It’s true that 2022 was an extraordinarily challenging year for Aotearoa New Zealand’s export and trade sector. Thankfully, 2023 is shaping up to be a much more positive one – a good time for export-focused firms to further their horizons.
Think back on 2022 and you’d be right in thinking that it delivered a fair amount of stress and challenges for New Zealand’s economy, businesses and, in particular, our trade and export sector.
The pandemic can mostly take the blame for exposing New Zealand’s ongoing vulnerability to global supply chain disruptions and it will be a while before that situation returns to normal considering current world events.
Essentially 2022 was a ‘Year of Disruption’ and a ‘Year of Reconnection’ all rolled into one.
The good news is that covid’s grip on the world has been slowly easing, and some degree of normality has returned to our lives.
Following the ill-fated trans-Tasman bubble in 2021 (from mid-April to late July, when quarantine-free travel from Australia was suspended), the New Zealand Government’s vaccination drive meant it was able to progressively lift border restrictions from February 2022, with all limits concluded at the start of August. The reconnection was under way and quickly gathered momentum.
The Prime Minister was among the first to lead the reconnection charge with a flurry of overseas trips. There were business missions to Singapore and Japan in April, the United States in May, Australia in July, and Vietnam in November. After a quiet two years, Trade Minister Damien O’Connor was able to spend time on the road as well, once again able to be face-to-face with trade negotiators and officials from New Zealand’s trading partners.
One direct consequence of this travel by senior members of the Government was a breakthrough free-trade agreement with the European Union, announced on 1 July. It had taken 14 years to finally negotiate an agreement, will probably come into force in 2024, and sees tariffs removed on 91 percent of goods.
The EU is New Zealand’s third-biggest trade partner. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost €7.8 billion in 2021.
While this FTA is indeed a breakthrough, at the time of writing The Ministry of Business, Innovation and Employment (MBIE) was seeking feedback on the Geographical Indications (Wine and Spirits) Registration Act 2006 as part of reforms needed to meet the negotiated terms of New Zealand’s FTA with the European Union.
The Government needs to make changes to the Act to register the EU GIs it has agreed to protect under the EU-NZ FTA. This provides an opportunity to review parts of the GIs Act that either have not been reviewed for a long time or where the EU-NZ FTA terms may create inequities.
The EU submitted a list of around 2000 products to New Zealand that have geographic indicators[1]. This stops other businesses from selling items under those names unless they’re from a certain region. This has New Zealand cheese producers in particular worried.
Under the agreement they will be forced to stop using the name feta and come up with another name within nine years of the FTA coming into force.
New Zealand’s gorgonzola producers would also face the same restriction, but within five years of the agreement being in place.
It’s not all doom and gloom though. Parmesan and gruyere producers can continue using the names if they’ve been making the products for five or more years before the FTA begins.
Other names like mozzarella, brie, camembert and gouda can continue to be used without restrictions.
The EU-NZ free trade agreement followed another FTA with the United Kingdom. The latter was ratified by the British Parliament in February 2022. Under the latest agreement New Zealand businesses will have preferential access to the world’s fifth largest economy and the UK’s NZ$3 trillion consumer market of more than 67 million people.
Two-way trade between New Zealand and the UK was worth $NZ6 billion pre-Covid, and it’s hoped that target will be easily exceeded with the new agreement in place this year.
It means Kiwi exporters will be able to compete on a level playing field in the United Kingdom, particularly against other global exporters who have already secured FTAs there.
The UK and New Zealand have also agreed to an inclusive Digital Trade chapter in the agreement that will support and facilitate easier and more effective digital ways and means of trading, including through paperless trading and the use of e-signatures and e-documents.
Improved connectivity
A further sign of New Zealand’s reconnection with the world came with its national airline launching a new direct service to New York last September. And when Air New Zealand resumed its non-stop service to Chicago in October, it had reached the milestone of bringing back all 29 of its pre-Covid destinations. With Air New Zealand’s extensive links to New Zealand’s business community, this was indeed an important milestone.
The lifting of border restrictions, and greater air connectivity with the world’s markets, has enabled thousands of New Zealand exporters to resume their business activities on the ground in those markets. At the time of writing the one exception remains China, whose zero-Covid policy has made travel to that country remain extremely difficult.
More flights to our leading trade destinations have also resulted in greater capacity for cargo movements, and sea-freight bottlenecks in Asia began to gradually ease across the second half of 2022. However, ongoing labour shortages have meant that supply chains around the world have remained under substantial pressure.
Support for exporters
With many new connections now being successfully made, NZTE has also stepped up with a number of supportive global marketing campaigns. Made with Care is a multi-agency marketing campaign designed to build a preference in key markets for New Zealand food and beverage brands. By August it already had a reported reach of 118 million people.
Through its Invest New Zealand arm, NZTE also launched a new investment brand in 2022[2], ‘Do Good, Do Well’, to highlight the opportunities for investment and investors in New Zealand. The initiative also serves to highlight the importance of sustainable, inclusive, and innovative business as the key to driving economic growth.
As the website’s landing page states, those features of New Zealand’s business culture have subsequently created an environment that delivers both societal and financial benefits.
It states, “For many years, New Zealand has boasted some enviable world-leading statistics around its values-based business culture including the fact it is first in the world for corruption sustainability, first for macroeconomic stability and aims to have 90 percent renewable energy by 2025 with net carbon zero emissions by 2050.”
