New Zealand & India: Win/Win PartnershipsForeign Affairs and Trade
An Address By The Trade Minister of New Zealand
Dr the Hon Lockwood Smith
Trade & Investment Seminar
Confederation of Indian Industries (Western Region)
Taj Mahal Hotel
This is my first visit to India, but it will not be my last. After just four days in your country, I can now understand why those New Zealanders who fall under the spell of India - including our former Prime Minister David Lange and adventurer and former High Commissioner Sir Edmund Hillary - return again and again. India somehow seems more alive than almost any other place in the world.
One of the reasons India holds such fascination for New Zealanders is because it is so different from New Zealand. Your population is approaching one billion. Our population is smaller than Ahmedabad's. Geographically, you dominate a subcontinent. We're a little smaller than Andhra Pradesh. India's recorded history goes back nearly 5,000 years. Our first settlers arrived no more than 1,000 years ago, and the bulk of the population only in the last 150. Much of our culture is similar to that found in Australia, Europe or North America. To many New Zealanders, India can seem so much more exotic.
But that is not to say we don't have a great deal in common. Cricket is foremost, and we look forward to welcoming your team to New Zealand later this year. Both India and New Zealand are democracies, yours the biggest in the world. Much of our legal systems are similar, as are many of our institutions of government We both regard the rule of law and human rights as paramount. For both India and New Zealand, the English language is the main language of commerce. And there is a strong and visible Indian community in New Zealand of around 45,000 - a fair sized community for us. Our Race Relations Conciliator, one of our Ombudsmen and the Mayor of one of our major cities are all of Indian descent.
At a political level, both India and New Zealand are members of the Commonwealth. We're both members of the ASEAN Regional Forum and dialogue partners with ASEAN itself. India has a "Look East" foreign policy initiative. I don't need to point out that New Zealand is east of India, and we look forward to our relationship growing.
Of most direct interest to the Confederation of Indian Industries, our commercial relationship is already growing strongly. India has long been an important market for New Zealand's wool, and will continue to be so. More recently, New Zealand began exporting kiwifruit to India, and I hope you have all tried it and enjoyed it. High quality New Zealand apples will also arrive in India soon. New Zealand's exports of timber products and coal have increased, and New Zealand's world famous dairy products are also entering the Indian market. Across the board, New Zealand companies export a huge range of products to India, from dried peas to credit cards; from electric fences to laser technology. Over 100 New Zealand companies are already doing business in India as part of long-term business alliances.
That growth in trade has meant that, in the year to June, New Zealand exports to India increased 34% to around US$80 million. The same year, New Zealanders bought Indian goods worth around US$70 million. In tourism, the number of Indians coming to New Zealand has also increased by 20% to around 5,000. These figures may not sound very big in the context of India's huge economy, but, to New Zealand, we regard our trade and tourism with India as very significant and important.
The reason my business delegation and I have come to India is because we want our commercial relationship to grow. You may know that our countries have had a difference recently over nuclear policy. But, just as in the case of France, the USA and China, New Zealand sees our differences on nuclear policy with India as separate from our trade and commercial relationship.
As New Zealand's Trade Minister, I'm obviously keen to see New Zealand's exports to India grow. Naturally, we encourage India to further reduce tariffs and widen market access for our critically important primary products such as wool, timber, dairy products and horticulture products.
But, at the same time, New Zealand is happy to see growth in India's exports to New Zealand. New Zealand has no quantitative restrictions on any products from any market. As long as Indian products meet our quarantine rules, you can sell as much as you like. What's more, New Zealand has passed legislation to eliminate our last remaining tariffs on footwear, apparel and textiles by 2006. Indian exporters will be able to sell any safe product to New Zealand with no tariffs by 2006. We've done that because we believe tariffs most hurt the country that imposes them. If New Zealanders can buy more of the Indian products that they value, then so much the better.
But, beyond two-way trade, I'm looking for New Zealand and Indian businesses to establish partnerships from which both our countries benefit - win/win partnerships. I'll give you some examples of what I mean.
Wool is New Zealand's biggest export to India, and textiles are India's biggest export to the world. It's obvious we can both win from working more closely together. As I told the Indian Woollen Mills Federation AGM yesterday, New Zealand has established what we call the Fernmark quality assurance programme and brand. It's the world's first fully integrated quality assurance programme which covers everyone in the value chain - the farmer, the shearer, the broker, the exporter, the textile or apparel manufacturer. It's available to those manufacturers who use predominantly New Zealand wool in their products. Already, nine Indian companies have met the quality standards and can use the brand. We want more to become involved. It would give them exclusive access to New Zealand's world-leading wool research developments and marketing network. We believe that would give them market advantage and price premiums, and that they would flow through to the New Zealand farmer. It would be win/win for India and New Zealand.
