New Zealand and the United States – Dynamic Economic Partners in the Indo-Pacific
It is a pleasure to participate today in the United States Business Summit and to have the opportunity to speak to you about the US-New Zealand trade and economic relationship.
I would like to join the Prime Minister in thanking the organisers – especially Fran O’Sullivan and Michael Barnett who I know have worked hard to pull this event together. This event is a welcome addition to the calendar and a timely opportunity to focus on a hugely important relationship.
I would also like to thank the distinguished guests we have here today: Ambassador Udall, representatives from the business community, Members of Parliament as well as those who are following the Summit online from the United States and especially those US officials and thought leaders who have given up their time to participate in this Summit.
Today I want to talk first about the way New Zealand's commercial links with the United States are evolving.
I then want to go wider and look at the critical role the US has to play in shaping the economic architecture of the Indo-Pacific region – and some recent developments in which New Zealand has had a close involvement.
New Zealand’s trade and economic relationship with the United States
Today the US is our third largest trading partner overall and our largest market for services. Two-way trade growth has averaged 5% per annum over the past 15 years. Bilateral trade was NZ$18.5 billion to the year ended December 2021.
There you have a really positive growth story.
Sitting behind that is an even more positive story about the composition of trade – and the striking shift from volume to value.
In high-technology sectors the United States is our most important market.
New Zealand’s exports of computer-related services have doubled over the past four years. Exports of computer services such as software and licensing fees account for a big part of that.
Future-focused and low carbon firms are a major contributor to our high-technology exports. Not only do these companies have a low carbon footprint, many are purpose driven by the intergenerational value of ‘kaitiaki’ – care for people and place.
The New Zealand software sector’s charge into the US market has been led by major New Zealand companies such as Xero, which now has a significant presence in the US.
But the big players are increasingly being joined by a wider ecosystem of niche firms like Parkable – a company offering a software-as-a-service solution that helps businesses with employee parking and mobility challenges.
Our next-generation offering is not limited to software. The US has also become a crucial partner to New Zealand’s advanced manufacturing industry. Injections of capital and technology from US partners were critical for the development of Rocket Lab, now a real force in launch and wider space services – and the company which kick started New Zealand’s lively new space industry.
There has long been a close relationship between the New Zealand and US film production sectors, demonstrated in the recent productions such as Sweet Tooth and Cowboy Bebop. And of course there’s the success for the OSCAR winning film Power of the Dog.
There is also an investment story. Two American giants, Microsoft and Amazon, are planning large investments in New Zealand data centres. These investments will help to build the technological foundation on which New Zealand’s high-tech sector can continue to grow.
I wouldn’t want you to think that traditional traders are missing out on the action. New Zealand’s primary sector remains a key contributor to export growth to the US. Here too we see a striking shift from volume to value in some segments.
The standout example is wine – especially Marlborough Sauvignon Blanc. Wine is now New Zealand’s second largest primary goods export to the US, having grown at an average rate of over 10% per annum since 2010.
Our largest export to the US, beef, has held steady averaging around $1.2 billion a year in exports over the last five years. But there is more to this story. New Zealand beef exporters are finding innovative ways to appeal to US consumers. In late February Silver Fern Farms launched a certified net carbon beef product into the US market. This is designed to appeal to environmentally conscious US consumers who are willing to pay a premium for a product they see as aligning with their values.
‘Volume to value’ has long been a focus for our primary industries, but in the 21st Century I believe what we’re really talking about is ‘volume to values’. And by that I mean consumers are increasingly looking at the values with which food and fibre is produced. Our ‘kaitiaki’.
Māori firms are strongly positioned to take advantage of their values driven approach. For example, Kono is a vertically integrated food and beverage company that combines traditional values of te ao Māori with their business model. Companies like Kono are increasingly finding that their focus on sustainability and conversation resonates in the US market.
We are seeing dynamic and cutting-edge New Zealand companies finding profitable opportunities across a wide range of sectors in the super-competitive US market – to the point where it is hard to point to an industry where we don’t have successful partnerships or potential to build them.
This will be a key message the Prime Minister and the accompanying business delegation will take on their visit to the US later in the month. The Prime Minister refreshing our relationships in the US will be crucial as we continue to deliver on our Trade Recovery Strategy.
It needs to be said that companies targeting the US market have some advantages in being based here in Godzone.
