A Strict Application of “Kiwi Made” Actually Hurts Our Exporters
Posted July 26, 2007on:
While I am all for supporting the domestic economy, I think that a strict interpretation of the requirements for a good to be labelled “Made in New Zealand” actually harms our exporters. People get upset when they find out that something that is “Made in New Zealand” is manufactured using inputs purchased from another country. Any attempt to put pressure on exporting firms to use entirely NZ inputs is detrimental given that we are a small open economy with a very volatile exchange rate. The argument I’m making has absolutely nothing to do with price or quality but instead centres on a corporate finance concept known as “Natural Hedging”. Put simply if you have a company that sells its output in a foreign currency, purchasing your inputs in that currency naturally hedges movements in the exchange rate. A good example of this is Navman who appear to be doing fine because they purchase a lot of their inputs in US$
While I accept that a good should still in essence be New Zealand made, I believe that when the firm is an exporter, they should outsource as much of their inputs as possible.