KEY POINTS:
The Government has designated 2007 "Export Year".
At year ending March 2007, New Zealand had a merchandise trade deficit with the world of $5.776 billion, but fortunately the 23 mainly small economies of our Pacific Island neighbours provide New Zealand with its single biggest regional trade surplus of
$985 million.
This is a vital market for New Zealand, which is increasingly under threat from larger, more distant nations.
As chairman of the New Zealand Pacific Business Council, I am concerned that if we do not develop strategies now to counter this threat, we will have only ourselves to blame.
Once the terms of trade begin to swing against us, it will be like an ocean liner which has developed significant momentum, and our smaller vessel will be left in its wake.
What can New Zealand and our well-founded establishment do to assist these small countries, for instance, New Zealand Customs?
Well, we know that Customs has important input into any Government trade agreement, such as negotiating free trade agreements and closer economic partnerships - and I am sure the Pacific Agreement on Closer Economic Relations and Pacific Island Country Trade Association. Border control at both ends must ensure there are fair but robust rules and compliance from both parties. The terrorist attack on the Twin Towers in September 2001 shook the whole process of world trade and demanded a much higher and consistent level of compliance, particularly accuracy of declarations for exports, and even the "Health and Safety" of the export source and its supply chain.
While this was demanded initially by the US, under the Container Security Initiative, the same regime applies to all exports from New Zealand, irrespective of destination.
There has to be a "consistent" security regime, because non-compliance can hurt our image as a "secure" trading partner.
Having stated that New Zealand has stringent and consistent requirements for accurate export documentation, then all goods sent to Pacific Island countries must also be accurately documented. Unfortunately, the same cannot be said for exports from many other countries to the island nations.
We are aware, for example, of shipments being declared as containing disposable diapers - but just the first two rows of cartons contained diapers, and the rest of the container is full of pricey things such as liquor, cigarettes, electrical goods, watches - and possibly even drugs and weapons. What's more, the cigarettes and watches are more often than not counterfeit brands.
We are aware that all containers may (or should) be inspected with greater frequency, but because island Customs officials are often not rigorously trained, or well paid, "inducements" can often persuade them to turn a blind eye to dubious cargoes.
The recent capacity building project in Tonga has shown that a more rigorously run Customs can improve the revenue of a Pacific nation significantly.
From a statement made by a former Trade Minister, Jim Sutton, Tonga earns about $6 million annually from duty on imports from New Zealand - and this is a very important source of Government income (and one difficult to replace, as there is already a 15 per cent value added tax in place for consumer purchases).
And this duty helps to fund their border control and employ a reasonable number of people.
I might ask, is the demand for tariff reduction under the WTO a realistic move for an already fragile economy such as Tonga - and many of their Pacific neighbours?
Therefore, I would like to see more of this facilitation by New Zealand (and Australian) Customs, to help to lift the level of compliance to a more international standard in the Pacific Island countries, otherwise this will be yet another trade barrier New Zealand faces (ie, if we are rigorously compliant, but other countries that supply the islands are not).
It seems that New Zealand "scrupulously" plays by the rules of international engagement, whether it be a "freely" floating dollar, an absence of subsidies and other inducements for exporters, low or no Customs duties on imports, honest and certified export declarations, and a raft of "non-tariff" barriers to contend with.
But we must somehow battle on, but operate smarter (with the support of people like the Customs), otherwise there will be a growing body of New Zealand manufacturers following Fisher & Paykel and others to Asia, in order to survive.
* Gilbert Ullrich is CEO of Ullrich Aluminium & chairman of the NZ Pacific Business Council (which was incorporated in 2005 as a multilateral Business Council, to promote "two-way" trade and investment between NZ and 25 Pacific island countries).
