Global Insights – March 2022
Our Kea Regional Directors give on-the-ground insights into what is happening in their region and the opportunities this presents for New Zealand export businesses.
Kiwi businesses exporting to China will watch with interest the upgrade to the NZ-China Free Trade Agreement (FTA) which enters into force on April 7, 2022. The upgrade to the agreement with our largest trading partner will modernise it, further reduce barriers for exporters, and boost trade. It was a world-first for any developed country when New Zealand entered into the original free trade agreement with China in 2008, giving us a unique competitive advantage at the time. Two-way trade (exports and imports of goods and services) has more than tripled from $9 billion to over $32 billion since the free trade agreement was signed. To learn about the areas covered by the negotiations and detailed objectives of the negotiations, read MFAT’s update.
China has been getting a lot of attention lately with the Winter Olympics in Beijing. With any international event comes branding opportunities and at these Games, all eyes have been on China lately with the Winter Olympics in full swing. 18 year old Chinese American ‘snow princess’ Eileen Gu is arguably the biggest brand ambassador in China right now.
Born in America to a Chinese mum and American dad, and raised by her mum and Chinese grandma in San Francisco, Eileen switched allegiances to compete for China after just two competitions for the US. Her polished conversations with Media and her polite refusal to be pulled into political tensions has made her popular with both Chinese and Western brands. She has worked with some big names including Mengniu, Luckin Coffee and Bank of China. You’ll also see her face all over Louis Vuitton, Tiffany & Co, Victoria’s Secret. Last year, she earned at least ¥200 million ($31.4m) in brand ambassadorships alone. Her appeal with a wide range of brands and markets should be a reminder to Kiwi businesses that trusted Brand ambassadors still have huge sway with Chinese consumers. While the impact of social influencers may have swayed recently there is still a lot to be gained from getting the right person to market your brand.
UK & Europe
The feeling that travel home is now a reality has brought many emotions to our offshore community and we are starting to see an increase in people looking to explore offshore opportunities and Kea community members reaching out with requests to navigate restrictions and protocols in the market. Working from home is still commonplace in London but in person events are back on the calendar, although these require some more planning with lateral flow tests, numbers and air flow.
Kiwi export businesses will benefit from the signing of the historic free-trade agreement with the United Kingdom, sealing a deal agreed in principle last year. The deal will see the UK eliminate all tariffs on New Zealand exports, with duties removed on 99.5 percent of current trade from entry into force. It’s expected to save Kiwi exporters roughly $37m each year on tariffs. The FTA should come into force by the end of 2022.
The big winners for New Zealand will be the wine, honey dairy and red meat sectors and it’s estimated New Zealand goods exports to the UK will increase by over 50 percent. The deal will also create opportunities for New Zealand businesses to grow and diversify their trade when it comes into force and is the first FTA to include specific climate change and indigenous provisions.
Continuing with the theme of climate change, we are seeing a real focus on sustainability coming from Germany. The country has a new centre-left three party coalition with an ambitious agenda. Led by the Social Democrats and joined by the Greens and liberal FDP, their Coalition Agreement sets out their agenda for the next four years and has signalled continuing support for free trade agreements, provided they include strong sustainable provisions. This is likely to affect our agricultural and tourism exports.
The German Government wants to promote more sustainable farming practises and animal welfare and has signalled it intends to introduce mandatory animal welfare labelling and comprehensive country-of-origin labelling, beyond what EU law currently requires. The scope of this is unclear at this stage but it’s good for Kiwi exporters to keep an eye on the changes.
The Health sector is also under review with coalition parties agreeing to legalise recreational cannabis, which could impact on the German market for medical cannabis. The Government will also support the proposed EU ban on microplastics in cosmetics, which could affect some exporters.
Other initiatives in the Coalition Agreement worth mentioning include the intention to make German Customs faster and more digitalised, and to make it easier to set up a business in Germany (including through digitalised procedures). This is good news for New Zealand exporters looking to expand into EU operations and reducing costs associated with customs.
