Long-time Listener readers may remember a brief era in the 1970s and early 80s when we made televisions and computers here in New Zealand.
Prime Minister Robert Muldoon was a fan of highly protectionist economic policy. His National government imposed significant import barriers, including tariffs of up to 40% on computer hardware, and import licensing requirements to shield local industries from overseas competition. It followed the same playbook US President Donald Trump is now reading from, hoping to foster domestic manufacturing.
The protectionist policies led to local assembly and manufacturing operations springing up to make consumer electronics. Companies like Pye NZ Ltd produced television sets in New Zealand, with factories such as the one in Waihi operating into the mid-1980s. The Poly-1 computer, developed for schools, also went into production with state backing in the early 80s.
But local manufacturers soon encountered the brutal reality of economies of scale. While European or Japanese manufacturers might produce 100,000 radios or televisions per run, New Zealand factories typically managed only about 5000 units. The per-unit production costs were roughly double those of large overseas manufacturers.
The rather stylish 22-inch Pye Nautilus Vidmatic TV set subsequently retailed for $755 in 1974, around $9500 in today’s money. The Poly-1 quickly became obsolete.
A young Silicon Valley entrepreneur called Steve Jobs was at the forefront of technological change, and our homegrown computers didn’t stack up in comparison. The government dropped the Poly-1 and started importing Apples.
Now, Trump’s administration is entertaining the fantasy of Apple’s bestselling product rolling off production lines in the US. “The army of millions and millions of human beings, screwing in little screws to make iPhones – that kind of thing is going to come to America,” Secretary of Commerce Howard Lutnick told CBS’s Face the Nation programme. “It’s going to be automated.”
Cue a flurry of internet memes showing fat Americans fiddling with screwdrivers and circuit boards in gloomy sweatshops.
The parts that go into Apple’s iPhone are made in about 40 countries and are assembled in Zhengzhou, China, where the manufacturer, Foxconn, has a massive plant, known as iPhone City, devoted to the task.
Most experts consider bringing production of those parts back to the US as impossible in the short term and financially ruinous without government subsidies. Which is why Trump quickly exempted smartphones and computers from the 145% tariff on imports from China and was last week preparing to dial tariffs back across the board after a backlash from US companies dependent on imported Chinese parts.
The US is the world’s second-largest manufacturer after China, so Trump’s concern about the hollowing out of manufacturing doesn’t stack up. The country pursued free trade and globalisation in a bid to avoid making certain products so it could focus on higher-value jobs and developing intellectual property. That’s why iPhones are proudly “designed in California, made in China”.
Our own manufacturing sector is a shadow of its former self. But NZX-listed Rakon is a world leader in high-precision frequency control solutions, such as quartz crystals and oscillators. Fisher & Paykel continues to design whiteware appliances and specialised health devices here, Gallagher Group manufactures innovative security systems, and Christchurch-based Tait continues to make high-quality radios and export them worldwide.
Muldoon’s flirtation with protectionism meant New Zealand consumers paid more for less while taxpayers propped up inefficient industries. His policies were swept away with the shift to economic liberalisation in the mid-1980s. Trump needs to face the same reality before he destroys the US economy he is trying to make great again.
