Stop looking for an FTA discount

The above photo well illustrates the real problem of New Zealand and its ongoing failure internationally. New Zealand butter next to Australian butter in a major wholesale supermarket in China. Photo is taken this week. The same and equal product next to each other on the same shelf from two neighbouring countries with the same cost structure and the same problem with a high dollar. The New Zealand product is priced nearly twice the Australian (173%), for no extra benefit. Could the reason be haughty greed, or just sheer arrogance.

We hear nothing but moaning and whining from New Zealand about a high dollar, high labour costs, increased fuel costs and skilled people leaving in droves. What about looking at the real underlying problem, New Zealand's ancient management style based on accounting and book keeping instead of realities and hard work, and the gross incompetence in international matters coupled with a DIY self cantered arrogant attitude. It is clear that the high NZ dollar is a problem, but the problem is the same for everyone. (Source www.x-rates.com and www.oanda.com)

If we look at the Chinese Yuan however, New Zealand has a clear advantage nobody seems to want to talk about, and nobody seems to be doing something about or take advantage of.

The advantage is even better with the EUR.

We often read about companies are moving to "low wage cost" countries as Thailand or China, but looking at the total cost picture, those countries are not at all cheaper to produce in just because the wages are lower. More people are needed to accomplish the same task, low skill level, low labour loyalty, high transport costs, and hidden costs as for the bureaucracy for instance. The fact is that New Zealand is often cheaper. New Zealand Norsewear is for instance manufacturing clothes in New Zealand and exporting to China, a low cost labour country said to be destroying jobs in New Zealand.

New Zealand trade balance is a disaster but despite a recent improving trend and an all time record high price level in New Zealand's primary export, food, there is no real improvement. What will happen when the prices drop.

Source www.tradingeconomics.com

The recently signed FTA is probably better than no FTA, but Winston Peters is right, it is a really raw deal for New Zealand. China got just about anything they wanted, including professional language and overseas training of 1,000 Chinese every year, and New Zealand is even paying for it. Access to China is really difficult for Kiwis, and small companies are in reality not allowed to set up shop there. The application of the visa rules prevents it, and the application of those rules has just been made considerably more stringent.

Unfortunately New Zealand has again demonstrated its total incompetence, inaptness, and its ignorance of the same. Why did not New Zealand require easy access to China and its market for Kiwis, import duties or not. China does not even need to change their visa and access rules, they don't even need a stroke of a pen, just a directive over the phone.

Chongqing in western China, the world's fastest developing region, has been declared national pilot and model in areas of New Zealand's primary industries as dairy and agriculture. Establishing a genuine presence there would mean preferential treatment in Chongqing and anywhere else in China in the future. Only the local market is 40 million people, and the consumer market for dairy products is said to grow 40% annually. Ample local subsidies are available. Instead, New Zealand is openly defying and violating Chinas internal polices by going elsewhere. That means failure.

New Zealand can not be bothered. NZTE is visiting Chongqing on average a day every 5 years or occasionally by low level admin staff from other regions, Fonterra apparently made a flash visit last year and within a day managed to snub and insult senior officials, instead they allegedly went and met with some juniors, and departed with ample promises to came back with experts, not to have been seen since. Millions of dollars are said to have been allocated to improve New Zealand's trade balance with China, but nothing seems to have happened. Has it all been squandered by the New Zealand officials?

Chongqing bought some cows last year for research and development, from a country and a company that had a genuine presence in Chongqing, which is in reality a local requirement for doing business in Chongqing. That company then bought the cows from New Zealand, shipped them direct to China, and made a killing profit. New Zealand became the laughing stock in agricultural circles in Chongqing.

Another story going around. A New Zealand agricultural rep had a meeting set up for him with a very senior official in a local commission with the intention to sell products and dairy technology from New Zealand. The rep turned out to be a beancounter yuppie in his late 20's, dubbed an "expert" by New Zealand. His Chinese counterpart was a 55 year old person with a dual PhD from China and Birmingham in dairy and agricultural science. Age, experience and scientific knowledge counts in China and the two never communicated. The Kiwi did a sales song and tap-dance number with prices and budgets, while the Chinese wanted to discuss economic advantages with different dairy sterilization and production processes.

Officially New Zealand had a net outflow of 114 people every working day last year. There are many skilled New Zealanders residing overseas, including in Chongqing, who would be most happy to work for improving New Zealand's situation if they were only asked to do so. New Zealand companies and government insist of sending out unskilled and inexperienced people from home unsuitable for the task, the selection seems more based on internal politics, a kiwi DIY culture and sheer incompetence and lack of experience.

KEA (Kiwi Expat Association) has a good and free register of Expat Kiwis for those who by change may be interested. Why not call them up and ask them. Why not use some millions to pay those expats to improve the trade balance instead of giving it to New Zealand officials to spend on lavish paperwork. It would be a good investment.

Probably New Zealand's beancounter infested management and political structure will now be nicely sitting back and waiting for the Chinese to come and break down the door to buy after the signing of the FTA, but that will not happen. Kiwis just have to bend over backwards, get out of the comfy laidback chair, and get out to do some real work. The door is open.

Rick Harriss

Kiwi writer in Hong Kong

Harriss.rick@gmail.com

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