by frog
I said one of the outstanding questions around preferential trade agreement with China was the economic impact it would have on New Zealanders. In 2001 New Zealand signed a preferential trade agreement with Singapore. Check out what it did for our balance of trade:
| TRADE WITH SINGAPORE | Merchandise exports ($ m) | Merchandise imports ($m) | Merchandise trade balance – or exports less imports ($m) |
| 1998 | 340.7 | 422.6 | -81.9 |
| 1999 | 418.8 | 531.2 | -112.4 |
| 2000 | 487.4 | 511.8 | -24.4 |
| 2001 | 398.6 | 618.4 | -219.8 |
| 2002 | 387.4 | 595.0 | -207.7 |
| 2003 | 306.7 | 629.7 | -323.0 |
| 2004 | 362.4 | 972.9 | -610.5 |
| 2005 | 427.9 | 1,240.0 | -812.2 |
| 2006 | 540.2 | 1,849.8 | -1,309.6 |
| 2007 | 687.4 | 2,149.2 | -1,461.8 |
So it did help grow the economy according to the government’s very narrow definition – we are now selling an extra $200-300 million more goods overseas. But in return we are importing more than $1.5 billion more than we used to. That debt with a country only the size of a Lake Taupo made up over a quarter of our total trade deficit for 2007.
Published in Economy, Work, & Welfare by frog on Thu, March 20th, 2008
Tags: China, economics, exports, imports, singapore, trade, trade deficit
on the trolls and those who are unable to keep on topic
unless you’ve put the figures in the wrong column that shows that have always exported more than we imported & that imports increased by half since the agreement while exportes quadrupled. the figures in the final column should have positive signs not negative… unless you put the information in the first two columns under the wrong headings
although not absolutely clear i presume the figures are purely for trade with singapore, you should probably make that clearer while correcting the data
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um, are the column headings back to front or do you need to replace the batteries in your abucus?
Considering which region’s economy benefits most from the trade deficits it’s hardly surprising that it’s MPs are the most outspokeb in favour of these free trade deals (and even get to sign the agreements!)
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Oops, yes. Sorry. Today must be the day for mistakes. It’s been fixed now.
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damn, it is bad news after all. more disturbing is our inability to trade our way out of debt. we have reached the point where trade surpluses don’t translate into current account surpluses because interest on existing debt swallows it up.
realistically i see little short of regulation that can fix this problem
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Makes me suspicious about the accuracy of country of origin labelling.
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Suppose that’s one (perhaps the only) advantage of the China FTA Kevyn. The Chinese workers won’t have to put the “Made in Singapore” labels on the goods any more.
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I’m more economically illiterate than literate, so someone mind explaining the problem? Seems that we buy the stuff from Singapore because it’s more competitive than anywhere else’s, so that’s saving us money which we can spend on anything else we want, while selling more. Is this negative mindset a Mercantilist one? Is someone advocating going back to tariffs?
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Not only does this trade agreement represent a threat to the balance sheet, it could also precipitate further changes in the New Zealand quality of life that would be negative in my view. This is something upon which economics is silent, and why being economically illiterate can be a plus StephenR!
With the economic arguments being neutral on the quality of traded goods or on the quality of the effects of trade, being solely evaluated in terms of price and volume, for those of us interested in the make-up of day-to-day life and in the quality of the material world that surrounds us, it is of great concern that these deals are being made.
I don’t entirely buy the “trade your way out of poverty” argument that the WTO puts forward to developing countries. Whether it’s tariffs or Fair Trade, there must be another way.
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Singapore is hardly known as a worker’s/environmental hellhole, or having lax standards on products for export though.
Tariffs as protection for inefficient workers = bad
Tariffs based on say, use of slave labour = good
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EU’s idea about tariffs on countries (developed) that refuse to reduce GHGs = interesting.
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thanks for the question. mercantilists wanted to run trade surplusses to build up hoards of gold. this view hasn’t proved durable, since it seems to involve depriving the current generation of consumption of the fruits of their production & trade in favour of later generations, yet gold doesn’t carry interest…
trade deficits have the opposite problem in that they create a debt which one day must be paid off with trade surplusses, & due to interest accumulating in the modern money economy, the surplusses in the future must be much greater than the deficits which incurred the debt problem in the first place.
for every 5% consumed over & above what we produce this year, we may have to produce 10% more than we consume at some point in the future.
current account deficits must be matched with capital movement surplusses, i.e. foreign investment in the domestic economy increases, creating a burden of debt to repay with interest. as the repatriation of return on foreign capital goes into the current account on the negative side as well, as long as that balance remains negative, we get further & futher into debt. we start running out of assets to sell off to repay it – first companies & bank deposits, then land. we become a nation of renters & workers for our foreign landlords & bosses.
only two ways to remove this debt problem, one is start running big current account surplusses, the other is to become absorbed into one of the creditor economies.
as to whether “someone” is advocating tariffs, not this someone, i’d rather regulate capital flows & foreign ownership.
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# StephenR Says:
March 20th, 2008 at 2:29 pm
“I’m more economically illiterate than literate, so someone mind explaining the problem? Seems that we buy the stuff from Singapore because it’s more competitive than anywhere else’s, so that’s saving us money which we can spend on anything else we want, while selling more.”
the problem is that this unbalanced trade with Singapore is not balanced out by our trade with other countries – our trade with the outside world as a whole is unbalanced so that we buy more than we export. So what’s balancing this off? mostly money being lent to New Zealanders by foreigners. It comes in the form of mortgages and credit card debt, which we think of as debt to local banks, but those banks in turn have to borrow the money off foreign banks.
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Hmmm…thanks chaps
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