1 Introduction
This paper addresses the question of whether there are a key set of countries that New Zealand should be seeking to form deeper relationships with.
The country selection criteria will build on the distinction between global connectedness and openness. Openness is the absence of barriers, both here and abroad, to the international flow of factors of production. Global connectedness requires deeper and richer links with other countries than is implied by openness. Global connectedness can be defined as the actual flows of factors of production (such as goods, services, capital, people, knowledge, ideas and technology) between countries.
As a small country, New Zealand only has the resources to focus on a handful of countries. Additionally, it is important that external economic strategy consider the full range of levers that affect these relationships, such as immigration policy, export promotion, security links, regulatory policy, and foreign policy. Access to off-shore technology and ideas are likely to be a key element in improving New Zealand’s productivity performance. Greater global connectedness allows us to take advantage of and participate in the larger international market and the latest technology and ideas.
Identifying the countries that New Zealand should focus on for deeper linkages will contribute to Treasury and Government thinking on priorities for budget and other initiatives. In each budget round, there are bids that are directed at increasing the levels of engagement with other countries. This paper will help develop thinking on which countries are the most important to New Zealand from an economic perspective and therefore help prioritise the different requests for funding. Also, this project will act as an input into discussions with other agencies on trade and other external linkages.
The plan of the paper is that section 2 will discuss the link between economic growth and global connectedness. Section 3 will discuss why country selection criteria are needed. Section 4 will develop the selection criteria and section 5 will apply them. Section 6 provides a summary of the paper and identifies next steps for the use of the criteria.
