We need more big multinational companies to match Fonterra, Export NZ CEO Catherine Beard says. Photo / File
We need more big multinational companies to match Fonterra, Export NZ CEO Catherine Beard says. Photo / File
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President Trump has sent out a tweet instructing all American business to stop trading with China. If they did (and they won't), it would break the global trading system overnight. Meanwhile, countries like New Zealand need more friends to trade with, not less, but what kind of trade deals are best? Economists Cameron Bagrie and Bill Rosenberg, from the Council of Trade Unions, plus Export NZ CEO Catherine Beard, join Josie Pagani in "She's a Hard Road Finding the Perfect Trade Deal", episode 2 of our On the Map podcast.
For the past 30 years, we've had no plan to "turbo charge" the export sector, according to economist Cameron Bagrie.
"Have we executed a strategy in regards to lifting the value-added part of the component rather than just being a volume-based player? The answer is no on that front, too."
"New Zealand is not going to get wealthy selling stuff to ourselves," he says.
We have yet to feel the full impact of the ongoing trade war between the United States and China, and economists agree New Zealand is not prepared.
In the long term, we need more "big companies" capable of becoming global players, because they've "got the reach to get the footprint … They get the beachhead", Bagrie says.
Everyone else, including small to medium businesses, follows behind.
Our next big multinational companies, to match Fonterra or Fletcher Building, will likely come from the Māori economy, Export NZ CEO Catherine Beard says.
"[Māori] are increasingly big owners of a lot of our big traditional agriculture asserts … and they re-invest for future generations. Whereas what we see with a lot of our really smart tech business is that they get to a certain size, and then they get sold off. It's not very sticky to New Zealand," she says.
That "stickiness" is how the benefits of trade will be felt more widely amongst more New Zealanders.
We shouldn't think about trade as different to the other things we do in an economy, Council of Trade Unions economist Bill Rosenberg says.
The wellbeing framework, for example, means we should "think not only about GDP and the pure economic side of things in trade deals, but also about the environment, social needs and our need for education and health", he says.
Trade agreements today are much broader than in the past. They're not just about tariffs and quotas, but about intellectual property (IP), music, the cost of medicines, and our ability to regulate.
"They impact on our ability to look after our wellbeing in a whole lot of different ways," he says.
But what drives wellbeing - the social side of the ledger – is GDP, Bagrie says.
"You've got to have the money coming in the door before it goes out."
On our latest trade deal, the CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership), Rosenberg thinks it's a "bad deal", because labour standards and environmental protections are not enforceable "throughout the whole document", only in specific chapters.
"How can you say [CPTPP] is a bad thing? The agreement's only been in place since the start of the year and exports are already up by 30 per cent."
Export NZ CEO Catherine Beard says we need more big multinational companies to match Fonterra or Fletcher Building.
All agree that the "perfect trade deal" needs to look after both sides of the ledger (economic and social), and be far more aware of the side effects of trade deals, otherwise there will be a populist backlash against trade deals in New Zealand, like the backlash seen in the United States, and against the original text of the TPP.
We also need to get much smarter about our investments overseas.
Foreign investors have done well out of New Zealand. They've picked up the cash cows. "But when New Zealand has invested overseas, we've tended to pick up the dog with fleas," Bagrie says.
At least "the glass is half full", with signs that some sectors, like kiwifruit and other pip fruit, are making the most of trade deals, and selling higher value products.
Meanwhile, dairy production, our biggest player, is still basically a commodity player, he says.
"They have a strategy but that strategy has been poorly executed."
Good trade deals make a difference. People across Asia have been lifted out of poverty off the back of trade, Beard says.
Rosenberg agrees. "But East Asian companies haven't just left it to the market. They got to where they have because of huge government action in their economies."
The On the Map podcast was made for the Herald with the support of the Ministry of Foreign Affairs and Trade. If you would like to send comments or ask questions about this podcast, please contact Josie Pagani on josiepagani@gmail.com or at twitter @josiepagani
