Gareth Morgan, director of Gareth Morgan Investments
The annual Kiwi ritual of bestowing Exporter of the Year trophies has confirmed once again the reverence with which the business and government establishment regard exporting activity. Over many years now New Zealanders have been conditioned to believe that only through exporting “better” will our living standards be raised. An interminable parade of governments and government quangos have come and gone, all crooning this same hymn to the exporter. Economic policy has, over the decades, been continually steered to favour export endeavours. Included amongst the policy initiatives to spur exports have been currency devaluations, and a raft of export subsidies.
In spite of (or maybe because of) this cultural and policy devotion to exporting, the performance of New Zealand’s export sector relative to others in the OECD has been singularly unspectacular. Over the last 40 years we have recorded the worst export volume growth in the OECD group. This, despite a policy framework emphasising volume growth of exports – livestock incentive schemes being a case in point. Even today some industries still see their future in terms of a volume objective – for example the tourism industry’s goal of 3 million tourists by the year 2000, would be more sagacious if it were aimed at a dollar goal rather than a numbers one but the volume objective, nurtured by policy over decades, dies hard.
The other avenue for lifting net external income from trade is by lifting the terms of trade – the ratio of export to import prices. This can be done either by exporting products which world markets value more, or by sourcing imports more efficiently. Both contribute the same to the efficacy of foreign exchange earnings. But an examination of the terms of trade trends for NZ reveals (a) the world price of our exports haven’t even kept pace with inflation in the markets in which we sell, and (b) the fall in the world prices of the goods we import have made a major contribution to the lift in our terms of trade.
Coming on top of the adverse volume trends then, it’s evident that we have been more successful procuring cheaper imports than we have in raising the value of what we export. Again export performance has been mediocre.
The paradoxes of the “export or perish” NZ policy psyche then, are that the export volume performance has been the OECD’s poorest, and that the significant contribution importers have made to raising our living standards have been ignored. Worse than that importers are generally berated for lowering living standards by “using up” valuable foreign exchange. The evidence is that they have played a substantial role in delivering New Zealanders real rises in incomes by delivering better products more cheaply. It renders the calls to buy New Zealand little more than the inane self interest of weak competitors. Tradenz might contemplate replacing their “Exporter of the Year” award with one for the most efficient “Importer of the Year".
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