The strength of a values-based approach is growing amongst the international business community, with an international study from Deloitte citing societal impact as the top factor when leaders evaluated annual performance. Thirty-four percent of businesses believe societal impact is the most important indicator of success, more so than customer satisfaction, financial performance, or employee retention.
Stuart Nash, the Minister for Economic Development, unveiled the new initiative at an investor migrant event in New York last year, saying “New Zealand doesn’t just aspire to be the best in the world, but we also want to be the best for the world.”
The ‘Do Good, Do Well’ initiative is supported by research that shows that serving the interests of planet and people doesn’t have to be at odds with profit. The vast majority of executives and investors out there believe environmental, social, and governance initiatives create corporate value long term. Now more than ever, businesses are aware that in order to protect their own financial interests, they must protect others.
There are hundreds of sustainable and innovative investment opportunities in New Zealand, including the likes of pioneering sustainable space travel firm Dawn Aerospace; WoolAid, the company reducing waste through merino wool bandages; and Xero which is championing workplace wellbeing through cloud-based computing software.
“New Zealand is renowned around the world for having a strong sense of environmental and social justice,” explains Dylan Lawrence, General Manager of NZTE’s Investment team. “And in recent years, that is becoming more and more appealing to global businesses as they keep up with changing consumer and societal demands.
“Regardless of whether it is Cogo, a digital tool that empowers individuals and businesses worldwide to measure, reduce and offset their impact on the climate, or Kono which is an artisan food producer contributing to the thriving $70 billion indigenous Māori economy, we are proving time and time again that purpose and profit can go hand-in-hand.”
This new investment drive is running across major international markets including the United States, United Kingdom, and Germany to “attract productive, inclusive, and sustainable investment opportunities that drive economic benefit for the good of New Zealand”.
Meanwhile, on the tourism front, in late 2022 Tourism NZ launched its first global campaign in two years, with its ‘If You Seek’ promotion. We all know how the country’s tourism industry was impacted by the effect of the pandemic. 2023 is the year to restore, and ideally exceed, the visitor numbers and revenues being produced pre-2020.
Technology a star performer
If you’re looking for a star-performer amongst New Zealand’s export sector in 2022, look no further than technology.
According to the annual Technology Investment Network (TIN) Report announced on November 17th, technology companies grew nine times faster in the previous 12 months than the general New Zealand economy. This is a remarkable achievement in what is considered a time of global economic uncertainty.
New Zealand tech exports generated $11.5 billion in revenue for the 2022 financial year, up 9.1 percent on the previous year and representing 14 percent of the country’s total export revenue. As for our top 200 tech export companies (TIN200 companies), they produced more than $15 billion in total revenue for the same year.
Technology is now New Zealand’s second largest export earner behind dairy and makes up 14 percent of the country’s total export revenue for the year to June 2022.
TIN Head of Research Alex Dickson believes there is a growing sense of confidence in the technology sector and by those people invested in it.
“By the numbers, we see our tech companies supporting much-needed export diversity, productivity and income assurance as New Zealand plots a path to recovery,” he says.
“Tech companies added more than a billion dollars of revenue growth and $960 million in export growth to New Zealand’s economy over the past year.”
Dickson adds that the sector’s breadth of export destinations, ability to absorb shocks and avoid conflict with climate goals is a major asset towards achieving its goals. “On its current trajectory, tech exports will reach $20.5 billion by 2027. However, challenges such as attracting, training and maintaining skilled talent remain an obstacle.”
The latest TIN Report also found that New Zealand tech companies are breaking new ground as exports contribute greater earnings, with 76 percent of total TIN200 revenue earned offshore in the past year.
The total value of tech exports to Asia hit $1.05 billion, almost double that earned two years ago.
Australia, the largest tech export market, grew by 11.9 percent with turnover of more than $4 billion, and exceeding domestic sales of $3.6 billion in the same year.
Article compiled by Glenn Baker, editor of ExporterToday and the NZ Export & Trade Handbook.
Celebrations with our closest neighbours
This year, a significant amount of focus will be on New Zealand’s closest trading partner, Australia.
2023 marks 80 years since New Zealand and Australia opened High Commissions in each other’s country. It also marks 50 years of visa-free travel between the two countries, and 40 years of the Closer Economic Relationship (ANZCERTA).
Both governments are working to ensure that the CER continues to adapt to the modern needs of business and individuals, reflecting the strength and vitality of the trans-Tasman relationship. Both countries are also working together to celebrate the successes of this unique trade agreement.
The World Trade Organisation (WTO) recognises the CER as being among the world’s most comprehensive, effective and multilaterally compatible free trade agreements. The agreement covers all trans-Tasman trade in goods, including agricultural products, and services.
Despite all the turbulence of the past three years, exports of goods to Australia continue to grow.
The importance of the market to New Zealand is reflected in that fact that exports to Australia totalled US$9.39 billion during 2021 (according to the United Nations COMTRADE database on international trade).
[1] Geographical Indicators (GIs) are intellectual property rights similar to trademarks. They help producers give consumers information on characteristics of a product that are connected to its geographical origin. Examples include ‘Marlborough’ (for wine produced in that region of New Zealand), ‘Scotch Whisky’ and ‘Champagne’.
