New Zealand hopes for expanded trade with Soviet Union

Press, 3 December 1987, Page 41

New Zealand hopes for expanded trade with Soviet Union

By

TONY VERDON

In Moscow

The Soviet Union’s economic reforms now under way are unlikely to unlock massive new markets for New Zealand producers. However, both Soviet and New Zealand trade officials believe trade between the two countries will expand gradually, particularly in the Soviet Far East region.

In some cases the much-publicised changes could make it more difficult for New Zealand traders to sell goods in Russia.

The greater independence being given to the large State trading organisations could diminish the political influences which have In the past helped New Zealand maintain reasonable levels of trade. In the future the Soviet trading organisations, under pressure from the Soviet Government to dramatically improve

their economic performance, could concentrate on developing links with companies and countries with more international clout.

But in spite of this danger, New Zealand Government trade officials and businessmen were pleased with the outcome of talks in Moscow recently. This was in spite of the fact that the Dairy Board failed to obtain a further butter order from the Soviets.

The board had hoped to secure further butter sales, but the Soviets are being wooed by the European Community, which is selling its butter surplus at exceptionally low prices. However, the board is confident there will be further Soviet orders for New Zealand butter, particularly when the European butter surplus is reduced towards the end of next year. While there was some talk about join venture

arrangements between the two countries during talks in Moscow, the bulk of New Zealand-Soviet trade in the next few years will continue to involve agricultural products. ; New Zealand trade officials were encouraged by the outcome of the intersessional meeting of the New Zealand-U.S.S.R. Joint Trade Commission, held in Moscow.

The last joint trade commission talks were held in Wellington in April last year, and last week’s talks were to review the situation. The New Zealand officials present noted a less strident reminder from their Soviet counterparts of the imbalance in trade between the two countries.

New Zealand exports 16 times as much as it imports from the Soviet Union. Last year’s Soviet imports totalled $12.55 million, compared with exports of $205 million.

However, the “quieter” reminder of the imbalance was seen by some officials as recognition of the Dairy Board’s efforts to try to broaden the range of Soviet goods sold in New Zealand.

The Dairy Board earlier this year bought the firm which undertook most of the trade between the two countries, and has set it up as a whollyowned trading arm of the board.

The company, Sovenz, was given official accreditation to operate a permanent office in Moscow. Such accreditation is difficult to obtain, but is considered essential for large organisations wanting to do regular, consistent business there. The Board’s efforts to lessen the trade imbalance was underlined by its signing of the largest single contract between the two countries, worth $lO million. Under the contract the Board will import 1720 new Lada cars in 1988, or almost twice as many as it will import this year.

The Soviets also know Sovenz is investing several million dollars in a predelivery service centre near Wellington, as part of its effort to improve the quality of the cars sold to New Zealanders. The Board has also discussed various possible projects, including the manufacture of Sovietski cheese (by buying Soviet technology to manufacture a type of cheese which could be more readily exported to, Russia) and a joint venture UHT milk plant in the Soviet Far East. Officials from both countries emphasised that all such projects were at a very early exploratory stage.

The most likely to succeed at present seems to be the Sovietski cheese plant, which would involve around 5000 or 6000 tonnes of New Zealandmanufactured Sovietski cheese being exported to the Soviet Union each year. Soviet Government trade officials agree with their New Zealand counterparts that servicing the Soviet Far East provides the best hope of developing trade between the two

countries. The deputy secretary of the Trade and Industry Department, Mr Ted Woodfield, said in Moscow that Soviet authorities were placing increased emphasis on the develdpment of the Far East. New Zealand is geographically well placed to compete favourably with products supplied from Western Europe, which must be transported by train the 8000 miles across the Soviet Union. The Soviet General Secretary, Mr Mikhail Gorbachev, gave a speech in Vladivostok earlier this year in which he made it clear the Soviet Government was aiming to speed-up development in the energy and mineralrich Far Eastern region.

New Zealand’s Ambassador to Washington, Miss Allison Stokes, was the first foreign Ambassador to be allowed to visit the region earlier this year.

Vladivostok is still a “closed” city, but there are indications that this status could change. Already several New Zealand companies have established contact with the area through the sales of meat, dairy products and livestock.

Opportunities are believed to exist for other products in the agricultural field, and the Soviets are believed to have raised possibilities in the forestry, geothermal energy and housing fields.

The Soviets have also given New Zealand “border status,” which enables New Zealand companies to trade with the local foreign trade organisation, Dalintorg. Such organisations have been given more independence from Moscow as a result of Perestroika, or the restructuring of the Soviet economy.

Mr Woodfield led the New Zealand delegation to Moscow, and after the talks said the changes were expected to lead to improved demands for New Zealand goods. The changes were aimed at improving the efficiency of the trading organisations, and linking them more directly with the market.

“It is an acknowledgement of the deficiencies of the previous system,

and we expect it will produce the results,” said Mr Woodfield. He said the changes could diminish the political influence which previously could be brought to bear on the Soviet trading organisations. Instead they would be expected to improve their economic performances, which could mean some New Zealand companies would be too small for them to do business with. However, it should still be possible for New Zealand companies to find a niche in the Soviet market for their goods.

Mr Woodfield said he personally saw potential for the timber industries in both countries to develop business. Soviet trade and diplomatic officials interviewed in Moscow echoed his sentiments, emphasising the need to broaden the trading relationship. However, they also acknowledged the relative sizes of the two populations meant there could never be a balancing of the trading relationship. The officials, from the Soviet Ministry of Foreign Affairs, the Soviet Ministry of Foreign Trade, and from various trade organisations, talked about the elimination of "all sort of bureaucratic snags” as part of the policy of Perestroika. While Mr Gorbachev may be having difficulty persuading everyone in the Soviet system of the need for change, those involved in foreign affairs and trade fully support the economic restructuring.

However, most Soviet officials also admitted they were still in the process of implementing the changes, and they were vague about how quickly big changes would be brought about But the greater independence of the trading organisations to negotiate directly with foreign companies is seen by New Zealand officials as an indication that the Soviets are eager to develop business with the West. The New Zealand Embassy in Moscow has built up its knowledge of how firms can become involved in joint ventures with the Soviets.