Trade promotion in challenging times: Damien O'Connor explains the government's approach to trade issues in the face of pandemic and war stresses.

• Author: O'Connor, Damien

These are challenging times for trade. The impact of the largest war in Europe since the Second World War is reverberating around the globe. International commodity prices are rising, inflation is increasing, supply chains are struggling and there remains uncertainty around what the major powers will do. All this is on the back of COVID-19, a pandemic that triggered a major global shock and continues to affect economies around the world. It persists in causing significant supply and demand disruptions, and has made many of the countries that we trade with more inwardlooking.

However, we continue as always to look outward and when it comes to COVID restrictions, we are turning a corner. Our borders are opening up. Tourists are coming back and businesses are able to travel offshore. Aotearoa New Zealand is reconnecting to the world, and we are open and ready to trade. This is a significant step towards restoring vital international social, economic and trade connections.

Nevertheless, international connections are taking a knock at the moment. Russia's actions are threatening not just the lives and way of life of the people of Ukraine but also challenging and violating international rules and order. We understand our responsibility as a productive and dependable member of the global community to help. We worked around the clock to set up a legal framework to enact sanctions against Russia. And so far, New Zealand has committed $30 million toward humanitarian, military, legal and logistical support. This includes a contribution to weapons and ammunition. We continue to stand by the people of Ukraine at this difficult time.

The impacts of this conflict on trade cannot be understated, because we live in an interdependent world. Internationally, it is having a profound effect and we are not immune. New Zealand imports from Russia, which are mostly crude oil, have dropped to close to zero in recent months. The most significant impacts on New Zealand of the invasion will be indirect, primarily through higher fuel and commodity prices, financial market volatility and the potential drag on global economic activity. For many of our key trading partners, particularly in Europe, the impact will be far more significant. To the extent that an extended invasion weighs on global economic growth, this could potentially affect the medium-term prospects for New Zealand trade.

I have talked in recent months about New Zealand's Trade Recovery Strategy, a critical part of our national response to the COVID-19 pandemic and essential to our recovery from its impacts. Here I want to discuss the bigger enduring picture: what we are doing to confront the major global challenges through our trade strategy? What is the future like for New Zealand's trade policy? And I will provide some thoughts on my recent trip with the prime minister to Singapore and Japan.

Throughout this pandemic, New Zealand's trade has held up remarkably well. At a headline level, merchandise goods exports have continued to grow over the last two years, which is incredible during one of the biggest recessions the global economy has seen. This emphasises the high regard for New Zealand goods internationally.

At home, our approach has been to treat our pandemic response as a health one first, with the belief that this would buffer our economy from the expected disruption to the global economy. We have been fortunate that as an island nation we were able to close our borders and pursue an elimination strategy until such point, as we are now, where we have very high vaccination levels. We are now re-opening and are well-positioned to continue our recovery.

We recognise, however, that the impacts have been uneven across exporting sectors and businesses. Service exports that rely on people's ability to travel internationally have, of course, suffered; our tourist industry in particular has struggled without international visitors; as have manufacturing and other businesses that depend upon efficient, well-functioning international supply chains and workers.

The need to protect and strengthen the resilience of those supply chains is clearer now than ever. Throughout the pandemic, New Zealand advocated--and will continue to advocate--for international co-operation on transparent, open, secure and diverse supply chains, which we believe generate the greatest resilience to shocks.

Our exports have led the New Zealand economy through the worst of this crisis, and it is my intention that exports will lead our recovery out of it. For example, exports from New Zealand increased 15.6 per cent from a year earlier to $4.8 billion in January 2022, led by sales of milk powder (8.5 per cent), butter (35 per cent), beef (51 per cent) and sheep meat (11 per cent).

Key driver

Trade will be a key driver of the overall economic recovery for New Zealand. Our Trade Recovery Strategy has put us in the best possible position to recover from the impacts of the global pandemic and to seize new opportunities for exports and investment.

The strategy was designed to position New Zealand to recover from the economic impacts of the pandemic by providing the tools, resources and support, including a $216 million package from the COVID Response and Recovery Fund to support New Zealand's exporters and international businesses. This allowed those businesses that were thriving through the pandemic to build on this success, whilst giving those that have endured harsh market shocks the information and tools to rebuild and find new opportunities.

With borders re-opening and international travel recommencing, we are now tweaking the Trade Recovery Strategy to focus on supporting businesses as they reconnect with partners, customers and key markets overseas...