Remaking NZ manufacturing

No-one can expect to see a return to the protectionist New Zealand of the 1970s.

Keep talking for long enough and eventually the world will agree with you. NZ First leader Winston Peters must know how that feels. Peters has been beating the economic nationalism drum for decades, warning of the perils of globalisation and foreign ownership and hoping for a renaissance of the locally made.

For a long time he has been considered a Muldoonish nostalgist. Now he finds that such a tune has become fashionable at last.

One of the truisms of Covid-19 is that it may bring down the curtain on one economic era and inaugurate another. Globalisation has been economic orthodoxy since the 1980s and New Zealand took to it like a fish to water.

The most obvious economic casualties of Covid-19 in New Zealand are industries dependent on steady numbers of international visitors – tourism, hospitality, the education of international students.

But there is also the disruption of an economic order we have come to take for granted. Global value chains depend on production spread across multiple countries, aided by liberalised trade and investment, cheaper transport and the ease of the internet. Manufacturing has become increasingly mobile and consumers benefited.

China was the obvious engine of this economy. By 2018, it was responsible for nearly a third of global manufacturing. Economies such as New Zealand have seen sharp reductions. In the early 1980s, before the dramatic overhaul of our economy that Peters still opposes, manufacturing made up 26 per cent of GDP. Within four decades, it had fallen to half that number.

Speaking in a near-empty Parliament on the first day of the alert level three lockdown, Peters warned that the post-Covid-19 economy will not restart from where it stopped. The vulnerability or fragility of the global system has been exposed.

The answer, Peters believes, is greater selfsufficiency. ‘‘If we can grow it or make it at near-competitive prices, then we will grow it or make it, use it or export it, rather than use valuable offshore funds importing it. The pitfalls of globalism have been laid out dramatically before us.’’

No-one can expect to see a return to the protectionist New Zealand of the 1970s. But Peters’ remarks make it clear that if there was ever a time for rethinking the global economic order, it is now.

It won’t be easy. The idea that we cannot return to business as usual is strongly contested. Trade Minister David Parker has joined his counterparts in the UK, Australia and Singapore in co-signing a commentary published in all four countries that warns against putting up trade barriers and reverting to economic protectionism.

Troubled times don’t call for abandoning globalisation, but require us to commit even more deeply to it, Parker argues, alongside Simon Birmingham, Elizabeth Truss and Chan Chun Sing. The four sing from the song sheet of globalisation that emphasises vast populations lifted out of poverty worldwide over recent decades and advances in health and technology, offering a view that is in stark contrast to Peters’ hopes for reform.

‘‘Some argue for a rolling back of the trade liberalisation that has underpinned much of the world’s economic growth over recent decades,’’ the four authors write. ‘‘Increased protectionism would only harm the world’s recovery from Covid19, slowing the necessary return of economic and employment growth.’’

Even if this might seem like the moment for economic nationalism to make a comeback, there is still significant and highly influential opposition.