We can learn from Australia about becoming too reliant on trade with China

So  how is  NZ Inc  doing  in this pandemic?    OK, you  might  say.  Take  for  example  NZ’s  external  trade.  NZ  has  posted   its  biggest  external    trade surplus in 28 years as  Covid-19  led  to a sharp fall in imports.

For the  month of  October  there was a deficit of  $501m, just under  half  the  size of the deficit  the  previous October.

All up, international trade has proved  remarkably  resilient – a welcome boost for a  small importing economy like  NZ. And there  are signs  the  economy is strengthening,  says  ASB  economist Nat  Keall.

He said that on the same day the NZ sharemarket rose to a new record.

But despite the positive signals, exporters  can’t  rest  on their  laurels.  Indeed, fruit  exporters  are already under the  pump  as  they  face  shortages  of  workers  for  coming  crop  harvests.

The  dairy  industry,  too, has  production  worries  of its own, as the  government’s freshwater regulations  discourage  intensification.

Trade experts   have a  broader  concern: will  markets in  the UK  and Europe  shrink   first  under  the  Covid   hammer,  or  more permanently  from the impact  of  Brexit,  whatever  shape it takes?

Whether  the  UK   leaves  with a generous, harsh, or (worst  of all)  no deal,  NZ’s  quota  arrangements  will  almost certainly be attenuated, even   if   temporary  arrangements  are  agreed.

The  easy  alternative, some industry authorities believe, is to  sell  more  into  China’s  markets.  But this   would   only  emphasise  NZ’s  growing  dependence  on   China.

That – as  Australian  exporters   have  found to  their  cost – exposes traders  to becoming  pawns   in political  games  at  an international level.

A   growing list of Australian  exports — wine, coal,  barley — have been  hit  in  retaliation  by Beijing  for  Australia’s call  into  Covid-19’s origins.

Australia  has  learnt the hard  way  about the cost of of  becoming  over-dependent   on the  Chinese markets. NZ   cannot risk jeopardising its sales there.

But PM  Jacinda  Ardern  has  hinted  only that  her  government  would seek  to  rebalance the  “relationship”  with   Beijing.

Where the previous Foreign Minister Winston  Peters sought  a  firmer  line  with  China,  he  did  not  appear  to  have  much  support  among  other  coalition  partners.

The dairy industry itself has sought to strengthen its  position  in the  Chinese  market with  new  products  and partnerships.  But some authorities believe  it  remains   very  vulnerable. Individual  companies  like A2 Milk   have  sought to  focus    new  marketing  efforts  in   huge  potential  they  seek  in  the US  and  Latin America — but  they  are  not  easy  markets.

The government  itself   should  be  heavily  focused  itself   on  what  it  can   do   to  make  the  dairy   industry  more  efficient  and productive.    It could  relax  the  current  regime  limiting  genetic  modification,  particularly  in developing  new  grasses    and  the  breeding of  highly productive  animals.

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