New Zealand is continuing to seek new trade deals though it acknowledges it will be extremely hard work.
That's because the only countries not already in a Free Trade Agreement (FTA) with New Zealand are either low income or are politically too hard.
New Zealand will this month conclude one of the best trade deals it has ever signed, the UK FTA. That has focused attention on the European Union (EU) FTA which is being finalised this year.
The Government has expressed confidence in signing more trade deals in the long run, despite the acknowledged difficulties of achieving an agreement with India and the near impossibility of signing a deal with the United States.
In addition, talks with wealthy Persian Gulf states spent more than a decade in hibernation before being revived.
The need for new trade deals was highlighted by the announcement in March that the annual current account deficit for New Zealand was the widest it had been since these numbers were first recorded in March 1988.
It was also highlighted by the contrast between the high level opportunities from the UK FTA and the more modest gains from the EU FTA, to say nothing of far more difficult countries.
If India and the US signed up, it would push the share of New Zealand trade covered by an FTA from 76% to 88%. But no-one in the New Zealand trade business expects that to happen any time soon.
There is near universal agreement that the American nut cannot be cracked, due to lobbying, gridlock in Washington, the residue of Donald Trump's economic nationalism, and President Joe Biden's disinterest in pushing global free trade.
NZ hasn't given up on India
India is another difficult project, but one which New Zealand trade officials would love to overcome.
This once-impoverished nation has averaged 6.8% economic growth since 1980, according to the International Monetary Fund, and is now the fifth or sixth biggest economy in the world, depending on how its wealth is counted. In fact, India is often predicted to become an economic superpower like China within 10 years.
In a report last month, the India New Zealand Business Council said New Zealand merchandise exports to India were languishing, though there was some offset from trade in services. New Zealand imports from India were stronger. But the council said with the right approach, trade both ways could dramatically improve.
Up till now, a deal with India has been held up by Indian reluctance to accept New Zealand dairy sales and New Zealand's reluctance to accept loosened immigration policies.
But Minister for Trade and Export Growth Damien O'Connor said New Zealand had not given up on India.
"We have had three ministerial visits to India in the past six months, we have had an Indian Minister here, we are building stronger economic relations with India and we will continue to do that."
O'Connor said his Government would continue to work on economic links with India, as would the private sector in both countries.
"Through those connections and bilateral understandings, I think we will get to a free trade agreement eventually."
Gulf Co-Operation Council states still on the radar
The third prize in the free trade trifecta would be the states of the Gulf Co-Operation Council (GCC), such as Kuwait, Saudi Arabia and the United Arab Emirates (UAE).
Talks to achieve progress here started, then stopped, then started again. Speaking after the UK announcement, O'Connor said New Zealand had been trying hard to reach agreement with this group for many years.
"We have been in discussion with the GCC for quite some time," O'Connor said.
"We were close to agreement in 2009, but that (agreement) was parked at their request. They have since come back to us to try to progress that, and there have been several rounds of discussions."
Nor was a multi-nation FTA the only issue at stake in this part of the Middle East..
"At the same time the UAE has expressed enthusiasm for a bi-lateral agreement," O'Connor said.
"We are working on both those fronts to ensure we grow operations in those regions."
In 2021, New Zealand sold $1.9 billion in goods and services to the states of the GCC of which dairy was by far the largest contributor. Those countries sold $2.9 billion in goods and services to New Zealand, which were made up overwhelmingly of petroleum products.
Trade barriers in the Gulf are in fact relatively low compared with most protectionist states, but New Zealand would like them to be lower still. According to O'Connor, there will be more talks with the GCC within the next couple of months.
One of the sticking points for a long time was understood to be Gulf resistance to access for large scale agricultural sales from New Zealand, even though a lot of sales take place already, unsecured by a free trade agreement.
The Gulf states are understood to be worried about their struggle for food security.
Even though desert conditions in the region make agricultural projects difficult and food imports essential, a desire to make the desert bloom has been politically important in the region for years, meaning New Zealand trade volumes could be hard for politicians to agree to in principle.
There have been suggestions, meanwhile, that complex issues like these mean New Zealand should spend less effort on seeking new markets, and should instead focus on improving business with the ones we already have,
There are currently 13 FTAs currently in force, ranging from the grandad of them all, the 40 year old Closer Economic Relations (CER) with Australia, to the lucrative deal with China, to large multilateral agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The addition of Britain and the EU will bring the total to 15. If getting new deals with the US and India prove too difficult, New Zealand is expected to put effort into improving the agreements we already have, as has happened with Australia and China.
*Also see the Of Interest podcast episode: Is New Zealand too dependent on China as an export market?
3 Comments
In 2021, New Zealand sold $1.9 billion in goods and services to the states of the GCC of which dairy was by far the largest contributor. Those countries sold $2.9 billion in goods and services to New Zealand, which were made up overwhelmingly of petroleum products.
The Irish in particular have outperformed in this region in terms of dairy and related food products. Obviously, route to market is far easier for them than NZ. However, their whole approach and strategy for the UAE market is light years ahead of NZ.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.