New Zealand's inclusion in the proposed 12-nation Trans-Pacific Partnership (TPP) will help lower its exporters' exposure to any downturn in the China market, Trade Minister Tim Groser said Wednesday.
Groser told a gathering of China experts at Victoria University in Wellington that the question of whether New Zealand was too dependent on trade with China was a fair question, given that any downturn in China would affect New Zealand exports both to China and the country's other major market, Australia, given Australia's dependency on China too.
"There are rather large practical limits to what we can do about this. Even further diversification of our export effort, which is central to this government's trade policy, does not avoid the problem," Groser said in a published speech.
"An astonishing 124 countries now count China as their number- one trading partner. If China slows down or worse, all our export markets slow down. We would be adversely affected even if we did not sell a single dollar of goods and services directly to China."
"In terms of our agri-business exports, we can only feed around 40 million to 50 million people. The new trade agenda in front of us -- and TPP is the biggest game in town here -- is about risk diversification and giving our companies more choice still," Groser said.
New Zealand had always a small economy whose economic fortunes were always affected by downturns in the major economies of the world, so it was important to maintain a flexible set of economic, market oriented policy instruments to adjust to external shocks, wherever those external shocks come from, Groser added.
New Zealand and China had just passed -- a year ahead of schedule -- a milestone set by Prime Minister John Key and then Chinese Premier Wen Jiabao in 2010 to double two-way trade by 2015, and Key and Chinese President Xi Jinping last year agreed to lift two-way trade to 30 billion NZ dollars (26.25 billion U.S. dollars) by 2020.
With the signing of the New Zealand China Free Trade Agreement (FTA) in 2008, as well as an FTA with Hong Kong in 2010 and a comprehensive economic cooperation agreement with China's Taiwan signed last year, New Zealand was better placed than any other country to get market access to "the greater China economic zone."
Groser said he was skeptical about the conventional wisdom around the "what happens if China's growth rate slows" school of thought.
"From 1992 to 2007, merchandise exports to China increased by an average compound annual growth rate of 12 percent. From 2008 to 2012, that rate more than doubled to 28 percent per annum. Last year, exports increased by a mind-boggling 45 percent. Note incidentally that this was during a period when Chinese growth was 'slowing down'," said Groser.
China was the most important part of a solution to New Zealand' s "over-arching strategic challenge" to reduce borrowing and increase export earnings, but New Zealand would inevitably be impacted if there were a China economic shock.
"Absolutely the best insurance policy New Zealand can take out is to complete the TPP negotiations and improve our access to the huge markets that would represent -- about 40 percent of global GDP," said Groser.