Singapore has annual exports of NZ$68,800 per capita, Ireland $49,700 per capita and New Zealand only $8400 per capita. Singapore's annual exports are 1.5 times of Australia and New Zealand combined while Ireland's total exports of NZ$190.8 billion are greater than Australia ($151.8b) and New Zealand ($32.7b) together.
In 1991 Ireland and New Zealand had the same GDP but according to the latest figures and foreign exchange rates the Irish economy is now twice the size of ours.
A study by Brownie and Dalziel shows New Zealand exports are concentrated in low-growth commodity industries. Our exports haven't performed too badly, considering the commodities we were in, but unfortunately we were in commodities that have had relatively low import growth.
Another study by Lattimore and McKeown was not so positive. It found that after taking account of both our commodities and our trading partner's growth, New Zealand's export growth was marginally below its expected level. The shortfall in the 1985-93 period was slightly less than in the 1970-85 period, suggesting that deregulation might have had a small positive impact on our export performance.
The overall message from the two studies was the same: there has been a continuing move in world trade from primary goods to manufactured goods and New Zealand's export growth has been significantly lower than the growth in total world trade because of our heavy reliance on food and other land-based products.
There are two main reasons why demand for manufactured products has increased more rapidly than the demand for agricultural products.
Agriculture protectionism. Many countries, including developed countries, protect their agriculture industries by having tariffs and quotas on competing imports. This is because they have well organised farm lobby groups that apply pressure to governments to keep protectionist measures in place.
Countries are also reluctant to see the production of food left to market forces, particularly if this means that nearly all of their food supply is imported. Governments feel that they have a responsibility to ensure that food supply is secure, especially in times of crisis, and a heavy dependency on imported food is contrary to this objective.
The pattern of economic development. As a country becomes wealthier consumer preference moves from food to other items, especially electronic equipment, leisure products and services. There is a limit to the amount of food one can eat but there are few limits in regard to most other items. It follows that as the world's population gets wealthier, the growth in demand for agriculturally-based products will be less than the growth in demand for other products.
There is no accurate database for international trade in services but the New Zealand Institute of Economic Research estimates that New Zealand's share of world tourism has stayed relatively constant over the past decade. In many other areas such as educational services, which includes the teaching of English as a second language, New Zealand is performing well.
Another study by Ballingall and Briggs concluded that Australia's export growth has also lagged behind the rest of the world because of the commodity composition of its exports. But economic growth has been higher across the Tasman because of a strong contribution from domestic demand.
Domestic demand can make a substantial contribution to economic growth in a large country but small countries are more dependent on exports to achieve long-term sustainable economic growth.
In the late 1970s and early 1980s New Zealand had a proactive export strategy but this was abandoned when reforms were introduced in 1984. The export tax incentive scheme was motivation for companies and visits to listed companies 20 years ago were mostly spent talking about exports.
But all forms of incentives and government intervention were abolished in the mid-1980s as economic policy refocused on trying to get the right price signals for investors. The reformers believed that if investors were able to see where they could get the greatest return then they would put their money into growth areas and the export sector would benefit.
Unfortunately price signals have indicated that it's easier to make money from buying and selling assets in New Zealand, particularly property, compared with investing in the export sector. There has been some worthwhile investment in export manufacturing but the benefits have been minimal, in a national sense, because our non-agriculture sector is small.
Attempts to set export goals have been half-hearted and ineffective. In a 1990 report the Trade Development Board (Trade New Zealand) argued that New Zealand needed much higher export growth if it was to get back into the top 10 OECD countries on a GDP per capita basis.
In a 1993 study Trade New Zealand set export targets for various industry groups. The objectives and targets contained in these two reports have not been achieved.
Ireland and Singapore have also had export targets but, unlike New Zealand, they have specific policies to achieve their goals.
The Irish Government established IDA Ireland, which promotes the country as an export base for multi-nationals. Last year the IDA received NZ$400 million from the Government and dispersed these funds as follows - $315 million in direct grants to overseas companies based in Ireland; $13 million to advertise and promote Ireland as an investment destination; $15 million for administration and more than $15 million paid to 295 IDA staff at an average of $117,000 an employee.
These are big numbers but they have produced huge dividends. Last year 1278 IDA client companies based in Ireland had 141,300 employees, exports of NZ$91 billion and paid corporation tax of $3.5 billion. The tax received from these companies was far in excess of the grants paid by the Government to the IDA.
The driving force behind Singapore's export-driven foreign direct investment strategy is the Economic Development Board (EDB). It has 16 offices around the world and aims to develop Singapore into a vibrant and robust hub of knowledge-driven industries in a knowledge-based economy.
EDB, which operates under an independent board of directors, attracted $13 billion of foreign direct investment in 1999 and $15 billion in 2000. We can only dream of this level of overseas investment in new greenfield operations.
The Briggs, Bishop and Fan study concludes that there are no easy solutions to our poor export performance. It makes several policy suggestions but gives the impression that economists are afraid to make bold policy recommendations because of the abject failure of our 'think big' policies in the 1970s and the free-market reforms of the 1980s and early 1990s.
It is obvious we need a foreign direct investment strategy because our indigenous non-agriculture business sector is too small to generate meaningful exports. But Briggs, Bishop and Fan believe the Government may do better by putting its money elsewhere or by cutting taxes rather than in providing direct inducements for a firm to locate here. If the Government did provide inducements to a firm, it may find itself being held ransom and having to make further payouts to keep a firm in the country.
This attitude is overly cautious. New Zealand's export base is overly dependent on low-growth agriculture-based products.
Exports are the key to our economic prosperity and we need a well-funded Investment Promotion Agency to attract overseas companies that have a strong export bias.
