Coronavirus: Wrong move banning manufacturing during COVID-19 lockdown, trade expert tells MPs

Australia has allowed manufacturing during the COVID-19 pandemic, and a trade expert has told lawmakers he does not support the Government's decision to ban it during the lockdown in New Zealand. 

Charles Finny, a New Zealand & Enterprise board member with more than 22 years' experience in diplomatic roles, told the Epidemic Response Committee on Thursday he would have advised against shutting the billion-dollar industry. 

Manufacturing represents about $9 billion in exports a year in New Zealand, encompassing industries like steel, mechanical and electrical machinery, and textile, and Finny said if New Zealand goes back into alert level 4 it should be kept open. 

"If I had been one of the people to take the decision, I would have been arguing very hard to have it kept open because I know how important it is for the economy," he said.  

"We need to have a certain base demand to keep the international shipping lines coming to New Zealand to add on top of agriculture to keep those ships full and keep that demand going."

It comes as the World Trade Organisation (WTO) predicts global goods trade to fall by between 13 percent and 32 percent in 2020. 

Finny said if the country does not come out of lockdown next week, many businesses will "fail" with pressure building on fulfilling contracts. 

"If we're not careful and keep those companies shut-down for much longer, they're going to have their contracts replaced by others."

Economic Development Minister Phil Twyford said the Government's main concern ahead of the lockdown was public health and ensuring the virus did not gain a footing in New Zealand. 

"The whole rationale was not about the economic value to the economy to New Zealand. It was about parts of the supply chain that were essential to human survival."

Charles Finny, a New Zealand & Enterprise board member with more than 22 years' experience in diplomatic roles.
Charles Finny, a New Zealand & Enterprise board member with more than 22 years' experience in diplomatic roles. Photo credit: Parliament TV

Finny raised further concerns about New Zealand's trade relationships going forward. 

With China looking to be one of the few nations opening up and recovering from the pandemic, Western countries are experiencing the worst of it and looking inward. 

He said New Zealand will be increasingly reliant on China and agriculture. 

"Obviously if China's buying and no one else is, we sell as much to China as we can," he said. "But as the rest of the world starts recovering, we need to be looking into ensuring we aren't just selling into one market and just relying on one sector."

New Zealand signed a free trade agreement with China in 2008. Two-way trade is now worth more than $30 billion, making China New Zealand's largest trading partner in goods.

Finny said that poses a risk for New Zealand because "there have been some instances in the last few years where China has not liked what certain jurisdictions might do". 

He cited the Government Communication Security Bureau (GCSB)'s warning to the Government in 2018 against allowing Huawei to build New Zealand's 5G network citing significant risks to national security, suggesting there could be implications. 

"By all means, trade a lot to China, but if you're selling more than 25 percent of your exports to that market, I'd be cautious and you go in knowing the risks that you're taking. 

He is also concerned about New Zealand becoming too reliant on farming. 

Agriculture exports were 2 percent higher in March 2020 than in March 2019, after it was ruled as essential during the lockdown. Dairy exports are up 7 percent, meat exports 10 percent and seafood exports 7 percent. 

But forestry, deemed non-essential, saw exports fall by 36 percent. 

Forestry Minister Shane Jones has instructed officials to explore law changes that would ensure wood product is prioritised for New Zealand-based projects after the COVID-19 lockdown, instead of it being shipped overseas. 

But Finny said now is not the time for that as it represents about $5 billion in trade. 

"I'm all for more domestic processing, but it's going to take a few years for us to boost the level of that processing, so in the meantime let's keep that log trade flowing."

Trade and Export Minister David Parker is confident New Zealand can bounce back, with Singapore, Canada, Australia and a number of other nations committing to keep trade open, especially in medical supplies. 

New Zealand and Singapore have agreed to drop tariffs on a range of essential goods and medical supplies and other products needed as part of the COVID-19 response.

Parker said a 2021 recovery in global trade is predicted, but it depends on the duration of the virus outbreak and the effectiveness of WTO members' policy responses.