Stephen Jacobi on world trade: ‘It’s messy out there’ – New Zealand Herald

New Zealand exporters are faring quite well despite turbulence in world trade. Photo / File

Trade expert Stephen Jacobi says New Zealand exporters - aided by strong demand from China - have held up well despite a "messy" world trade environment.

Jacobi, speaking at a presentation put on by the newly listed trade software specialist, Trade Window, gave a rundown on the current state of play with global trade.

"What can I say it's messy out there," Jacobi, executive director of the NZ International Business Forum, said.

"Exporters are today facing unprecedented challenges in getting their products to market and into the hands of discerning consumers who want them.

"The global economy is in a funk.

"The pandemic is by no means over, there is war in Europe - who would have thought we would be using that phrase in the 21st century - global markets are disrupted by supply chain bottlenecks, inflation is taking its toll on the global economy and people around the world are hungry.

"We have [Russian President Vladimir] Putin's abominable invasion of Ukraine to blame for this even before the global economy has recovered from the pandemic, the war has ruined any chances of an early recovery."

In July the International Monetary Fund (IMF) released what it described as a "gloomy and uncertain forecast".

The IMF said world growth was expected to slow from an estimated 6.1 per cent last year to 3.2 per cent in 2022 and 2.9 per cent in 2023.

Last October, the IMF was forecasting growth for 2022 of 4.9 per cent.

Global trade had dropped by 5 per cent in 2020 but had grown by 9.8 per cent last year.

Now the World Trade Organisation was forecasting growth of 3 per cent because of the war.

"Against this backdrop, New Zealand's exports have held up remarkably well, at least in terms of value. Exports were up 6 per cent last year but trade volumes have been slipping.

"Both exports and imports remain hampered by bottlenecks at our ports and an exponential rise in shipping rates which makes getting products to and from market exceptionally difficult and expensive."

He said thankfully, exports to China were up 21 per cent by value last year and still growing despite the economic slowdown and continuing lockdowns in that country.

"That growth, and China's increasing assertiveness on the world stage, is causing some, especially in Government, to question whether we are over-dependent on China and should seek to diversify.

"That's a fair enough question to ask, but it probably has as much if not more to do with geopolitics than economics.

"Clearly in a highly contested and unstable global environment the political risks of doing business around the world are growing and exporters need to keep a watchful eye on this and look especially to consolidate their relationships in key markets."

Jacobi said trade diversification was "a lot easier to talk about than do".

Much would depend on the availability of alternative markets, with market access a particular problem for New Zealand.

The recent free trade agreement with the UK was a case in point.

"It is undoubtedly one of the best we have concluded, giving significant new market access for all goods and services of export interest," Jacobi said.

The recently concluded NZ-EU free trade agreement (FTA) gave new access for a range of products but not at all for dairy and meat, New Zealand's two biggest export sectors.

Jacobi said neither FTA would replace China "it is simply a question of market demand".

"FTAs remain important, but we need to look at other instruments to fuel our export drive."

Jacobi said digital technology was transforming economies and had the capacity to speed the movement of goods through supply chains, reduce costs and promote the development of a new "weight-less" economy through new digitally delivered services.

New Zealand and Australia were investing in arrangements to provide a new architecture for digital trade New Zealand through the Digital Economy Partnership Agreement (Depa), which was attracting new interest around the region.

Software tech startup Trade Window was listed on the NZX last November at a 25 per cent premium, giving it a market capitalisation of $99m.

On debut, the company, which provides digital solutions for exporters, importers, freight forwarders and customs brokers, increased its share price trade to $1.15, up from its 92c reference price.

Trade Window traded on the NZX today at 68c.

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Stephen Jacobi on world trade: 'It's messy out there' - New Zealand Herald