Other examples are in food processing and handling, and agri-business more generally. Agriculture has been the backbone of the New Zealand economy. But we have no subsidies and no protection for our agriculture sector, and we are half way round the world from many of our major markets. That's meant we've had to become more efficient by far than any other producer in the world. Our research and technology in agriculture and horticulture has had to be the best in the world. We've had to lead the world in shipping techniques. Our agricultural and horticultural marketing has had to be leading-edge, and we continue to improve it.
All that has meant we have competed and won against subsidised and protected agriculture industries, even in their own home markets. We're now in a position to offer India our expertise in these areas. To assist in the development of the food sector in India, the New Zealand company HortResearch signed an agreement with the Indian Council of Agricultural Research early this year. There is considerable potential for New Zealand skills and expertise to be used in areas such as post harvest handling and storage. We've also seen New Zealand companies construct two abattoirs for meat exports from India. We've seen New Zealand working with your apple industry in Himachal Pradesh. While it is up to New Zealand business to make its own decisions, I will certainly be encouraging our agri-business sector to be involved in Maharashtra's "Agro-Advantage" programme.
Forestry is also an area where New Zealand is thriving. It's another area where we have particular expertise, and I'm pleased we have been able to fill the gap for your construction industry following new restrictions on cutting indigenous forests here in India.
New Zealand's particular expertise in these areas flows through into our education system. As a former Minister of Education, I can assure you New Zealand's education institutions offer world-class courses in everything from anthropology to zoology; from business management to pure mathematics. But we have a particular competitive advantage in areas related to the agriculture, horticulture and forestry sectors. I was pleased that the first India/New Zealand Joint Business Council Scholarship was awarded to a representative of your textile industry to study at our prestigious Wool Research Organisation of New Zealand. He will bring new expertise back to India and, I hope, a greater appreciation that New Zealand wool is the best in the world. We look forward to seeing more of the 45,000 Indians who study abroad each year, choosing to come to New Zealand.
The same is true of your tourists. There is no country offering so much in so small an area as New Zealand. We have sub-tropical islands and bays, geothermal regions and volcanoes, lush rolling country-side, alps, lakes and fiords. All that, remember, in a country smaller than Andhra Pradesh.
The 150 Indian travel agents who have taken part in training workshops in Delhi and here in Mumbai will be able to tell you more. I'm pleased Air India, Singapore Airlines, Qantas and Air New Zealand are now all working cooperatively on air-links between our two countries. With our 1997 Air Services Agreement, I look forward to the day we see Air India jets in New Zealand, and Air New Zealand jets here in India.
That is not to say that New Zealand is merely a country of farms, forests, excellent education institutions and beautiful scenery. We offer world-class expertise in areas such as telecommunications, electronics, energy, construction and banking. With the Government of India putting priority on infrastructure development, these are new areas for us to work together. One of our biggest companies, Fletcher Challenge, has built a premix concrete plant in Bangalore. In South India, on the Krishna River, the New Zealand consortium AsiaPower is building a new hydropower project valued at US$1.5 billion. The New Zealand consortium, New Zealand Airport Technology, is also considering a joint venture here in India. I'm keen for there to be more of these kinds of developments.
In the other direction, the New Zealand business community is becoming increasingly aware of India's own technology and expertise. A good example is the computer and IT industry where New Zealand companies are using Indian consultants to remedy their Year 2000 problems.
We welcome your involvement in New Zealand. In fact, this week, the New Zealand Government has announced changes to immigration policy which will make New Zealand an even more attractive destination for skilled migrants, businesspeople, investors and tertiary students. Among the changes, a new long-term, multiple entry business visa will be available for people wanting to establish a business in New Zealand. It will be available for up to three years, and will be renewable after that. There will be improved access to residency for businesspeople who successfully set up a business in New Zealand. There will be a simpler, more streamlined procedure for investors seeking residence in New Zealand. Foreign students who gain New Zealand qualifications will also find it easier to gain residence. Our immigration staff at our High Commission in New Delhi will be able to give you more details of these and other changes. I'm confident the new policies will assist in bringing our business sectors closer together.
