Protectionist Cronies

Gareth MorganEconomics

Gareth Morgan, Director of Gareth Morgan Investments

The Buy New Zealand campaign sponsored by the Manufacturers Association generates warm fuzzies among the ignorant, but little besides. There’s a complement to the slogan which qualifies its relevance. That is, New Zealanders should only Buy NZ if the product is the best value for money. To force them to do so by restricting their choice reduces their standard of living.

There has to be a suspicion that those promoting the Buy NZ campaign do so with no regard for the overall benefits to NZ citizens from such activity, but simply from a desire to incite xenophobia about foreign goods for their personal gain. In many cases New Zealanders still have little choice but to buy NZ as the level of import protection is set so high as to make it cost-detrimental to do otherwise. The irony of our government campaigning on the world stage about the need for GATT to reduce protection on agriculture, when we retain punitive tariffs on imports, is an hypocrisy which undermines our sincerity. With such a forked approach we cannot expect to be taken seriously and our government remains a legitimate target for protectionists seeking to feather their personal nests. Increasing the frequency of anti-dumping duties simply spurs them on.

The notion that a $1 million dollars spent on NZ made goods places twenty New Zealanders in jobs has been touted in a recent advertising campaign by Ajax Fasteners. We know that the tariff on screws and bolts is up to 16%. If an exporter of machinery could acquire international competitiveness by getting his nuts and bolts for 14% less, he would attract greater overseas orders. International competitiveness means the demand for the product is infinite – the jobs generated would be restricted only by how much labour NZ has to offer. This full employment outcome contrasts to the benefits of the Ajax-supported Buy New Zealand campaign, which are at best dubious, little more than the result of flaky reasoning.

It’s pretty rich for a manufacturer benefiting from tariff protection to evangelise the moral suasion of nationalism when peddling product to beleaguered buyers. If the product was the best value, protection wouldn’t be necessary, and the users’ competitiveness would improve. Growth in manufacturing is occurring not because of the success of any introverted Buy NZ campaign, but because international competitiveness of manufacturing has improved under deregulatory pressures and containment of domestic inflation. From our internationally competitive firms there is little support for government measures to restrict consumers to Buy NZ.

For the government, the policy issue has to be how to accelerate the growth of our competitive firms so unemployment is reduced via them generating greater external income. Protectionist measures do the opposite – raise our cost structure, hamper export growth and cost jobs. The Minister of Finance last week called for greater maturity to be shown by some of NZ manufacturing’s protectionist cronies. With that maturity will come managerial focus on the critical competitive issues which determine business success.

Protectionist Cronies was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.