April 22, 2024

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New Zealand is a trading partner of almost the entire world  Commercial

New Zealand is a trading partner of almost the entire world Commercial

Having only five million people and being separated from global supply chains by thousands of nautical miles are not insurmountable obstacles. As New Zealand demonstrates, growth is achieved with a specialized strategy based on competitive advantages and trade agreements with the rest of the world.

with income each Compared to the United Kingdom, the southern country signed a free trade deal with Brussels in July, which will come into force in 2024, and which, according to official estimates, will increase trade between the EU and New Zealand by 30%. The raising of cows and goats and the highly technological development of the industry made dairy products the first export, followed by tourism and meat.

The free trade agreement with Brussels, following the one agreed with the former British metropolis in 2022, adds to more than 10 in force with almost all its trading partners, among which the Regional Comprehensive Economic Community (RCEP, for its part. ) stands out. Abbreviated in English, it also includes China, Japan and Australia. is part of) and the Trans-Pacific Partnership (CPTPP), with 10 countries in the Americas, Asia and Oceania (without China and without the US).

According to economist Shamubeel Egup, New Zealand’s tradition of openness to the world began with the United Kingdom’s entry into the European Common Market, which left the former Pacific colony without preferential access. “It was like cutting the umbilical cord to our homeland,” he says. According to Egup, who works in Wellington for consultancy Sense Partners, the importance of free trade agreements such as the one signed with Brussels has more to do with the potential for commercial integrity and shared knowledge than potential benefits. Reduction of duty.

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First, since average tariffs are already so low, their withdrawal has a revolutionary effect (according to the World Trade Organization, the average tariff under the Most Favored Nation policy is 9%). But the protection offered by Brussels to the dairy sector, where New Zealand has a clear competitive advantage, will take the form of non-tariff barriers that Europe has no plans to remove.

Indeed, the free trade agreement between Europe and New Zealand defends as an innovation the inclusion of environmental and social controls, such as equality criteria between men and women or the measurement of greenhouse gases generated by production and transport. As Eaqub says, “What we need is more coordination, especially with climate change, where one of the problems is that inaction by some discourages action by others.”

But Wellington’s main trading partner is not the EU, with China accounting for 30% of its direct exports (followed by Australia and the US). As New Zealand economic historian Brian Easton notes, this percentage can reach up to 65% when exports to other countries in Asia and Oceania are integrated into China’s supply chain.

This emphasis on China illustrates the balance in the New Zealand government’s compulsion to strike in the face of Beijing’s attacks on human rights. Although it has been embroiled in several international complaints over abuses in Hong Kong and Xinjiang, the Labor-led government has publicly defended its business relationship with the Asian giant while signing trade deals with London and Brussels. .

“New Zealand’s worst-case scenario is a collapse of the Chinese economy or a military conflict between the Asian nation and the US involving sanctions against Beijing,” says Easton. Thus, he defines a diplomacy as “diptoying”. “New Zealand should condemn some of China’s actions, but not so strongly as to avoid trade consequences such as those suffered by Australia.” [país con el que China libra una guerra comercial que se disparó con unas declaraciones de Scott Morrison sobre los orígenes de la covid-19]. On the other hand, it needs to ensure its security relationship with the US is close enough to ensure that New Zealand’s key exports are respected in the unlikely event of trade sanctions against Beijing, but not so close that China cannot tolerate it.

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At opposite ends of the Iberian Peninsula, the New Zealand economy shares a surge in house prices with Spain’s, which has become particularly stressed after the coronavirus pandemic. Property prices rose 45% in just 18 months, according to data from Jarrod Kerr of state bank Kiwibank. Although they’ve fallen 15% since November, buying a home still costs eight times the median annual household income (or half the median salary in mortgage payments, according to calculations by Brad Olsen of consulting firm Infometrics).

According to Kerr, the increase in prices was driven by long-term low interest rates, which kept mortgage loans “at 2% or 2.5%”; and by the change in way of thinking created by the blockages caused by the epidemic. “Many people who spent more time at home started looking for better homes,” he says. The problem is that the rate hikes used by the Reserve Bank of New Zealand may now strain them.

Inflation and rates

The central bank had to raise its benchmark rate to 5.5% to combat inflation, which reached 7.3% in June last year (now around 6%). Although the Monetary Authority has given indications that there will be no new increases, the main mortgage contract system in New Zealand combines the concept of fixed interest with variable interest, agreeing to a fixed rate for only one period (typically, between one and five years). According to Christina Leung of the New Zealand Institute of Economic Research, “More than half of mortgages due to be renegotiated in the next 12 months will go from 4% to 6%, 7% or 8%. So even though RBI is not going to hike its rate further, we are going to hold interest rates up to 8% for at least one or two years.

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