There is an elephant in the room when it comes to New Zealand’s trading aspirations. I’ve borrowed the phrase from Bharat Joshi’s book Navigating India. He spoke at the recent India NZ Business Council Summit about opportunities to collaborate to grow trade between India and New Zealand, and I chatted to him as he signed a copy of his book for me. Others at the Summit talked about a dance between the elephant and the kiwi.
An article in the April 2019 issue of the Journal of Asian Economic Integration suggests the Indian Ocean economy will be about 20 per cent of global GDP by 2025, and GDP per person will almost double. And Goldman Sachs have predicted India will have the largest economy in the world by 2050. Joshi argues in his book that whilst moving from a $2 trillion economy to a $20 trillion economy in 25 years will require a compound annual growth rate just shy of 10 per cent, it is plausible for India.
Despite this, trade between Aotearoa and India is low. The call from the Summit could not be more timely: we need to collaborate to grow trade. I presented figures for two-way trade in products between India and New Zealand when I chaired a panel at the Summit, noting that whilst both exports and imports have grown by about 40 per cent from 2015 to 2019, both are from a low base. Grahame Morton from the Ministry of Foreign Affairs and Trade also spoke and noted how total (goods and services) two-way trade is about $2.6 billion.
History tells us that the Indian Ocean was often the crossroads of world trade. This was disrupted by the expansion of the European powers, but after 500 years, geography and demography are re-asserting themselves.
The last great expansion in population is likely to be around the Indian Ocean. About 2 billion people, 30 per cent of the world population, live around it today. By 2050 it could be over 5 billion. Africa’s population is projected to grow from 1.1 billion to 2.5 billion, Arab states will grow from 260 million to 400 million, and south Asia from about 1.8 billion to about 2.3 billion.
The region is rich in natural resources. Regional trade went from US$302 billion in 2003 to US$1.2 trillion in 2012, and growth continues to exceed the global average. About 100,000 vessels pass through each year including about half the globe’s container traffic.
Otago University economist Andrew Coleman argues the economic rise of the region will drag Australia’s attention west, pivoting to where markets, demand for capital, and surplus labour are growing exponentially.
Of course, New Zealand is pushing for free trade with India and other countries in the region through RCEP as part of our agenda for global free trade, and collaborating to grow trade was the focus of the Summit. The underlying facts of demography, resources, geography and trade routes show the importance of this effort starkly. The huge investments in infrastructure and the thickening of defence relationships across the region are both well-documented.
Focusing on trade though, in New Zealand we hear a lot about APEC, and the web of Asia-Pacific regional bodies. Aside from RCEP, and occasionally SAARC (the South Asian Association for Regional Cooperation) we hear little or nothing in the mainstream media about the growing web of regional bodies centred on the Indian Ocean.
The Indian Ocean Rim Association (IORA) was launched in 1997 after Nelson Mandela visited India. Its members include 22 littoral states, and seven dialogue partners, including the US, the UK, France and China. It also includes Australia, but not New Zealand. Its role includes promoting sustainable growth and freer flow of goods and services. Like APEC, it has a growing number of related bodies, such as the Indian Ocean Rim Business Forum, and new maritime agreements.
In 2015 IORA adopted the Blue Economy Declaration, seeking to sustainably harness marine resources to drive innovation and growth. One Indian writer claimed, “The Ocean-Based Blue Economy is the next sunrise issue for development experts,” saying it would catalyse India to become a $10 trillion economy by 2032.
There is debate about how effective these new bodies and initiatives will be. But the real point is that they have emerged and are evolving because of the underlying drivers of demography, resources, geography and trade routes.
Our pivot to China in the early 2000s brought great wealth to Aotearoa. The opportunities to go again and grow trade with India and other Indian Ocean countries are huge and can aptly be called elephant-sized. We need to look west.