Southern Link: The potential to develop a global value chain
November 24, 2021
The Southern link is a trade route that links Asia and South America via New Zealand – it turns what is seemingly a distance challenge for New Zealand into a competitive opportunity.
The notion of a Southern link has been around for while, but there are three reasons that provide excitement:
It puts New Zealand in the middle of a global value chain where we have traditionally been at one end – typically the producer of raw materials. What we know is that the closer you are to consumers the more opportunities for businesses of all sizes.
The Southern Link is built on e-commerce trade – b to b and b to c trade generated by online platforms. A cross-border trade that hardly existed five years ago. E-commerce provides the opportunity to develop a sustained link with South America. This is a link which other trades and services could capitalise on.
Increased connectivity will bring more opportunities. It will bring down barriers to trade and allow businesses to capitalize on opportunities that did not exist previously.
Connectivity will generate significant value: NZIER estimate that this will be nearly $2 billion over 10 years. These benefits will mainly come from the e-commerce trade, but we will also benefit from tourism, education exports, and business intermediaries.
There are regulatory barriers (for e-commerce) to be overcome and challenges (particularly for education and tourism) but none these are insurmountable. Customs have signaled on the regulatory issues that they are willing to work collaboratively with business on outstanding issues.