Dunne Speaks: Trade is part of our economic DNA

8 October 2015

When I left university I went to work for the Department of Trade and Industry, in import licensing. I was then a true believer in protectionism, in regulating the flow and nature of imports and consequently the choices available to and standard of living of New Zealanders, in the wider interests of encouraging domestic industry, promoting economic stability and maintaining reasonable living standards.

However, I was quickly disillusioned. Not only was the policy ineffective, it was unevenly and incompetently applied, it was fundamentally unfair, and certainly did nothing to build efficient domestic import substitution industries, or to keep unemployment, inflation and the balance of payments under control. Import licensing was widely abused, and served only to entrench the privilege of the wealthy import warehouses and selected merchants.

That early exposure to the failure of protectionism and the folly of trying to insulate the domestic economy from the rest of the world was quickly reinforced by the increasingly erratic economic policies of the Muldoon Government of the time. As a latent liberal, I became an enthusiastic convert to free trade and open market economic policies, and have not wavered in that view over time. But I also learnt that there is no economic nirvana, that every system is far from perfect, and that governments have to strive constantly to uphold the best overall interest of their citizens, to achieve a form of economic justice.

It is a short step from there to the Trans Pacific Partnership, which had its seeds in New Zealand’s economic reforms of the 1980s, including the initiation of the Uruguay Round of talks for freer world trade. That led to the formation of the World Trade Organisation to replace the General Agreement on Tariffs and Trade (GATT) that had regulated world trade since the 1940s.

From the time of the formation of the then nascent European Economic Community (EEC) in the late 1950s, through to the more fully blown version of the European Union in the 1980s and 1990s, the focus has been on economic and political integration as the bulwark of broad stability. Other agreements, like the North American Free Trade Agreement, and our own Closer Economic Relations agreement with Australia, show the moves to eliminate trade barriers have been consistent and widespread over a number of years now. They have been reinforced by a series of bilateral arrangements (like the New Zealand-China Free Trade Agreement, for example).

Against that backdrop, the momentum to develop a broader Trans Pacific Partnership was inevitable, its ambitious nature notwithstanding. From New Zealand’s perspective, it completes the process the Labour Government began in the 1980s through its domestic economic and social reforms, and moves through the Uruguay Round to liberalise world trade. (In many senses, it is the Lange Government that deserves the kudos for the TPP deal, yet its survivors seem hellbent on running away and hiding from that achievement.)

Since frozen lamb was first exported from Port Chalmers to Britain in 1882, New Zealand has been on a quest for economic security, for stable and reliable markets for our products. For almost a century that quest was satisfied by the guaranteed British market, but after it joined the EEC in the 1970s, we had to rapidly diversify our trade through the pursuit of bilateral (and now through the TPP multilateral) free trade agreements. Either way, trade has long been part of our economic DNA, a point today’s economic revisionists would do well to remember.

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