Trade promotion a poor relation

By GILBERT ULLRICH*

I really enjoy chairing the joint Trade and Transport Committee of the Export Institute and the Employers and Manufacturers Association (Northern).

Topics can range from the problems experienced by Canterbury exporters in securing air cargo capacity to progress by Government negotiators on trade bilaterals through to problems in collecting debts from countries where the court system discriminates against the exporting party.

One issue facing us at the moment is that we don't have an export guarantee scheme that can cover unusual risks and bonding needed in numerous developing markets.

No small or medium-sized company wants to make further involuntary overseas aid donations when it needs to be paid for its goods or services, so this is of concern to many exporters.

But an even bigger problem is the lack of a properly financed and coordinated effort to promote New Zealand trade.

Everybody in exporting realises the need for overseas promotion of our goods and services, from agriculture and manufacturing to education and tourism.

And it's hardly a secret that our trade development board, Trade NZ, comes a bad last in available promotion funds relative to most of our competitors, including, of course, Australia.

A further worry to exporters is the lack of measurable efficiency of our Ministry of Foreign Affairs and Trade. We constantly strike examples of other exporting nations requiring their overseas posts to make export promotion a priority.

If you are not in the class of the United States or France, and are one of the many smaller nations dependent on overseas trading, your overseas diplomacy can really only be concerned with trade, and perhaps also with defence or with the environment.

MFAT has rightly been taking flak lately for failing to do any of its tasks particularly well.

One thing it does not do at all is to promote trade. In fairness, it is not one of its jobs to do so, but without plunging into the nuances of trade policy versus trade promotion, MFAT appears actively to avoid any export effort. And it gets worse.

Most people are aware that MFAT has been found wanting in handling New Zealand's aid to developing countries and the function has been recently handed over to an independent office. It is of little comfort to note that the same people manage the new office.

Overshadowing this - and this is what has made my committee sit up in disbelief - is the money at stake.

If I say the overseas aid budget sits at about $160 million a year I think I'm in the ballpark. The cost of distributing it is around $17 million, so in round figures $140 million goes in aid. This is a large part of the MFAT annual budget.

More than that, out of some perverse ideological purity this money is paid out with no proviso that it be spent to New Zealand's advantage. It isn't tied, as it is with all other aid donor countries that I'm aware of. If the Falklands, let's say, gets $1 million from New Zealand to build schools in timber, it is free to buy that timber from a competitor of ours.

So we pay a huge sum annually to compete against ourselves - to score own goals, you might say.

In a submission on the subject, a member of our committee, Hugh Cronwright, had this to say:

"While New Zealand's standard of living continues to creep steadily downward one must question whether we can afford to be totally altruistic in our approach to aid funding. There should be no shame in requiring that New Zealand get maximum benefit it can from every taxpayer dollar spent, no matter what it is spent on.

"Aid is no different. If New Zealand can gain some return without diminishing the benefit to the recipient, this win-win result should be demanded."

That is common sense. But it gets worse. Trade NZ, the institution commissioned by the Government to score goals for us, operates on a $54 million annual budget, in which $50 million covers costs and not more than $4 million is distributed to exporters to help promotion - to help in scoring the goals.

Taxpayers each year finance $4 million in direct export promotion against $140 million in potential negation of that promotion.



I suggest that the Government does these things:

Ensure all aid funds are tagged to New Zealand supply where practicable.

Finance Trade NZ properly.

Create a watchdog mechanism to ensure nonsense like this is eliminated in our export goals.

Make MFAT accountable in both trade promotion and trade policy.

* Gilbert Ullrich is managing director of Ullrich Aluminium Industries.