Our brand is strong.
We have come through the pandemic in reasonable shape.
The innovation ecosystem bringing together science, research and business gives New Zealand the flexibility and speed to respond to market demands and disruptive trends as well as consumer and business needs in the US.
And it works both ways. US innovation and investment and entrepreneurial culture are going to be crucial to boosting the productivity of the New Zealand economy and building the high wage economy that New Zealanders want. The US, in turn, is set to benefit from the next generation of kiwi business leaders and entrepreneurs who are increasingly looking to the US when making their decisions about where to expand and invest.
And let me say that government has a role in making things happen. Beyond our investment in science and research and a fit for purpose business environment we offer a flexible and responsive regulatory culture. This can be critical for some industries – as the space industry will attest.
Working with the United States in the Indo-Pacific
Let me broaden the discussion.
You will know that as well as having an important bilateral relationship New Zealand and the US have a shared history of working hand in hand on the regional trade agenda.
The original TPP was the product of some New Zealand strategic craft followed by some creative conversations that Phil Goff and his team had with US counterparts. The US ultimately chose not to stay in TPP but the list of current bids from big economies wanting to join CPTPP is testament to the immense importance of what was achieved.
The regional agenda is not just about FTAs. Over several decades APEC has had a big positive impact on policy and regulatory practice both at the border and behind the border. As host in 2021 we put a huge effort into re-establishing APEC’s status as one of the pillars of regional trade and economic governance – and I thank the business sector for its contribution to the great results we achieved notwithstanding the challenges of the pandemic. We worked closely with the US and others in APEC forums to help chart a course for the region’s recovery from the economic crisis brought on by COVID-19.
We welcomed US support for the Aotearoa Plan of Action which will help to define the agenda of APEC over the next 20 years.
We particularly look forward to the United States’ hosting of APEC in 2023. This will be a crucial opportunity for the US to leverage its energy and ideas to drive conversations on the economic direction of the Indo-Pacific region.
In the meantime we have welcomed President Biden’s move last year to launch a new regional trade and economic initiative – the Indo-Pacific Economic Framework.
The development of this initiative has been led by Secretary of Commerce Gina Raimondo and US Trade Representative Ambassador Katherine Tai, who addressed this summit earlier.
The Indo-Pacific Economic Partnership is innovative in its form. It will have a trade module within which there will be a negotiation on some traditional trade rules. But it also aims to promote cooperative partnerships across a wider agenda including topics of high interest to New Zealand – among them supply chain resilience, infrastructure and clean energy and decarbonisation.
The US is also focused on what IPEF can achieve on labour and environment issues – an area of alignment between the Biden administration’s trade priorities and our own Trade for All Agenda.
We have welcomed the opportunity to work with the US as a trusted partner in the early development of the IPEF concept. We will want to engage more closely with business as well as other stakeholders as the negotiating agenda starts to take shape in the months ahead.
The pandemic has created unprecedented disruptions to the global supply chains that were built up over decades to be “least cost” and “just in time”.
Climate change presents different challenges.
The Indo-Pacific Economic Framework recognises these challenges and is focused on developing a new model of cooperation that can help Indo-Pacific economies address them together.
At a time when climate action is becoming more urgent than ever it goes without saying that we welcome the opportunity to engage with some of the world’s biggest economies on what we can do, in partnership, to bend the curve on global emissions.
For our part I expect we will end up drawing heavily on American innovation, technologies and investment to help drive New Zealand's transition to an economy generating net zero carbon emissions. For example, in March this year the highest number of new electric vehicles registered to drive in New Zealand were Tesla Model 3s.
We are confident that the Indo-Pacific Economic Framework can provide a platform for building high standard approaches to modern economic challenges, like digital trade and climate change.
Let me offer a couple of concluding comments.
The first is to note that New Zealand has long sought to be part of a free trade agreement involving the United States – and this naturally remains a goal for us. Alongside our efforts in the IPEF process we will continue to engage with US counterparts on that longer-term vision.
At the same time it will not have escaped your notice that New Zealand firms are thriving in the US market in spite of the lack of preferential access.
That says something important about the changing commercial landscape here and globally – and about the particular strengths that New Zealand firms can offer in an increasingly digital marketplace.
I look forward to hearing more in the course of the day about how members of this audience are doing business in and with the United States.