment to competition, New Zealand would not have been able to maintain the levels of economic performance we have seen in recent years.
As Commerce Minister, I am always looking to promote pro-competitive collaboration between firms.
This can help businesses innovate and tap into overseas markets and enable collaborative arrangements with our friends and neighbours, including right here in Japan.
More diverse markets and products have helped
New Zealand ride out the slower growth in China and the
decline in international dairy prices.
Key non-dairy industries such as tourism, international education and ICT have shown strong growth.
New Zealand’s total exports over a range of sectors increased by around 20 per cent from 2010-2015, and are now valued at more than $69 billion.
The outlook in New Zealand remains positive.
We have a strong, stable government that has robust growth and diverse exports. Taken together, our business growth policies provide the platform to make New Zealand a world-leading hub for products, talent and ideas in the Asia-Pacific region.
We see the Asia-Pacific as the place where New Zealand can realise its potential and work with key partners, like Japan, to grow the opportunities for us all.