Trade defines our place in the world
The government’s rationale for its shakeup of the Ministry of Foreign Affairs and Trade contains a strong dose of self-congratulation.
The reasons are spelled out in Trade Minister Tim Groser’s guest column on page 13. While he doesn’t say outright, he implies the country’s premier ministry has failed to recognise and act on the biggest development of the past decade.
This is the rise of the emerging markets and the shift in the world’s balance of power toward China, India and Brazil, not to mention a host of others such as Mexico and Turkey.
Naturally, Mr Groser exempts his former trade negotiating colleagues from this criticism. Apart from his own distinguished role in global trade talks, Mr Groser grasps the essence of New Zealand’s new role in the world.
It is important to realise just how effective this has become – but achieved, he suggests, over the body of the ministry itself.
New Zealand has crested these major changes – one of them being the lifting of hundreds of millions of Chinese out of extreme poverty and its link to the spread of free trade.
Unfortunately, this huge achievement is not well recognised by the wider public, which explains much of the xenophobia in the political and media scene and reflected in the ministry clinging to its old attitudes.
New Zealand has positioned itself as what Mr Groser calls a facilitator of “soft power” in two of the world’s major groupings of top 20 nations in trade and climate change.
This is no mean feat but has not happened without a long history of involvement in what was called the Third World.
One reason was necessity. Shut out over many decades by protective trade measures in Europe and North America, the New Zealand dairy industry has been forced to focus on emerging markets.
The result is a commodity bonanza that has turned Fonterra into the world’s largest trader of milk products. This example was mirrored in some niche markets, such as electronics, where Tait and other companies led the charge.
But until recently, diplomatic efforts failed to build on these trade links. New Zealand is still a laggard in the Middle East, Africa and South America – areas Foreign Affairs Minister Murray McCully has identified as badly needing a stronger presence.
Asia and China, in particular, have been more successful, thanks to free-trade agreements with most countries in the region.
Mr McCully’s recent visit to Myanmar (Burma) was more than a symbolic and costly gesture, as unfairly depicted in the media.
It was an important signal to the Burmese, and the rest of the interested world, that New Zealand wants to be at forefront of that country’s emergence into the global economy.
This will not be an easy process but Myanmar could easily be the next “tiger” economy and one that is less forbidding than most countries due to a shared colonial heritage.
The growing prosperity of the emerging markets – explored in more detail in the latest issue of the NBR Wealth Guide out today – need not mean a break in New Zealand’s traditional ties to the old triangle of North America, Europe and Japan, which once dominated world economic activity.
The spread of free trade and investment in the emerging markets will continue to challenge the developed grouping’s importance as long as it remains wedded to protectionist policies, rigid labour markets and addiction to subsidies.
Ironically, it is China, with its mix of top-down state control and freewheeling entrepreneurialism coming up from the bottom, that is setting the pace for economic change in Africa, the Middle East and South America.