Stephen Jacobi says the lesson for New Zealand from today’s uncertain world is that resilience matters

By Stephen Jacobi*

How can New Zealand thrive in a world which by any measure has become more uncertain and less predictable?

The after-effects of the pandemic continue to linger. War in Ukraine grinds on. Conflict in the Middle East threatens energy supplies and global shipping routes. Strategic rivalry between major powers is reshaping trade and investment patterns. At the same time, climate pressures and rapid technological disruption are adding further instability to an already fragile global environment.

For a small, open economy like New Zealand, these developments matter.

For many years New Zealand benefited from a relatively stable international system built around open markets, agreed rules and multilateral institutions. That system was never perfect, but it provided smaller countries with a degree of certainty and protection. It enabled trade to expand, investment to flow and disputes to be managed through rules rather than power alone.

Today that framework is under increasing strain.

The erosion of the international rules-based order is no longer an abstract diplomatic concern. It is showing up directly in financial markets, supply chains and economic growth forecasts. Institutions designed to uphold international law and trade rules are increasingly ignored or weakened. Geopolitical risk has become a major economic factor in its own right.

The result is a global economy characterised by volatility, caution and slower growth.

According to the International Monetary Fund, global growth remains below long-term historical averages, while world trade growth has slowed sharply amid rising protectionism and uncertainty. Even modest downturns in growth have real consequences: reduced investment, fewer jobs and increased social pressure.

Asia remains the centre of global economic growth, but even there the outlook has become more uneven. While large economies such as India continue to expand strongly, they and other countries in the region are more exposed to energy shocks, slowing demand and trade disruption.

Against this backdrop, New Zealand’s extensive network of free trade agreements remains one of our greatest strategic assets.

Our agreements across Asia, Europe and the Middle East provide exporters with enhanced access and market options at a time when many countries are becoming more inward-looking. They also help cushion the impact of unilateral trade measures and political instability elsewhere.

The recently concluded free trade agreement with India is a good example.

India is now one of the world’s fastest-growing major economies and represents an increasingly important strategic partner for New Zealand. There have been two earlier attempts to secure an FTA, so securing an agreement at all is significant.

The deal is not perfect. Dairy access remains limited, and some provisions—particularly around investment promotion—have attracted debate. But in a world where economic openness is becoming harder to secure, the agreement represents an important step forward for exporters in sectors such as horticulture, seafood, wood products, wine, education and sheepmeat.

More broadly, it reflects a changing reality in international business. Traditional trade in goods is increasingly accompanied by investment, technology partnerships and supply chain integration. Future economic relationships will depend as much on investment in growth markets as on exports alone.

At the same time, New Zealand must continue managing its relationships with both the United States and China carefully and pragmatically.

Despite ongoing tariff uncertainty and political volatility, the United States remains an important, high-value market for New Zealand exports. Trade has proven more resilient than expected, supported by strong consumer demand and long-established commercial relationships.

China, however, remains New Zealand’s largest and most significant trading partner. Despite slower growth and geopolitical tensions, demand from China for high-quality food and consumer products continues to underpin major sectors of the New Zealand economy.

That relationship too requires careful management. New Zealand will inevitably differ with China on some issues. A resilient relationship should allow for both engagement and disagreement. It is not in New Zealand’s interests to frame the relationship solely through the lens of geopolitical rivalry.

Trade policy alone, however, will not secure New Zealand’s future prosperity.

The more difficult challenges lie at home.

New Zealand has been successful at opening doors internationally, but less successful at building the scale, productivity and innovation needed to fully take advantage of those opportunities. Our exporter base remains relatively small, research and development investment is low by OECD standards, and many companies struggle to achieve the scale needed to compete globally.

If New Zealand wants to lift incomes and strengthen economic resilience, greater focus must be placed on innovation.

There are positive signs. Technology exports are growing rapidly. New Zealand’s agri-food sector is moving further up the value chain into higher-value and more specialised functional and novel foods. New opportunities are also emerging in digital services and creative industries.

But sustained progress will require long-term strategic commitment.

The same is true of sustainability and climate policy.

Consumers and regulators increasingly expect products to meet higher environmental and ethical standards. Sustainability is no longer simply an environmental issue—it is becoming a core element of international competitiveness.

New Zealand has an opportunity to position itself strongly in this environment, but only if it matches rhetoric with credible action to decarbonise, electrify and bring down emissions.

Artificial intelligence and other emerging technologies present similar opportunities and risks. Used well, these technologies can improve productivity, enhance sustainability and create new business opportunities. But they also require thoughtful governance and investment in skills and capability.

In the end, the lesson from today’s uncertain world is straightforward: resilience matters.

New Zealand cannot control geopolitical conflict, global energy prices or great-power rivalry. But it can strengthen its ability to respond by diversifying partnerships, investing in capability at home and maintaining an outward-looking approach to the world.

The global environment may be becoming more fragmented, but retreating from engagement or building new walls is not the answer.

For a small trading nation, remaining connected, competitive and adaptable has never been more important.

*Stephen Jacobi is a former diplomat, trade official and business advocate.  He currently serves as an Honorary Senior Fellow at the Helen Clark Foundation. He previously led both NZ US and NZ China Councils and, until last year, the NZ International Business Forum.