Eldrede Kahiya: NZ government has promised to double exports (again)....

NZ government has promised to double exports (again) – but as history shows, this is easier said than done

With the goal of doubling exports over the next ten years, the National Party’s Boosting Growth Through Trade policy is now central to the coalition government.

The government hopes to achieve this through trade agreements, trade missions and by making India a strategic priority for trade and development.

The benefits of exporting – increased foreign currency earnings, higher paying jobs and better standards of living – explain the coalition’s export goal.

But the reality is that doubling exports is easier said than done. Recent history is not on the government’s side.

A common goal

Ten years ago, then Prime Minister John Key’s government launched the Business Growth agenda.

Within the agenda sat a specific initiative – Building Export Markets. The goal of the initiative was to grow exports to 40% of the gross domestic product (GDP) by 2025 – from NZ$65 billion to $130 billion. But 2025 is here and this target has not been achieved.

Subsequent governments have outlined similar goals. Former Prime Minister Bill English introduced the Trade Agenda 2030 in 2017 and Labour had the 2021 Trade for All agenda.

New Zealand is not the only country to focus on significantly increasing their exports as a pathway to improving the economy.

Under President Barack Obama, the National Export Initiative was tasked with doubling United States’ exports from US$1.5 trillion to $3 trillion over the period 2010–14. The US fell well short of this goal, with exports increasing by less than 50%.

Closer to home, Australia set the goal of doubling the number of exporters between 2001 and 2006.

That didn’t happen either. Austrade – the equivalent of New Zealand Trade and Enterprise across the ditch – has since tried to suggest the goal was only ever aspirational.

Slow Growth

In 2023, New Zealand’s exports to GDP ratio was 24%, trailing the OECD average of 29%. The under-performance is not new.

Setting aside the nearly 20% reduction in exports in 2021, following the pandemic, average annual growth has hovered around 2%. This is well below the 5–6% growth required to attain the export goal.

Several historical factors – such as low participation rates of businesses in exporting, low productivity and distance to market – and emergent challenges – such as supply chain disruptions, compliance-related costs and non-tariff barriers – have made it difficult for New Zealand to achieve the goal of doubling exports.

A feasible goal?

Considering the failure of New Zealand to achieve the goal of doubling exports, it would be easy to dismiss subsequent governments’ efforts as overly ambitious. It would also be easy to criticise policy makers for ignoring the country’s unique challenges or for disregarding the role of anti-global sentiments, the residual effect of the pandemic and persistent supply chain disruptions.

But there are key considerations the government can make to build and strengthen the export sector.

First, clarity is needed. The government needs to establish growth expectations for individual sectors, industries and regions. While most of our merchandise exports simply cannot double over the next decade, knowledge-intensive, technology, or service exports can.

These expectations need to be aligned with the relevant sectors to enable each sector to develop targets and initiatives which contribute to the overall export goal.

Equally, it is important to establish priorities.

For example, should we grow exports by motivating more businesses to commence exporting? Or should we focus on encouraging current exporters to expand their international operations?

Roughly 12,000 businesses export, a third of which have ongoing export involvement. That means there are 8,000 intermittent, occasional or “uncommitted” exporters that can be nudged to adopt ongoing export status.

Nudging these businesses towards permanent export status requires a good grasp of their unique needs and international pathways.

The task of export promotion should not fall solely on the trade promotion organisation, New Zealand Trade and Enterprise (NZTE).

With trade promotion organisations such as NZTE required to demonstrate impact, there is a preference for supporting a small, carefully curated list of high-growth, high-potential exporters.

But for businesses that miss out on the chance to work directly with NZTE, engaging with the wider network of trade support organisations can be useful. Business councils, chambers of commerce, industry bodies, regional development agencies and shipping ports represent a large untapped resource which can be used for the benefit of exporters.

For exporters, joining chambers of commerce, business councils and other industry bodies remains a valuable way of keeping up with important developments.

Aspirational but not without merit

Maybe doubling exports is aspirational. But there is room for improvement with clarity and buy-in at the sector level, if priorities are spelled out and if we involve the wider network of trade support organisations.

Working on these factors might not lead to a doubling in exports, but they can help build a stronger sector that weathers global economic winds and benefits all New Zealanders.

Eldrede Kahiya, Associate Professor - Strategy and International Business, University of Canterbury.  This article is republished from The Conversation under a Creative Commons license. Read the original article