PM Key tells US business leaders their future is exporting to rising Asian middle classes, takes stab at Asian controlled exchange rate regimes

Prime Minister John Key has told a US business meeting that the economic futures of New Zealand and the US are based on exporting to the rising middle classes of Asia, as he pushes for US participation in the Trans Pacific Partnership (TPP) free trade deal.

In a speech to the US Chamber of Commerce on a week-long trip to America, Key also took a stab at "restrictive and controlled" exchange rate mechanisms used by Asian countries, and acknowledged that some of these nations had "less predictable and transparent" business environments - challenges that should not be reasons for not moving forward in terms of a deal.

Key told the Chamber the health of the US economy was not only vital for the American people, but also for the rest of the world.

"As you may know, I spent much of my career working for US financial institutions. Throughout that time, and in the years since, I’ve been continually impressed by the US economy," Key said.

"I’ve been impressed by its ability to rebound, its ability to innovate, its ability to improve productivity, and its ability to create new wealth. These are the characteristics that will get the US through what by any definition has been challenging times in the past few years. Like all countries, the US faces both opportunities and challenges," he said.

'Embrace the rise of China'

As Prime Minister of New Zealand, Key said he had witnessed incredible growth coming from the Asia-Pacific region, particularly China, which had important implications for the economies of the US, New Zealand, and the whole Asia Pacific region.

"We live in a time where China has an increasing presence, and we have to make the most of the enormous trading opportunities it poses," Key said.

New Zealand's Free Trade Agreement with China in 2008 was China’s first FTA with a developed nation, and it had seen a huge increase in trade between the two countries.

"In fact, China has now become our second largest trading partner, recently eclipsing the US," Keys said.

"This boost in trade helped us mitigate some of the impact of the global recession, and China’s growing middle-class will continue to provide great opportunities for our exporters," he said.

"We are also looking to India. Two weeks ago I visited India, and being on the ground made me confident that we’re making good progress towards signing a Free Trade Agreement early next year. New Zealand is determined to maximise the opportunities provided by the whole Asia-Pacific region, so that we can speed up economic growth."

Exchange rate challenges

The rapid emergence of this new middle class in China and India, and indeed all of the Asian region, was a unique opportunity for both New Zealand and the US. 

"It continues to present challenges and frustrations particularly when we reflect on the more restrictive and controlled exchange rate mechanism prevalent in Asia as opposed to the developed world," Key said.

"Equally many of our companies have had to contend with a less predictable and transparent business environment," he said.

"But what is clear is despite all this the Asia-Pacific region will be where the growth action will dominate in the next decade or two, and for the US this has to present a very exciting prospect."

It was against this backdrop that TPP should be viewed.

"TPP is a gateway for increased US participation in Asia, and a stepping stone to wider and more far-reaching trade agreements in Asia," Key said.

"Both the US and NZ are democratic, so inevitably there will be aspects of potential FTAs that are not met with universal agreement. But that cannot be a reason to not move forward. The TPP promises too much to miss on this great opportunity," he said.