While there are challenges ahead for exporters in the smaller countries of the world, New Zealand should not get hung up on disappointing free trade agreements.
That was the message from former trade minister and ambassador to the World Trade Organisation (WTO) Tim Groser in his keynote address to farmers at the Silver Fern Farms conference.
“Naturally, NZ farmers are interested in what is going on in the world as nine out of ten consumers they supply are not living in NZ,” Groser said.
But added today’s challenges are not just on NZ farms but the ecosystem around us.
“We have a first-class system in place that has proven time and time again it has demonstrated resilience,” he said.
“We will be fine. We will get through this.”
There will be changes in the macroeconomic environment that will affect NZ.
“It is clear now that the tightening cycle has begun,” he said.
“Peak inflation matters as the higher it is the worse off we are, but the real thing is the duration of the inflation.
“The global macroeconomics are clearly heading south and going to crush demand and we are going to have to work our way through it.”
That will be either in food or energy.
“The business we are in is food so there’s a natural avenue there.”
The geopolitical situation becomes more difficult and challenging and Groser said one thing it will affect is business models.
“The more recent political unease will see giant multinational corporates slicing and dicing the supply chain and that will see a move towards somewhat different business models.
“It’s just an evolution in a slightly different way,” he said.
“Don’t believe the doom and gloom that this is the end of globalisation – this is an adjustment to current globalisation.”
NZ must trust that the existing system does not fall apart.
The WTO is capable of taking some steps forward, albeit baby steps taken at glacier speed.
“I’m obviously disappointed with the EU FTA, but it would have been complete fantasy to think we were going to get something comparable with the UK and Australia,” he said.
“While NZ has no FTA with China, the US, or the US with the EU and so on, their trade is still governed under the WTO system.
“This basic system is very important for NZ, as out alone we will be gone.”
Groser is confident NZ’s farming resilience will pull it through.
“Sure, we face global challenges and enormous threats but we have made huge progress in recent years,” he said.
“I’m sure we will get through with resilience to invest in innovation, keep listening and above all keep faith – let’s celebrate successes.
He questioned the notion that NZ is too dependent on China.
“In the past we had a shocking dependency on, for example, the UK at 50% in 1973,” he said.
“At 22% of global exports we are far less exposed to China than we have been in the past.
“And we have options – in terms of market diversification we are not in a that exposed position.”
As for the likelihood of future FTAs, the biggest challenges are demographic.
“China’s population will fall dramatically over the next 40 years.
“I think about this trend and what next?
“I say Africa, one of four fastest growing economies in the world.
“The direction of that massive young population, I would love to see us make a model FTA with an African country.”
