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David Miller: New Zealand and Free Trade

David Miller Online: New Zealand and Free Trade - Dealing With Globalisation in the 21st Century.

Following its first year in government, the Labour- Alliance coalition has been complementing itself on its achievements thus far at the Labour Party conference in Wellington over the weekend. During the past twelve months the government has gone some way to delivering on the promises it made prior to the election but it has also come in for criticism, especially for its large spending policies, the recent drop in business confidence and its handling of Maori affairs. However one element of government policy that is encouraging is its commitment to international free trade.

The Closer Economic Partnership agreement between Singapore and New Zealand that was signed earlier this year not only marks the first such pact this country has signed with an Asian trading partner but is also a step forward towards achieving a this policy of free trade worldwide. The agreement will not only help give more stability to New Zealand’s trade and bilateral economic ties with a dynamic and prosperous economy but more importantly, to one, which withstood the ill winds of the East Asian Economic Crisis.

For those who advocate international free trade this agreement is something to be celebrated. It will not only help to further the goals of organisations such as APEC and the ASEAN Regional Forum, to which New Zealand belongs, but it will also aid the liberalisation of trade around the world. However, such measures are not welcome by all. The protests outside of the World Bank and IMF meetings and the G-8 summit earlier this year demonstrate that a section of the world community do not agree that globalisation is the way forward.

Globalisation is viewed as an ideological export of free market and trade policies by the United States and the industrialised nations, that not only have become the dominant ideological orthodoxy following the Cold War but also which extenuates the gaps between those in the industrialised world and those who cannot afford to keep up with economic development. To others, especially western liberal thinkers and those in the business community it remains the means by which the global economy should be managed, but to most it is a word not well understood.

Globalisation is not limited to finance and economics, although popular use of the term makes it appear this way. It is a portmanteau concept, however for the purposes of this column the focus is limited to the financial area. In short, it is the process by which large amounts of unregulated capital can flow across borders, along with production, which can overcome costs by relocating offshore to developing economies. It is this process that has allowed the developing states access to the massive capital injections they need to accelerate economic growth and this was the case with East Asia prior to the economic crisis. The problem with this equation is that once the capital inflow is mismanaged meltdown can occur and this is what occurred in East Asia, the reliance on borrowing starts to outstrip the actual benefits gained and once this capital flow began to ebb, then financial markets and institutions can start into free fall.

The viewpoints on such a topic are mixed to say the least. There are those who wish to see globalisation ended, who see it as a tool for Western exploitation of the developing world and a method in which to keep the economic gap between these two spheres wider than ever. On a more practical level there are those, especially in the Asian states hard hit by the economic crisis and even here in New Zealand who seek a solution where the government insulates the economy from the forces of globalisation and withdraws it from the financial markets. Malaysia has demonstrated its willingness to follow this course and other states such as Indonesia, have also debated whether to adopt isolationist policies.

Economic isolationism is not an option in the 21st Century. The world we live in is becoming more interdependent, what happens elsewhere will affect this country as the ongoing petrol costs and falling dollar demonstrates. New Zealand cannot simply back off and put the shutters up and turn a blind eye to world economic forces. We need the access to overseas markets for our goods and services and the capital injections that the financial markets can offer. This country needs trade to prosper and access to those materials and goods we cannot produce ourselves.

The present government is committed to trade liberalisation, but at the same time wishes to see a set of rules in place to govern the International system and the trade within it. A noble cause, but whether this can be achieved is another matter. Globalisation, a friend in times of growth and prosperity and an enemy in times of recession must remain a friend if we are to continue to grow economically. It is the source of wealth for this country and in a world that is reducing trade barriers New Zealand must not allow itself to be left behind.

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