Benefits For NZ In Trade Liberalisation

A computer model developed by Lincoln University researchers shows New Zealand would benefit significantly if OECD countries dropped their barriers to agricultural imports.

“New Zealand would benefit more than any of the regions modelled,” says Lincoln economist Caroline Saunders, an associate professor in the university’s Commerce Department.

Dr Saunders says the model predicted a 13 percent rise in milk prices, for example. Along with greater output, this would lead to producers boosting their returns by nearly 20 percent. Other regions studied included Australia, Canada, the European Union, Japan, the United States, Argentina and Russia, as well as some smaller countries.

While there would be benefits from OECD liberalisation, the same could not be said for the European Union (EU). The model found that little would change for New Zealand if the EU dropped trade barriers because New Zealand still had preferential access. The preferential status would lose its value if the EU liberalised.

“These predictions suggest that New Zealand trade negotiators would be better to concentrate their efforts on multilateral trade links, rather than bilateral links with specific regions, such as Europe,” Dr Saunders says.

The project to develop the Lincoln Trade and Environment Model – which predicts the effect on New Zealand of other countries’ changes in trade and environmental policy – is funded by the Foundation for Research, Science and Technology. Research results will be used by the Ministries of Agriculture and Fisheries, Foreign Affairs and Trade, and by Trade New Zealand.

Dr Saunders says the model could help improve New Zealand’s competitiveness and sustainability.

“It enables businesses, policy-makers and negotiators to demonstrate the financial and environmental impact on New Zealand and other countries from existing and proposed changes in international and domestic production systems, markets and policies,” she says.

The model demonstrates innovative production methods that could help New Zealand break into high-value markets. Potential risks and benefits of targeting certain markets can be assessed before products and markets are developed.

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