"A CAMEL," said Alec Issigonis, the brilliant engineer who created the Mini, "is a horse designed by a committee."
Reading Manufacturing: The New Consensus, the Opposition report on the state of the manufacturing industry, it is difficult to avoid thinking of his aphorism.
Not only have the report's authors had to accommodate the divergent views of Labour, the Greens, NZ First and the Mana Party, they have also had to pay due deference to the manufacturers and unions who gave up their time to participate in an exercise that has no official status.
The result is a paean to the "good old days" when foreign goods were kept out of fortress New Zealand, export subsidies and research and development grants were there for the asking and profits and job security were virtually guaranteed because the public had no choice but to buy locally manufactured, or assembled, goods.
It was a golden time for the sector but, lest anyone has forgotten, it also was the era during which import licence holders bought television sets in Japan, paid Japanese workers to disassemble them, shipped the pieces here and then paid workers in Waihi to put them back together.
The report does not propose a return to the protected past, but it does advocate special treatment for a sector that has been buffeted by competition from low-wage Asian economies and wild fluctuations in the value of the dollar.
Among the measures canvassed are a return to a managed exchange rate, the reintroduction of R & D tax credits and a national procurement policy that favours Kiwi-made.
Unfortunately, the world has changed since those sorts of policies were affordable.
The leader writer is quite right; times have changed. Advances in technology and automation have reduced the number of jobs in manufacturing. We now trade with a far different suite of countries to those with whom we traded when there was a butter mountain in Europe, and when sheep farmers commanded top dollar for meat and wool exports. The Holyoake years are long behind us.
Our economy is far more diverse now, as is the range of countries and economies with whom we do business. And businesses who have adapted to change, or who have even led change have done well; read on:
The hard-learned lesson of the past few decades is that New Zealand works best when it is flexible, nimble and resilient. We cannot expect other nations to buy our milk powder, wool and manufactured goods if we discriminate against their clothing and generators.
Trade is very much a two-way street. We cannot expect to have access to lucrative markets, especially the emerging Asian markets without a degree or reciprocity.
The editorial closes with a suggestion to the Government:
There is one area, however, where the Government should act. Over the past 15 years the value of the dollar has fallen as low as US39 cents and risen as high as US84 cents. In the modern marketplace in which a few cents at the margin can mean the difference between success and failure, that places an almost impossible burden on exporters.
Exchange rate controls are not the answer. They have been tried and failed, but there are things that can be done to reduce the volatility of the dollar. One of those things is bringing government expenditure under control, which this Government has done. Another is discouraging speculative investment in housing, which pushes up interest rates and the value of the dollar – something this Government continues to pretend is not an issue.
New Zealand cannot afford to heed the siren song of vested interests, but nor can it afford to indulge property speculators when the consequence is lost exports, lost jobs and lost opportunities.
We are still not convinced that a capital gains tax is the answer, but then we have never pretended to be economists! The Government has certainly kept its pledge to bring down government expenditure, and the evidence of that will be seen when the books are in surplus in 2014-15 if not sooner. But something needs to happen with housing; we're just not sure what!
Exporters will be pleased with a three-cent fall in the value of the NZ dollar this week against the USD. There is precious little that we can do to control the exchange rate, given the size and scale of our economy against that of the US, which will at some point recover. In the meantime, our manufacturers need to focus on making their businesses the best and most resilient they can be for the future, rather than reflecting with nostalgia on the past as this "parliamentary inquiry" has encouraged them to do.
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