Global Economic and Trade Update for New Zealand Businesses - 30 October 2020

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Domestic Update

The Ministry for Primary Industries (MPI) has announced(external link) new requirements for the safe transport of livestock by sea. These findings come from the independent review into the animal welfare assurances MPI receives from exporters which was launched after the loss of the Gulf Livestock 1 in early September. The review found that New Zealand has robust checks and balances in place to ensure the welfare of livestock transported by sea, but that MPI can strengthen parts of the Animal Welfare Export Certificate (AWEC) process.

Industry stakeholders and freight forwarders continue to report sea freight import and export delays and increasing costs. In addition to forestry and wine exporters, some avocado exporters are now expressing concern that delays are impacting the quality of their product landing in market. The Ministry of Transport is continuing to engage with MFAT, MPI and other agencies to assess the extent of the problem.  Congestion from deferred import activity from earlier in the year due to global COVID-19 shutdowns and schedule disruption caused by recent industrial action at the Australian ports continue to be seen as the main causes. Increased freight costs are likely to impact SMEs that are more exposed to market price fluctuations.

Global & Multilateral Update

In the race to be the next Director-General of the WTO, the General Council Chair and New Zealand Permanent Representative to the WTO, Ambassador David Walker has reported on the results of the consultations to appoint the next Director-General. The final two candidates are South Korea’s Yoo Myung-hee, and Nigeria’s Dr Ngozi Okonjo-Iweala, which ensure that for the first time the WTO will be headed by a female. Following the conclusion of the meeting a WTO spokesperson said that the candidate that had the best chance of attaining consensus amongst the WTO membership is Dr Ngozi Okonjo-Iweala and that consultations on the way forward will start immediately.

The WTO reported(external link) last Friday that global trade in services in the second quarter of 2020 plunged by a record 30% year-on-year, with the travel sector particularly hard hit by COVID-19 and associated restrictions. Declines in services trade were recorded across all regions and most services sectors except for computer services, which was buoyed by a shift towards remote working and a rising demand for digitalization.

Regional updates

Australia

In a speech about major risks to Australia's financial stability on Tuesday evening, the Reserve Bank Australia (RBA) assistant governor Michele Bullock said Australia's economic recovery from the COVID-19 recession will be "unpredictable and uneven". The RBA expects non-performing loans to continue to rise as falling incomes make it hard for households to meet repayments. The RBA says the likelihood of a major bank failing is "very low, but there are vulnerabilities".

Asia

China’s National Bureau of Statistics reported(external link) this week that China’s GDP grew by 4.9% in the third quarter (Q3). On the back of 3.2% GDP growth in Q2, China recorded GDP growth (of 0.7%) for the first nine months of 2020, putting China on track to be one of the only global economies with GDP growth in 2020. This is a sharp turnaround from the historic 6.8% decline in China’s economy over the first quarter. Q3 growth was led by the secondary (manufacturing) sector, which grew by 6%. The primary sector also expanded 3.9%, and the tertiary (services) sector was up 4.3%. Consumer spending returned to growth this quarter for the first time, supported by increased consumer confidence and a continued increase in real household income.

China’s State Postal Service published(external link) a notice on 20 October noting the predicted increase in postal services required before the end of the year. The notice called for further strengthening of COVID-related ‘prevention and control’ measures and directed the postal service to “implement advanced control” around the processing of all “imported cold-chain mail shipments.”

The Japan-United Kingdom Comprehensive Economic Partnership Agreement (CEPA) was signed on 23 October. The aim is to complete respective domestic procedures by the end of the year, with entry into force on 1 January 2021. The agreement largely rolls over the provisions of the Japan-EU Economic Partnership Agreement, with enhancements in areas such as digital and data, financial services, food and drink, and creative industries. Following signature, UK Government has published the following suite of documents(external link), including a summary(external link) of the Japan-UK CEPA.

New Zealand goods exports to Viet Nam (our 15th largest two-way trading partner) have stood up well despite the pandemic, with agriculture, food, and forestry products making up roughly 93% of New Zealand exports to Viet Nam. In the year to June 2020, whole milk power, skim milk powder, fruit (mainly apples) and frozen fish exports significantly increased, while timber products have seen a decrease. Value-added dairy products (liquid milk, butter, cheese, infant formula) remained fairly steady, and other processed food (supplements, formulated powders) have seen significant growth. In the same June-June timeframe, two-way trade in services with Viet Nam has decreased by 1.7%, with further declines expected through 2020 and early 2021 due to travel restrictions. E-commerce in Viet Nam is growing as Vietnamese consumers are increasingly purchasing online, particularly at the premium end of the market where New Zealand products compete.

Europe

The UK’s transition period from the EU will end on 31 December 2020, when it will leave the EU customs and single market. Information about how Brexit may affect New Zealanders, including exporters, can be found here.

Market reports released this week

  • An update to MFAT’s monthly report on international supply chains can now be viewed here.
  • A report on food purchasing trends among consumers in the UK and Europe is available here.
  • An economic update on China was prepared by the New Zealand Embassy in Beijing and can be found here.
  • Last week’s global economic and trade update can be found here.

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Disclaimer

This information released in this report aligns with the provisions of the Official Information Act 1982. The opinions and analysis expressed in this report are the author’s own and do not necessarily reflect the views or official policy position of the New Zealand Government. The Ministry of Foreign Affairs and Trade and the New Zealand Government take no responsibility for the accuracy of this report. 

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