“If there is anything that the last few years of global trade turbulence have shown it is that exporters and importers need to be able to pivot, sometimes at very short notice, and that is very difficult to do in the face of tariff and non-tariff barriers.”
There has been growing concern that NZ may depend too much on a handful of trading partners, with 31% of the nation’s merchandise goods exports going to China in the 12 months to May 31.
While NZ has been active in negotiating bilateral and regional free trade agreements (FTAs) for almost 40 years, it still has no existing or planned preferential market access with almost 40% of the world’s economy and consumers, according to the report by Sense Partners.
These countries account for 16.1% of NZ’s current goods trade, but represent 37% of global GDP and 38% of the world’s population.
The report focused entirely on new FTAs and excludes any countries NZ was negotiating with or that were long-standing targets, such as the US.
The report used a data-driven approach, with the analysis largely shaped by goods trade and heavily weighted towards the primary sector.
Its FTA Partner Suitability Index included 29 criteria, such as population, income levels and growth, existing trade links, and revealed comparative advantage in dairy and meat.
Of the 22 other nations, the top spot is Switzerland followed by Norway.
In both cases, key advantages were the fact that they’re wealthy nations, with high ease of trading across borders and both are party to negotiations for a global Trade in Services Agreement.
On the downside, Switzerland has very high meat and dairy trade barriers, while Norway has a highly protected agricultural sector.
Switzerland imported an annual average of $135 million worth of NZ goods from 2018 to 2020, while Norway imported $47m.
The list also included South Africa, which imported $184m of Kiwi goods, Nigeria at $189m and Algeria, which imported $472m of goods.
The report also raised some questions about how FTAs are negotiated.
It noted NZ’s approach was always a principled one and sought the elimination of all tariffs on all products.
“This approach makes sense for negotiations with large countries where we have a wide range of commercial interests spanning the primary sector, manufactured goods, services and investment,” the report said.
However, its analysis of the next tranche of FTA partners showed “existing trade relationships tend to be very narrow” and centred on a handful of individual broad product groups.
The report questioned whether it would be possible to sign a FTA with a country that was focused on the meat sector, for example. Or could NZ contemplate an FTA with Israel centred on tech sector interests, with traditional goods market access given less priority, at least initially.
It noted a targeted approach should be less resource-intensive for NZ negotiators and still deliver commercially meaningful gains.
“This break from tradition would no doubt be uncomfortable and would require careful planning and external communication,” it said.
However, “we would argue a one-size-fits-all FTA template makes little sense when looking at the next tranche of potential FTA partners.”
BusinessDesk
