During urgency last week, parliament ratified, through amending legislation, two new FTAs: one with Malaysia and the other with Hong Kong (technically, the HK treaty is called a Closer Economic Partnership (CEP) agreement).
Labour supported the passage of both Bills. After all, former Labour Trade Ministers Jim Sutton and Phil Goff did the ground work. However, I have major concerns about the government’s (and Grosser’s) ability to put the framework in place that will allow NZ companies to take advantage of these agreements.
In last year’s budget the govt cut $110m over 4 years from New Zealand Trade and Enterprise’s (NZTE) budget, thereby slashing the funding that Labour had directed towards developing NZ international markets.
Why is a government overseas development agency important? I could write a book on this, however, in a nutshell, 97% of NZ companies are SMEs (they employ 19 staff or less). This means the vast majority that may have export potential simply do not have the resources to: a) employ a full time International Marketing or Market Development Manager, b) set up an office in an off-shore market, or c) fund the level of due diligence necessary to justify capital expansion in order to become ‘export-ready’.
Only 12% of our exports now go to Europe – and these two FTAs were ratified with countries that have completely different cultures, customs, languages, legal systems etc. Exporting into Asia is a whole new ball game and success requires a significant level of competency that is in short supply in NZ. The Fonterra’s and Fletcher’s will be able to take advantage of these FTAs as they do have the resources, knowledge and networks, but as we know, these firms are few and far between.
This is where NZTE should come to the fore. This government organisation should, in my view, be NZ’s international eyes and ears (and a lot more besides…). About 6 months ago, I asked the retiring CEO of NZTE if his organisation was NZ’s international market development manager, and he replied “if only…”.
How can NZ achieve an international vision when $110m has been cut to the budget of the country’s off-shore operators? Quite simply, we can’t.
I think we all agree (except the Greens..) that if NZ is to achieve a high level of sustainable economic growth, it has to be though a much greater level of international engagement (ie grow our export volumes, value and competencies). Negotiating free trade agreements is an important step, however, helping NZ companies see the possibilities and reach their potential is vital if we are going to make it a reality. National is failing on this one I am afraid.