That dreaded word ‘uncertainty’
It’s often said that business can live with both booms and busts, but what really unnerves industry is uncertainty. There’s money to be made in times of growth and in times of crisis – but it’s not knowing which way it’s going to go that makes us uncomfortable.
New Zealand export businesses have had a period of relative certainty in recent years. We knew China would keep growing; that there were some clear, if imperfect, rules to rely on; and that if New Zealand came up with good products there would likely be willing buyers paying a good price.
The mood right now suggests some of these core assumptions are under threat, and that dreaded word ‘‘uncertainty’’ is being spoken about in terms it simply hasn’t been for a couple of decades.
Commentators are talking about China’s economy slowing; the World Trade Organisation’s Dispute Settlement Body – the jewel in the trading crown – could cease to function by the end of the year on its current trajectory; and there are tensions over trade wars when in years past they have been absent.
The Economist has declared the glory days of globalisation over and noted the trend toward ‘‘slowbalisation’’, which it says will see a preference for regional blocs over global sprawl and an aversion to partnerships that carry high geopolitical risk.
New Zealand diplomats have Executive director, Asia New Zealand Foundation
worked hard for years getting us membership of various regional clubs, yet we see in the UK a country deciding to leave one of the biggest and wealthiest of clubs.
Whilst I’m generally pessimistic (I would say cautious) when it comes to international affairs, and despite all of the above, I in fact feel quite optimistic about 2019 – in Asia and New Zealand at least.
Yes, there are geopolitical issues in the Asia-Pacific region that could have a real impact on our ability to do business or build partnerships in the region or affect the way we operate.
And yes, there are a number of important elections coming up in Asia this year, there are human rights crises brewing in various pockets of the region, and it’s unclear how the USChina trade war will be resolved.
But the sheer size of China’s market and the demand inelasticity for much of what we sell (food, ingredients, raw materials) should mean that if their economy slows, New Zealand goods would be one of the last to be affected by consumer demand. If New Zealand was a car exporter or produced high-end luxury goods you might feel a bit more nervous.
Important, too, as impressive as China is, Asia is not just China.
We’ve recently signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the rebranded TPP, now known as CPTPP).
Five Asian countries have signed the CPTPP. Most significantly for New Zealand, the agreement gives us access to Japan, the third-largest economy in the world after the United States and China. Tariffs on goods ranging from beef to wine will be steadily dropped for New Zealand producers exporting to Japan, a multimillion-dollar boost to their industries.
New Zealand exports are also doing well under free-trade agreements with South Korea and Taiwan.
The 600 million consumers in Southeast Asia are becoming wealthier and more demanding in areas such as food safety and quality products. They see New Zealand as a reliable provider. In many of these countries, like Malaysia and Thailand, New Zealand has significant ties going back decades. And with the Asean-Australia-New Zealand Free Trade Agreement we have good access to these markets.
Then there is the wealth of Singapore, the rising giants of India and Indonesia, and much potential in places like Sri Lanka and Pakistan.
It seems to be that while some of the assumptions we have operated under these last couple of decades may be under some strain, as a country we are well placed to explore the many other opportunities in Asia.
Yes, it may mean that business leaders have to wear out even more shoe leather getting to some of these new markets, and officials may have to think a little more creatively and advocate a bit harder for New Zealand business in places we may not have been so focussed on in the past.
But it seems to me that New Zealanders have always had to work hard to get their product offshore in often protected, heavily subsidised and regulated markets.
We have done it before and we might have to do it again, because as much as business may like certainty, we know the only certainty is change.