Dialogue: Large, affluent market a platform for our success

By MICHAEL BARNETT*

In a whirlwind tour of New Zealand early this month, former Canadian Prime Minister Brian Mulroney spoke passionately of the economic and social benefits Canada had enjoyed from membership of the North America Free Trade Agreement.

Sensing that New Zealand is at a crossroads in managing opportunities in today's globalised economy, he posed an obvious question: is there not a glittering opportunity here for New Zealand?

His enthusiasm encouraged me to recall a similar glowing Nafta testimony from Mexico's President Ernesto Zedillo when Auckland hosted the Apec chief executive's summit in 1999. Free trade in Nafta, he said, had been a significant factor in Mexico's recent economic growth.

After just five years of Nafta membership, Mexico had become the largest exporter in Latin America and the eighth-largest in the world. Mexico is now the second-largest trading partner of the United States, surpassed only by Canada.

If Nafta has helped Canada and Mexico to achieve sustained economic growth, imagine what it could do for us. When New Zealand joined Australia in the Closer Economic Relationship in the early 1980s, with a single stroke of the pen we lifted our domestic market from three million to 22 million.

Our manufacturers had a market in which economies of scale could justify upgrading plant to produce higher volumes and better-quality products at lower cost.

Nafta, bringing together the US, Canada and Mexico, encompasses a market of some 400 million people with a combined gross domestic product of more than $US7000 billion, or about a third of the world's total, and just under that of the enlarged European Union.

Obvious trade gains will be achieved from joining Nafta. As Australia has provided a level playing field on which just about any innovative and energetic New Zealand business is able to compete successfully, the potential in an open Nafta environment becomes unlimited.

Australia is our largest export market, taking 21 per cent of exports by value. The US is already second, at about 15 per cent, which increases to nearly 17 per cent when Canada and Mexico are included.

However, the glittering opportunity of Nafta membership is what it could do to accelerate emerging trends to create a second market beyond Australia for advanced added-value exports - items such as processed foods, furniture, software, super-yachts, power boats, electronics and other consumer goods.

Then there is the boost Nafta membership could provide to investment flows, tourism, and, significantly, third-wave, knowledge-based biotech, research and development joint ventures, education, film, television-making and many other leading-edge products and services.

That is, joining Nafta has huge potential for wider effects which will matter even more than securing a sustainable export market. With a single signing, Government and business has the opportunity to build a platform on which to action the vision that Finance Minister Michael Cullen unveiled in this year's Budget of transforming the economy and propelling New Zealand's return to the top group of the world's rich nations.

To transform the economy and start to become a net importer of skills, investment and building New Zealand into a global destination for businesses to locate, we need to establish a sense of vision, strategy and agreed action, or closure from the considerable soul-searching in which the nation is engaged.

The timing to seek Nafta membership is now. Business leaders have largely embraced and signed off on the vision of joining. Our challenge now is to develop and drive a strategy as a business-Government partnership. Or if the Government doesn't want to, or cannot, grasp the prize, business must undertake the required cost-benefit analysis under its own resources.

First we need to know that New Zealand's membership of Nafta would be welcomed by the US, Canada and Mexico. We need to assess the benefits that Mexico and Canada have received from Nafta membership - the number of business opportunities created, business startups and closures, investment benefits and costs, impacts on jobs and skills, and many other vital matters.

We need to activate our networks in North America to test the proposal. When CER was seriously mooted between Australia and New Zealand, the process leading up to the signing in 1984 involved intensive negotiations between business groups, officials and politicians at all levels over 10 years.

We must do the same again, but faster. CER was signed off at the start of globalisation. The internet was not yet a fact and communication was by telephone and fax.

Mr Mulroney has offered to open the Canadian network to New Zealand. Our Ambassador in Washington, former Prime Minister Jim Bolger, is an obvious conduit for developing a dialogue in the US, and there are numerous business contacts available in the three countries, including an extensive network of Chambers of Commerce.

The more I ask about the future role and place in world affairs of a small backwater such as New Zealand, the more I keep coming back to a fundamental truth: we live in a world of more than 200 nation-states; if we wish to uphold our interests and desire to secure a top-world standard of living, somehow we must find a formula to make our own way in the world that strongly differentiates our brand from those of other nation-states.

We have to set a secure business-based platform on which we can build our nation's wealth and living standards. What better platform for growth over the rest of the century than to secure access to the world's largest and most affluent market?

* Michael Barnett is chief executive of the Auckland Chamber of Commerce and Industry.

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