International Trade

A Stitch in Time

December, 2021

By: Thomas Manning

Successive New Zealand governments, mindful of the danger of overdependence on Asian and European export markets, have worked with a variety of multilateral forums to deepen trade with Latin America (including the Caribbean).

New Zealand is a member of APEC (the Asia-Pacific Economic Cooperation, which includes Chile, Mexico and Peru), is a founding member of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) which has liberalised trade and investment between 12 Pacific-rim countries (also including Chile, Mexico & Peru), is a prospective associate member of the Pacific Alliance (a regional free trade bloc comprising Mexico, Colombia, Peru & Chile) and is accredited to the Caribbean Community and Common Market (CARICOM).

New Zealand’s relatively recent trade policy pivot to the Caribbean and Latin America was a long time coming after our first tentative outreach by prime minister Robert Muldoon, who made a state visit to Mexico in 1980 in the company of Dairy and Meat Board leaders.

Upon his return, Muldoon openly disparaged trade opportunities in Mexico and continued to focus trade policy entirely on New Zealand’s traditional markets.

It was not until 1990 when then Foreign Affairs Minister and Deputy Prime Minister, Sir Don McKinnon, who saw opportunities where Muldoon did not, led another trade mission to Mexico after which the winds that blow in the corridors of the Ministry of Foreign Affairs and Trade (MFAT) changed course.

Sir Don McKinnon

Sir Don had MFAT devise the ‘Focus Latin America’ Initiative as a guide to substantive engagement with Mexico and the wider region.

In the early 2000’s, under the aegis of then prime minister Helen Clark, the Initiative morphed into MFAT’s current guide, the ‘Latin America Strategy’ (Sir Don & Ms Clark still retain their influence in Latin American/NZ trade as patrons of the Latin American NZ Business Council).

Rt. Hon. Helen Clark with Mexican president Felipe Calderón

In the course of the last three decades, state visits (with accompanying trade missions) led by prime ministers Jenny Shipley, Helen Clark and John Key opened doors for New Zealand exporters in Brazil, Chile, Colombia and Mexico as did the state visits to New Zealand (again with accompanying trade missions) led by Latin American presidents Carlos Menem (Argentina), Michelle Bachelet and Sebastián Piñera (Chile), Ernesto Zedillo and Felipe Calderón (Mexico), Alberto Fujimori (Peru) and Tabare Vazquez (Uruguay).

John Key with Brazilian president Dilma Rouseff 

New Zealand trade ministers (particularly Mike Moore, later head of the WTO), diplomats and officials have all done the hard yards on the ground to forge productive relationships with Latin America’s governments and business which, building on the goodwill engendered by heads of government contact, laid the foundations for what has been an exponential twelve-fold increase in NZ exports to Latin America (approx. NZ$100m in 1980 to NZ$1.22b in 2019 (source: Stats NZ).

In proof of the “Murphy’s Law” which says that “if anything can go wrong, it will”, the advent of the COVID-19 pandemic has clouded New Zealand’s bright trade prospects in Latin America.

The International Monetary Fund (IMF) is predicting Latin America (including the Caribbean) will take “many years” to recover from the COVID-19 pandemic after the region’s economic activity plummeted by 7%, much higher than the global average, which was a fall of 3.1%.

Nigel Chalk, head of the IMF’s Western Hemisphere Department, in announcing the fund’s predictions, said “The region should anticipate a long and winding road ahead as it still has not contained the health crisis and vaccination rates have lagged, undermining employment and shuttering schools and these trends could, potentially, take many years to reverse.”

In the global economy high consumer demand and rising commodity process are presently driving a recovery but in Latin America moribund tourism coupled with rising inflation and higher interest rates will hinder growth compared to the other regions.

The IMF believes that average GDP is not expected to return to its pre-pandemic levels in the region for at least five years and that growth will be “subdued” due to the “COVID-19’s long-lasting scars.”

MFAT has observed how the COVID-19 pandemic is putting global supply chains under intense pressure and disrupting trade and especially so in NZ’s case.

In a proactive approach, MFAT and its trade promotion analogue, New Zealand Trade and Enterprise (NZTE) are, according to their websites, “working with New Zealand’s trading partners to help ensure trade flows remain unimpeded, to remove any existing trade restrictive measures on essential goods and medical supplies, to protect supply chains and to keep critical infrastructure such as air and seaports open”.

Additionally, New Zealand exporters have access to a tailored suite of Government services to mitigate COVID-19’s effect, including financial support, air freight subsidies, an online marketplace to help New Zealand exporters find offers and requests for resources, an Exporter Helpline for addressing problems with export clearance issues, trade barriers and blockages, international market updates and webinars, trade shows and events.

The New Zealand Government deserves generous praise for the measures it has implemented to help exporters weather the Covid-19 storm as the measures are a needed ‘stitch in time’ to protect, in the particular interest of this column, the huge investment of political, diplomatic and financial resources NZ has made in the development of Latin American markets which will otherwise be lost into Covid-19’s unforgiving maw.

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