One of the key reasons a much closer commercial relationship is possible between India and New Zealand is because of our respective economic reform programmes. Two decades ago, New Zealand was so insular - so afraid of the rest of the world - that a former Government even closed our High Commission here in Delhi. I consider that to have been an extraordinary decision. If it makes it any better, I can tell you the New Zealand of two decades ago even continued to impose tariffs and restrictions on our closest neighbour, Australia. In both respects, I can assure you that the New Zealand of that time is well behind us.
Today, we embrace the rest of the world. Since 1984, we have embarked upon a reform programme which has taken us from being one of the most controlled, restricted and insulated economies in the world to the New Zealand we are today.
Back in 1984, our manufacturing sector was protected by high tariff barriers and import licensing. That made it so inefficient that it couldn't compete with the rest of the world without export incentives. Our farmers received massive subsidies, reaching up to 30% of the value of agricultural production by the early 1980s. That, and other overspending, meant we had government deficits of up to 8% of our GDP, and huge debt. And that was despite tax rates of up to 66%.
We had a fixed currency, and currency controls. Unions were able to hold the country to ransom. Our bureaucracy was inefficient. And inflation was controlled only because the Government banned price and wage rises.
Before our reforms started to take hold, the Fraser Institute in Canada ranked New Zealand only 60th out of 103 countries on a series of criteria indicating freedom of the economy.
I can't claim to have been part of the Government that first started to address these issues. That was our opposition Labour Party, and, at the time, I was concerned by some of the initiatives they took. But both the previous Labour Government, and the National Government, which took office in 1990 - of which I have been a part - have contributed in different ways to turning New Zealand around.
We got rid of all the support for our manufacturers and farmers. As I've mentioned, our last few tariffs on clothing and textiles will be abolished by 2006. The Government withdrew from commercial activities better undertaken by the private sector. The bureaucracy was slashed. We freely floated our currency. We controlled inflation by giving day-to-day management of monetary policy to our fully independent Reserve Bank. Labour relations are now based on simple contract law, and we see cooperation not confrontation.
Government spending was controlled, turning deficits into surpluses. Taxes have been cut, with the very top rate now being only 33%. We have an objective of getting the total tax take down to 30% of GDP. We've paid back all our net foreign public debt. Our remaining public debt has fallen from more than 50% of GDP back in 1992 to just 25% today.
The cumulative effect of all these reforms is that we are now able to compete with the rest of the world. Our environment for business is as good as you would find anywhere, and we continue to make efficiency gains. According to the World Economic Forum's Global Competitive Index published last year, the New Zealand economy is now the fifth most competitive in the world, behind only Singapore, the Hong Kong SAR, the USA and Canada.
As a result, through most of this decade we've experienced high levels of economic growth. Over 200,000 new jobs have been created in a country with a population, remember, smaller than Ahmedabad's. While we have subsequently been hurt by the Asian Economic Crisis, we expect we will experience less than one year of recession.
India, too, has embarked on a programme of economic reform. I note that your Finance and Commerce Ministers recently declared their continued commitment to economic liberalisation. I do not want to suggest that what we did in New Zealand can be translated directly to other countries, including India. Our social and economic circumstances are too different. But I think I can safely say that some of the principles behind New Zealand's reforms may well be worthy of study. And New Zealand's practical experience may hold some answers to both the short and medium term implications of reform. I'll give just two examples.
When we entered into a free trade agreement with Australia, many of our manufacturers said it would be impossible for them to compete. The Australians' economies of scale would be too great. In fact, open competition with Australia forced our manufacturers to become more efficient. It gave them a bigger base from which to take on the rest of the world. The growth in our manufacturing sector has been one of the success stories of the last 15 years.
The other example concerns our farming sector. When we abolished all our subsidies, many predicted disaster for the sector. In fact, fewer than 1% of farmers had to stop farming. Since then, we have seen a 10% increase in agricultural employment since 1990.
India's destiny is obviously for India to choose. But we look forward to our relationship expanding, and we believe it will expand faster if India remains committed to policies of economic liberalisation.
As I said, we look forward to seeing more Indian businesspeople, tourists and students in New Zealand. We are an open market for your products. Our last remaining tariffs on clothing and textiles will have been abolished by 2006.
I urge you to look at New Zealand as a country with which to build a win/win partnership. We want to work with you so that both of us are better able to take on the world and win. I look forward to seeing many of you in New Zealand. Let's do business.