In its report for ExportNZ, the New Zealand Institute of Economic Research had suggested a number of initiatives to remove the country’s export performance, thereby enhancing economic growth. An analysis of this Report appears under Businesslink in this issue.
Lifting exports is perhaps the surest way of improving the economy, since this sector forms the single largest source of income for us. From agriculture, meat and dairy products to wool and machinery, New Zealand has immense potential to do better.
As the Report implied, merely blaming our small size and remote location is not an option; it is important to take the necessary steps to move ahead.
Notwithstanding the requisite measures, there are at least two aspects over which the New Zealand government would not be able to exert control. These include the value of the dollar which remains high (lowering the value may not necessarily be a good thing) and the continued state of the US and European economies.
Not that the governments concerned are keeping quiet, just witnessing a parade of inert events. President Barack Obama has made the US economy as his main target in his second term with measures that would assist cash trapped corporates and ease the burden of ordinary Americans.
Greece, Italy and Iceland were among the countries in Europe that caused serious concern in 2012, although even wealthy nations such as the Netherlands and Germany also suffer from the global financial crisis.
According to the Economist, lack of imagination has blinded these economies to simple solutions but with a little effort, they can make 2013 a lot better.
The publication suggested three ways to improve confidence and increase growth, although the New Year appears bleak for these countries.
All three involve liberalisation of trade.
The popular weekly said that the world is less integrated than most people realise and that trade offers a chance for liberal democracies to re-establish their credentials as the world’s guides towards prosperity.
An International Monetary Fund report estimated that the US economy may grow by about 2% this year, while those in the Eurozone should be lucky to witness any growth at all. Policymakers in each of these economies could do much to improve this dour prognosis, but most involve unappealing choices.
“Freer trade does not involve spending any money. It demands nothing of participating governments other than a bit of legwork and a lot of political courage. And even if some lobbies, such as farmers, will fight hard, the benefits for the overall economy of cutting barriers—the tariffs, subsidies and red tape that gum up international markets—are large,” the publication said.
If market forces come into play effectively, wages will rise as the cost of imported goods and services fall; exporters’ markets will expand and productivity will improve as the helpful consequences of freer trade filter through the whole economy.
Trans-Pacific Partnership (TPP), a free-trade agreement that straddles the Pacific; an Atlantic-spanning free-trade deal between America and the European Union; and a true single market in services within Europe are seen as catalysts for freer trade.
As the Economist advised, “By championing freer trade and open markets, the West taught the rest of the world how to grow. Nowadays, globalisation is associated with the surging middle classes of the emerging world, and some illiberal dictatorships. Let 2013 be the year when the West claims back its creed—and its oomph.”
