Once an export (and import) powerhouse

We’ve been having a bit of conversation at home – my son doing a NZ history paper at university and me reading yet another old book – about the line that pops up in almost any old book about the New Zealand economy, that New Zealand once (pre-war) had consistently the highest exports (and imports) per capita of any country.

It isn’t really a surprising statistic. All else equal, small countries tend to sell abroad a larger share of their output than large countries (there isn’t much market at home and the world, by contrast, is big). And rich and productive countries tend to do more per capita of every component of GDP. 80-100 years ago we were small and we were rich – on standard comparisons, inevitably limited as they are, among the two or three richest countries on the planet.

All else equal, we also know that countries that are more physically remote do less foreign trade than those that are close to others – one of the costs of distance. New Zealand was (of course) very distant, but so successful was this small country/economy that our exports/imports were very high anyway.

I’ve done posts here (eg here) in years past comparing exports as a share of GDP more recently, but this time I thought I might just do the same raw comparison the old books did and look at exports per capita (imports per capita on average over time will show very similar pictures). Since Covid and border closures messed up trade in foreign travel (in particular), here I’m showing 2019 numbers for OECD member countries (Luxembourg is literally off the scale, which I’ve truncated for better readability).

Not only are we nowhere near the top of the table, we are now quite near the bottom. All the countries below us are either (and mostly) much much bigger (even Australia has five times our population) or much much poorer (Colombia, Chile, Costa Rica, Mexico).

That chart is mostly for the simple comparison with decades past. These days, much more than in years past, gross export numbers for many countries – and especially those close to neighbours – include a large imported component. A car that counts as a German gross export will typically include a lot of value that was actually added in nearby countries (Poland, Slovakia). The OECD has collated data that adjust for this effect, calculating the extent of domestic value-added in a country’s gross exports. It takes time to get that data together, so the most recent numbers appear to be for 2018.

(And here I would ignore the Luxembourg numbers, because much Luxembourg economic activity uses a labour force that works but does not live in Luxembourg)

On this chart, New Zealand does better, being just above the median, but it shouldn’t be much consolation. The only one of the really rich and productive OECD countries to the left of us on the chart is the US, which has by far the biggest domestic market. Big countries all else equal will typically do less foreign trade per capita and as a share of GDP than small ones. There are small countries to the left of us (Portugal, Hungary, Lithuania, Slovakia, and Estonia), but if most of them have had more impressive productivity growth performances than New Zealand this century, that has only brought them to about New Zealand’s distinctly mediocre levels of average productivity.

By contrast, the small countries that now really count as OECD productivity success stories – Sweden, Belgium, Austria, Denmark, Iceland, Norway, Switzerland, Ireland, and Luxembourg – all export far more domestic value-added than New Zealand does. As far as we can tell, that wasn’t the case when New Zealand was once of the richest countries on the planet.

To be clear, exports aren’t good or superior for their own sake, but really successful small countries/economies tend to be ones with firms that successfully sell lots of stuff to the rest of the world (and enjoy the purchasing opportunities from the rest of the world – high exports and high imports tend over time to go hand in hand).

The previous National government sort of had some inkling of this. They articulated a goal of getting gross exports up to 40 per cent of GDP (actual now nearer 25 per cent), but had no real ideas about the sort of economic policy that might lead to such a more successful outward orientation. It isn’t obvious that the current government – or today’s National in opposition – either know or care.

8 thoughts on “Once an export (and import) powerhouse

  1. There’s more to life than money, but life expectancy itself used to be highest in NZ and not just for one or two years but many decades in a row. (Many Maori still lived outside of official statistics in those days though.)

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  2. Distance from customers: I can understand Belgium doing well since my son drives 20km to buy his beer in Belgium. But how on earth are we behind Iceland? Its exports have very rough seas to cross and I can’t imagine their agriculture being more productive than NZ. Do they really export fish worth more than our dairy, fruit, timber? I can only assume it is their low population. Are we handicapped by speaking English so attracting immigrants from throughout the world. Incidentally do the Icelanders catch their own fish or have they delegated fishing foreign businesses using foreign workers on foreign vessels?

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    • Hi Bob. My numbers are all per capita, so total exports from Icelend are materially lower than those from NZ, but their material living stds are quite a bit higher than ours. Not sure about the fishing industry, but actually these days tourism and aluminium (exported electricity) are each about as important in Iceland’s export totals as fish.
      For us, as for most countries, the number of non-citizen immigrants is almost entirely a matter of policy choice. Personally, I suspect English may be a mixed blessing – speaking the same language as Australia makes it v easier for NZers to leave for there.

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  3. Agree Michael and this is very sad. I enjoy visiting places like Cognac, where, well, you can buy Cognac from all the premium brands, and you can have a tour of one, at a price.

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