Story: International economic relations

Page 5. The US and New Zealand

All images & media in this story

The leading role the US has played in the international political economy has overshadowed the US’s bilateral relations with New Zealand. Nonetheless for a long period the US supplied the second or third largest volume of imports into New Zealand.

US imports, early 20th century

In the early part of the 20th century US businesses reached out beyond their massive domestic market. American companies saw New Zealand as yet another part of the British Empire in which profits could be made.

A losing bet

The Civic Theatre opened with great fanfare in Auckland in December 1929. Built at the onset of the great depression it was not a financial success. Owner Thomas O'Brien's determination to screen British rather than American films also contributed to poor attendances. Falling receipts led to the collapse of O'Brien's company and his hasty departure for Sydney in 1932.

US business was particularly active in New Zealand (as elsewhere in the world) in cars and petrol, and in movies. US petroleum companies, notably those later known as Mobil, Caltex and Atlantic, all entered the New Zealand market in the 1920s. General Motors opened a car plant in Petone, near Wellington, in 1926 to assemble cars from the US.

Before the First World War the US usually supplied around 10% of New Zealand’s imports, but in the 1920s it was usually between 15% and 20%.

A 1928 law set up a rising quota of British films that cinemas had to show – it was expected to reach 20% within 10 years. But feature films from Hollywood were the most popular – British films were usually ‘shorts’.

The right kind of car

In the 1920s US- and Canadian-made models accounted for most cars sold in New Zealand. Tariff revision in 1927 and 1934 saw a preference given to British over Canadian makes, and a substantial preference over US makes. British makes after 1934 faced tariffs of 5% to 15%, but for Canadian makes it was 10% to 25%, and for the US 50% to 60%. In 1929 the US and Canada accounted for over 80% of car imports, but by 1939 they were under 40%. By then however, the US companies General Motors and Ford were making cars in the UK as well as in the US.

Growing trade with US

During the depression of the 1930s imports from the UK gained more favoured treatment and the percentage of imports supplied by the US fell back to around 10%. After the Second World War currency restrictions made it difficult to import from the US, or Canada, not least after devaluations of all sterling-linked currencies against the dollar in 1947 and 1949. Through the 1950s the US still supplied only around 10% of New Zealand’s imports.

Until the late 1950s New Zealand’s food exports had difficulty gaining a foothold in the US, because domestic competitors had powerful allies in Congress. There was some improvement in the 1960s, although the lobbies remained. The most reliable markets were those for products which were manufacturing inputs – notably casein and beef for hamburgers. In 1981/82 beef and veal accounted for 50% of US imports from New Zealand. Through most of the years after 1970 the US supplied between 15% and 20% of New Zealand’s imports, and bought about 15% of its exports.

Some lamb for guns

In 1969 New Zealand was a supporter of US involvement in Vietnam, with soldiers serving with US forces in that country. After representations from New Zealand, US government officials spoke against a Senate proposal to place embargos or quotas on New Zealand lamb.

US banking interests first floated loans to New Zealand in the 1950s, and New Zealand became a regular client for such business thereafter. When New Zealand’s official levels of indebtedness rose in the 1980s, credit rating agencies such as Standard and Poor’s and Moody’s acquired a higher profile in New Zealand. A credit downgrade by Standard and Poor’s early in 1991 highlighted rising concerns about the growth of public and overseas debt.

On the lookout

US investors took advantage of the privatising of many of New Zealand’s state-owned enterprises in the late 1980s and 1990s, though the investments were usually short-term. Telecom, sold principally to two US companies – Ameritech and Bell Atlantic – in 1990, was sold by them in 1997. Wisconsin Rail bought New Zealand Rail in 1993 and sold it in 2003.

A long-established protest organisation, the Campaign Against Foreign Control of Aotearoa (CAFCA), was critical both of the original sales and of what it saw as excessive profit-taking.

In the 1990s and 2000s the US expanded its imports in non-traditional areas. At a time when trade in goods each way amounted to around $10 billion, trade in services between the US and New Zealand amounted to $1.1 billion. US customers bought computer, information, personal, cultural and recreational services from New Zealand, and New Zealanders bought computer and information services from the United States.

Lamb skewered

In July 1999 US President Bill Clinton signed a three-year trade-restrictive measure against lamb imports from Australia and New Zealand. Farmers paraded sheep outside the US embassy in Wellington in protest, but the issue got no air time in Washington.

Aircraft, vehicles, machinery, medical equipment and pharmaceuticals were among major items that US firms supplied to New Zealand in 2009, and meat and dairy produce accounted for around one-third of US purchases from New Zealand.

In the early 2000s the US usually accounted for 5–10% of direct investment in New Zealand, and about the same proportion (but about one-fifth in value) of outward investment from New Zealand.

In 2008 the US announced that it intended to join the trans-Pacific partnership agreement, which included New Zealand, along with Brunei, Singapore and Chile.

How to cite this page:

Malcolm McKinnon, 'International economic relations - The US and New Zealand', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/international-economic-relations/page-5 (accessed 20 August 2019)

Story by Malcolm McKinnon, published 11 Mar 2010