Former trade negotiator Charles Finny told MPs that New Zealand needed a strategy to diversify export markets or face risks from its exposure to China.
Former trade negotiator Charles Finny told MPs that New Zealand needed a strategy to diversify export markets or face risks from its exposure to China.
A former top trade official has warned the Covid-19 crisis could leave New Zealand more dependent on China and agriculture, as he called for urgent work to develop new markets.
Charles Finny, who led negotiations for free trade deals with both China and Taiwan, urged the Government to immediately allowmanufacturing to resume and not close it down if New Zealand returns to alert level 4 restrictions later.
Appearing before the epidemic response select committee as an independent witness, Finny, now a lobbyist with Saunders Unsworth, said the response to Covid-19 by the Government was delivering good results, but had come at an enormous economic cost.
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"If we don't move very fast that cost will increase greatly, and if we're not careful we'll be left with a really perverse result.
"We will be even more dependent on one market, China, and on one sector, agriculture, than we were going into the crisis," Finny said, warning that China had shown itself willing to use trade dependence to advance its political interests.
Former trade negotiator Charles Finny told MPs that New Zealand needed a strategy to diversify export markets or face risks from its exposure to China.
While China's economy was now improving, "the rest of the world is now in very serious trouble" with a risk of trade seizing up with the UK, Europe, the west coast of the United States and Japan.
Finny said manufactured exports, worth around $9 billion a year, should be allowed to resume quickly, or New Zealand risked both lasting damage to the sector and to the rest of the economy.
"If we keep this sector closed we will start losing international contracts," Finny said.
"Without that flow of exports, we will start seeing international shipping lines reduce the frequency of their services to New Zealand. That will start flowing onto agricultural exports also."
As well as calling for the idea of a levy on log exports to be dropped, Finny said New Zealand needed to focus on exporting more to CPTPP and Asean economies, as well as expanding trading blocs, and seeking new trade agreements with the EU, UK, Russia, Turkey and countries in Africa.
"We need a very active market diversification policy led by NZTE and Mfat," Finny said.
New Zealand Trade and Enterprise chief executive Peter Chrisp said the organisation was categorising exporters into groups ranging from booming as a result of Covid-19 to those which were in distress.
The main concern the organisation had was for manufactured exporters. Markets were often "very hard won" but were under threat as rival companies could continue to operate.
"Tait [Electronics] competes with Motorola, Hamilton Jet competes with Rolls Royce, Glidepath competes with Honeywell," Crisp said.
The disruption caused by Covid-19 had caused a "massive shift" in the speed with which commerce was moving online, with ramifications for exporters globally.
Vangelis Vitalis, chief trade negotiator at the Ministry of Foreign Affairs and Trade, said one of the main concerns businesses were reporting to officials was "how you sustain exporting and contract relationships internationally, when you are not able to export but a third country company is able to service that contract, and the fear that some exporters have of losing market share".
Exporters were also seeing a rising threat from trade protectionism, where countries impose barriers to favour their own industries. "[There is] a real concern there that the world that we're about to get back into has become much, much harder on New Zealand traders," Vitalis said.
