That was then. Yesterday I noticed this tweet from a Herald journalist. I presume the chart was taken from The Treasury’s Briefing to the Incoming Minister.
Click to view
2021 wasn’t a great year for comparisons, since our border had been largely closed, directly affecting exports and imports of tourism services, but perhaps it was the most recent complete data Treasury had back in October.
This is the New Zealand story in isolation, for as far back as the quarterly national accounts data go.
Click to view
You might discount the peak in 2000 (coincided with a shortlived trough in the exchange rate), but however you look at the chart, external trade as a share of GDP hasn’t been growing for 30 years. In the last decade it has been shrinking. Ministers and trade lobbyists, touting their preferential trade agreements, would prefer you didn’t notice these actual outcomes.
How does New Zealand’s experience compare to that of the other OECD countries (large and small)? The OECD database is complete from 1995, so here is the change in the average share of exports and imports from then to 2022.
Click to view
Most OECD countries have seen quite a big increase in foreign trade shares over that period. Some of that will have been a rise in trade in intermediates. One could look at the OECD data on trade in value-added, but there is a multi-year lag in the availability of that data..
Can you spot New Zealand? That’s us over on the very far right of the chart, one of just a handful of countries to have had no growth in foreign trade as a share of GDP over those decades (as it happens - and I’m not here arguing causation – each of that handful of countries have been long-term OECD productivity underperformers).
What about the level of trade as a share of GDP (which is what that Treasury chart is showing). Here is the 2022 data for all the OECD countries (in case you are worried that pandemic effects are still distorting the picture the 2019 chart is very little different).
Click to view
There are two regularities when looking at the extent of cross-country trade, neither very surprising:all else equal, big populous countries tend to do less foreign trade (share of GDP) than smaller ones, and
all else equal, remote countries tend to do less foreign trade (share of GDP) than ones close to lots of other (advanced) countries.
Most OECD countries aren’t large (22 of 38 have populations of 12 million or less) and most of them are close to other centres of advanced economic activity.
What of New Zealand? We have the 5th lowest foreign trade share of any OECD countries. Of the four lower than us, three are large countries and the fourth (Australia) has a population five times our size. Every single other small country has trade shares higher than New Zealand’s. In all but Israel’s case, materially higher, and Israel is another example of a country fairly geographically remote (surrounded by plenty of other countries but not wealthy advanced economies, and wealthy advanced economies tend to trade a lot with other countries like them).
And if you inclined to read this and note it as just one of those things, here is how New Zealand stood in 1995.
Click to view
Not great…..and still smaller than all the small OECD countries other than Greece…..but a substantially different picture than the 2022 one, and one that does not flatter New Zealand.
(And yes, for many purposes it does make sense to discount the numbers for Ireland and Luxembourg, but doing so won’t really change the underwhelming picture of New Zealand’s place among OECD countries.)
Michael Reddell spent most of his career at the Reserve Bank of New Zealand, where he was heavily involved with monetary policy formulation, and in financial markets and financial regulatory policy, serving for a time as Head of Financial Markets. Michael blogs at Croaking Cassandra - where this article was sourced.
This is the New Zealand story in isolation, for as far back as the quarterly national accounts data go.
Click to view
You might discount the peak in 2000 (coincided with a shortlived trough in the exchange rate), but however you look at the chart, external trade as a share of GDP hasn’t been growing for 30 years. In the last decade it has been shrinking. Ministers and trade lobbyists, touting their preferential trade agreements, would prefer you didn’t notice these actual outcomes.
How does New Zealand’s experience compare to that of the other OECD countries (large and small)? The OECD database is complete from 1995, so here is the change in the average share of exports and imports from then to 2022.
Click to view
Most OECD countries have seen quite a big increase in foreign trade shares over that period. Some of that will have been a rise in trade in intermediates. One could look at the OECD data on trade in value-added, but there is a multi-year lag in the availability of that data..
Can you spot New Zealand? That’s us over on the very far right of the chart, one of just a handful of countries to have had no growth in foreign trade as a share of GDP over those decades (as it happens - and I’m not here arguing causation – each of that handful of countries have been long-term OECD productivity underperformers).
What about the level of trade as a share of GDP (which is what that Treasury chart is showing). Here is the 2022 data for all the OECD countries (in case you are worried that pandemic effects are still distorting the picture the 2019 chart is very little different).
Click to view
There are two regularities when looking at the extent of cross-country trade, neither very surprising:all else equal, big populous countries tend to do less foreign trade (share of GDP) than smaller ones, and
all else equal, remote countries tend to do less foreign trade (share of GDP) than ones close to lots of other (advanced) countries.
Most OECD countries aren’t large (22 of 38 have populations of 12 million or less) and most of them are close to other centres of advanced economic activity.
What of New Zealand? We have the 5th lowest foreign trade share of any OECD countries. Of the four lower than us, three are large countries and the fourth (Australia) has a population five times our size. Every single other small country has trade shares higher than New Zealand’s. In all but Israel’s case, materially higher, and Israel is another example of a country fairly geographically remote (surrounded by plenty of other countries but not wealthy advanced economies, and wealthy advanced economies tend to trade a lot with other countries like them).
And if you inclined to read this and note it as just one of those things, here is how New Zealand stood in 1995.
Click to view
Not great…..and still smaller than all the small OECD countries other than Greece…..but a substantially different picture than the 2022 one, and one that does not flatter New Zealand.
(And yes, for many purposes it does make sense to discount the numbers for Ireland and Luxembourg, but doing so won’t really change the underwhelming picture of New Zealand’s place among OECD countries.)
Michael Reddell spent most of his career at the Reserve Bank of New Zealand, where he was heavily involved with monetary policy formulation, and in financial markets and financial regulatory policy, serving for a time as Head of Financial Markets. Michael blogs at Croaking Cassandra - where this article was sourced.
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