As a trade dependent economy, geographically distant from export markets, New Zealand is a firm supporter of free and open trade. We practice what we preach and have one of the most open market economies in the world.
- What is New Zealand’s trade policy?
- Why does NZ advocate free trade?
- How does free trade fit with the Business Growth Agenda?
Over the past three decades, successive New Zealand governments have reformed our trade rules by removing many barriers to imports, ending most subsidies, and ensuring that the rules relating to foreign investment are designed to encourage productive foreign investment in New Zealand. We’re consistently ranked by the World Bank and others as one of the most business-friendly countries in the world. We believe that open markets and the free flow of trade are ultimately in everyone’s best interests.
Over the past 20 years New Zealand has taken the following approach to free trade:
- Making domestic reforms, eg removing tariffs
- Working for better rules for global trade, eg through the WTO
- Pursuing bilateral trade agreements, eg the China FTA
- Pursuing regional and plurilateral agreements, eg ASEAN Australia New Zealand FTA (AANZFTA)
While FTAs are very important, New Zealand considers the WTO to be the best first option for trade liberalisation. Because most countries in the world belong to the WTO, it offers the greatest potential for progress. Its large membership means any trade-related reforms agreed in the WTO are effectively applied on a global basis.
Trade is critical to New Zealand’s economy. We can only pay for the goods and services we import from overseas by selling exports to other countries. At the moment international trade (exports and imports) make up around 60 % of New Zealand’s total economic activity. New Zealand has an open economy that places few barriers in the way of foreign service providers or imports. But our exporters - particularly agricultural products exporters - often encounter barriers overseas, such as steep tariffs, quantitative restrictions, and anti-competitive local subsidies. Other non-tariff measures such as regulatory barriers also impact services exporters. This is why New Zealand pursues an active free trade agenda. We need to establish and maintain our exporters’ access to markets that matter so we can advance and safeguard New Zealand’s interests.
Free trade doesn’t just benefit our exporters. Our open economy has meant New Zealand importers and consumers now enjoy access to a much wider and cheaper range of goods and services.
Since 2000, free trade agreements have flourished worldwide. As our global competitors develop new networks of trade agreements, New Zealand needs to match their progress or risk our exporters being disadvantaged.
New Zealand’s participation in the World Trade Organisation (WTO), the Organisation for Economic Cooperation and Development (OECD), and Asia Pacific Economic Cooperation (APEC) supports our free trade policy.
Exporting creates opportunities for business. These opportunities generate jobs for New Zealanders. Jobs allow people to realise their full potential and live the lives they and their families aspire to
The Business Growth Agenda – Future Direction 2014
The New Zealand Government’s Business Growth Agenda (BGA) aims to create a more productive and competitive economy. The agenda focuses on six key “ingredients” businesses need to grow: Export markets, innovation, infrastructure, skilled and safe workplaces, natural resources, and capital.
Our exports of goods and services represent around 30% of the economy (GDP). This is about the OECD average but well below the 40%–50% of GDP for similar-sized OECD countries. So our government has set an ambitious target of growing exports of goods services to 40% of GDP by 2025. This effectively means doubling exports between now and 2025 from around $60 billion to $120 billion. Free trade agreements will play an important role in achieving this target.
Goods make up around 75% of our exports and were valued at $51 billion in the year ending June 2014.
Agricultural Goods – New Zealand is the world’s 12th largest agricultural exporter by value. We’re the number one sheep meat exporter, the number one dairy product exporter and the second biggest wool exporter. The agricultural sector is therefore critical to achieving the BGA’s growth target. This sector has achieved productivity of around 2% per year on average since 2000. The primary sector would need to continue to deliver robust export growth at, or near, recent rates in order to reach the BGA export target and free trade agreements are one way in which we can ensure this happens.
Non-Agricultural Goods – 38% of our merchandise exports are non-agricultural goods. Our top earners include forestry products, crude and refined petroleum, and fish products; and exports of manufactured products such as clothing and electronics are growing. However, as a whole, our non-agricultural exports have only been expanding by 1% per year in the last decade. We need to up this to 5% per year if we’re to meet the BGA targets. To do this it’s critical we work to secure the FTAs we have under negotiation, and make sure we help businesses to take full advantage of our current agreements.
Services make up around 22% of our total exports and were valued at $16 billion in 2013. These exports include tourism (our largest service export), transport, education and commercial services such as IT, telecommunications, accounting and film production. It is important that we continue to negotiate high-quality comprehensive free trade agreements that cover trade in services and investment, as well as trade in goods.