For more on what the new German Government means for New Zealand exporters see the full MFAT report here
Kea community member John Bache has worked with AUDI, BMW, Porsche, and Volkswagen. He explains how the new German Government policies are affecting the automotive industry. Read more
Sara Fogarty, Kea UK/Europe Regional Director
The peak of the omicron wave seems to be in the rear-view mirror in the United States, with new Covid cases falling to half those seen during January. The tension between Russia and Ukraine dominates news over here, alongside the protests at the Canada border and rising inflation. As Covid cases fall, we see some states starting to ease mask mandates, and more and more offices are reopening. Events like the Super Bowl and the upcoming Coachella concert are again drawing huge crowds.
As restrictions relax and with the recent news of the New Zealand border reopening, Kiwi businesses will undoubtedly be eyeing an entry into the U.S. market this year. I caught up with several US-based Kea members who have well-established companies here to ask them what sort of advice they would offer those starting business stateside.
Chris Perfect is the owner of Concept and Perspective, a business advisory firm that helps organizations grow and navigate complexity, change, and risk. His most important advice is to do your research.
“The American market is vast. Unless your business model is to sell (online) and ship, choose a narrow piece of the market to focus on. Remember that America is an incredibly diverse country. Demographics, culture, political affiliation, buying habits vary significantly between states (and often within states)! Don’t make assumptions, with borders reopening, take the time to visit, listen, learn, ask questions and test assumptions.”
This statement echoes Six Barrel Soda founder Joe Slater who says it’s crucial businesses treat each state as a separate entity with its own set of procedures, laws, and tax requirements. Make sure you work with a partner who understands your brand, services the proper channels, and is willing to work together for long-term success.
While the vastness of the American market may be one of the biggest hurdles for Kiwi businesses to get their heads around, the American legal system is also another challenge.
Novelli CEO. Craig Pinker urges businesses entering the U.S. to engage a good lawyer. “In smaller markets like New Zealand and Australia, we tend to operate a lot more on handshake/informal agreements, whereas here in the U.S.A., most things are done via written agreements. Boilerplate agreements, redlining, and negotiation via a war of Word documents were new to me and not something I expected. With the litigious nature of the U.S.A., there are a lot of mediocre lawyers around who do not always have their client’s best interests at heart. It’s worth paying for good advice on structuring your entity as while it’s expensive; it’s money well spent.”
With the ability to visit key markets on the not too distant horizon, this is an excellent time to start looking to the U.S. for the opportunities it brings. There are plenty of Kiwi businesses that have seen success in the U.S., and I hope many others will join them this year.
Gary Fortune, Kea North America Regional Director
DIGITAL ITP REACHES NEW MILESTONE
It has been a busy start to 2022 for the Digital Technologies Industry Transformation Plan (Digital ITP) with two milestones being reached. The publication of the Draft Digital ITP for the period 2022 – 2032 proposes the detailed sector transformation steps needed to move toward a future state defined by a tech sector with high-quality jobs, productive businesses, weightless exports, low emissions, and regional job growth. MBIE is seeking feedback on the draft, with submissions due by 5pm 31 March 2022.
We have also seen the launch of the New Zealand Tech and Innovation Story. One of the workstreams of the Digital ITP, the Tech Story was created in collaboration with industry and government and delivers a compelling, consistent way of promoting our tech capabilities to the world. It aims to help our tech businesses grow by attracting investment, talent and global sales and also helps share what we stand for as a country and our values when it comes to creating tech.
With the evolving COVID-19 situation playing out in NZ and globally, technology and digital tools have become a lifeline for businesses during the pandemic and they are making a real difference to business productivity and performance. Since starting in 2021 MBIE’s Digital Boost Educate platform now has over 44,000 Kiwi business owners, business starters and employees engaging. The team runs daily 10am Digital Boost Q&A sessions on Facebook and anyone in business can sign up for the free skills training. MBIE’s Better for Business team recently released two new reports on the health of New Zealand businesses and the New Zealand business digital landscape taking a closer look at the impacts being felt by different industry sectors.
Saya Wahrlich, Global Director, Government & Industry
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