As of June 2017, New Zealand was reliant on three trading partners for 48 percent of our merchandise trade. These three partners are China with 20 percent of our trade, Australia and the European Union (EU), both with 14 percent. Other large trading partners for New Zealand are the Association of South East Asian Nations (ASEAN), the USA and Japan. Finally all other nations comprised just 22 percent of our merchandise trade.
New Zealand reliance on a small number of trading partners can make us vulnerable when negative events or shocks occur, such as the Global Financial Crisis (GFC) in 2008, and in 2018 the potential threat of trade wars between the US, and both China and the EU. New Zealand has already been caught out by being too reliant on a single trading partner. In 1955 the United Kingdom (UK) took in 65.3 percent of New Zealand’s exports. When the UK joined the EU in 1973, New Zealand trade with the UK plummeted.
Up until 2013 Australia was our largest trading partner as shown in the figure below. Since 2013 China has been New Zealand’s largest trading partner with merchandise trade valued at $20.9 billion in 2017. Also shown in the figure is that New Zealand’s trade with ASEAN has been growing strongly since 2002, with total trade value growing by $8.1 billion over that time. Lastly the figure shows that total trade with Australia has been in decline since 2008, while our trade with the EU has been slowly growing since a large decline in 2010.
With growing fears that the US, China and the EU could engage in multiple rounds of tariffs increases, this could have a large negative impact on the value of New Zealand’s trade. These three countries are powerful global traders and it is likely that any continued trade disruption caused by tariff increases will spill over into all trading countries.
To lower New Zealand’s risk of over reliance on a small number of trading partners, New Zealand needs to continue to be pro-active in seeking trade deals with countries outside of our main trading partners. This would be in areas such as the Middle East, Africa, South and Central America, and South Asia (which includes India).