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Recent key developments in MAKE│NZ
Our friends at Hardware Meetup NZ will be holding an event on the 15th of April in Wellington, showcasing several companies leading the way in innovation in Wellington. Making sure Christchurch (as well as Auckland and Queenstown) stay in the loop, they’ll be hosting watch parties to live stream the meet up- they’ll be an opportunity for local networking, drinks, food, watching the live stream and participating in the Q&A sessions. If you attended their last meeting in Christchurch then you will be familiar with how their events are run, and if not, then attending is a great way to find out!
Their speakers include:
-Bradley Leuw – the head of HTS Subsystems at OpenStar
-Terry Miller – the founder and CEO of the hardware startup Eight360
-And a third speaker yet to be announced….
Would you or someone you know benefit from improving productivity and learning how to lead through change? Maybe with some new digital tools helping along the way? Well do I have the event for you!
Tuning your Production Engine – Manufacturing Industry Conference
Make sure to get your tickets here, and see if you’re eligible for discounted tickets as a community member!
A reminder to keep next Tuesday 5:30-8:30 free for the Hardware Meetup NZ watch party. You’ll be able to share a bite with fellow manufacturers focused on hardware, all while listening and learning from Bradley Leuw the head of HTS Subsystems at OpenStar, Terry Miller the founder and CEO of Eight360, and Craig Bond the co-founder of Goodnature!
For more information, check here.
Recent key developments in New Zealand
• We couldn’t find any precise estimates of how much of New Zealand’s industrial output is purchased by government (agencies), directly and indirectly. And the answers are likely to be quite different for different sub-sectors of manufacturing. However, and to varying degrees, government decisions on what to buy, and off whom, can have important implications for New Zealand’s manufacturers. Those decisions have, at least in the past, been guided by a strict adhesion to the principles of WTO Rules, that adhesion being closely monitored by our Ministry of Foreign Affairs and Trade to avoid any suspicion of favourable treatment for domestic suppliers.
The New Zealand government first published “Mandatory Rules for Procurement by Departments” in April 2006. These Mandatory Rules were replaced by the “Government Rules of Sourcing” (now known as the “Government Procurement Rules”) from October 1, 2013. Nominally, the new rules aimed to streamline procurement processes and make it easier for smaller New Zealand companies to tender for government contracts, while also ensuring better value for money for taxpayers. In reality, government agencies often continued to award tenders on the basis of up-front prices, with scant attention paid to life-cycle costs and the interests of domestic suppliers.
The government (MBIE) is currently seeking feedback on the draft 5th edition of its Procurement Rules, replacing the previous edition from 2019. The draft can be found here. The New Zealand Manufacturing Alliance, which MAKE│NZ is part of, is making a submission on the draft, pointing to severe shortcomings in what is altogether a better set of Rules than previous editions. Among others, we propose:
– Accountability (Rule 3): This Rule states the “Primary requirement” is that “Agencies must be accountable for their procurement performance“.
There is, however, no prescription for how Agencies must be accountable and how they must demonstrate that they have delivered to each of the Rules as appropriate to the contract.
– The Manufacturing Alliance suggests that Rule 3: Accountability be amended to include specific measures of performance relating to key rules:
* All contracts above a defined threshold should be evaluated post hoc.
* Likewise, a random sample (we suggest 20%) below the defined threshold should be evaluated.
– Economic benefit to New Zealand (Rule 8): New Zealand businesses need to be confident that they are competing on a level playing field. The draft stipulates that “Agencies are expected to award contracts below the [defined] value thresholds … to New Zealand businesses that are capable and have capacity to deliver on the contract.”
– Why “expected to award” and not “should award”?! The Manufacturing Alliance is asking for a word change to say that “Agencies should award contracts below the value thresholds …to New Zealand businesses …”
Furthermore, Rule 8 states that the Economic Benefit to New Zealand considerations should be introduced with a minimum weight of 10% on the final procurement decision. We regard that threshold as being arbitrarily low. It should be a minimum of 20%, with higher ratings on a case-by-case basis as suggest in Rule 8
– Subcontracting (Rule 14): In terms of material impact, this has always been the most important Rule, especially when it comes to large government construction contracts. Rule 14 says that “Agencies must require prime contractors to meet certain standards, including who their key subcontractors are, in their subcontracting.” These standards include “the Government Procurement Charter”, which is a one-page document that in six generic principles “sets out government’s expectations of how agencies should conduct their procurement activity to achieve public value.”
The wording in Rule 14 as it is, however, specifically does not require prime contractors having to apply the government’s Procurement Rules when appointing subcontractors. This has for a long time been the most contested part of these Rules, and, again, government appears to be unwilling to accept change in this Rule.
The Manufacturing Alliance is asking that the Subcontracting Rule be changed to ensure that subcontractors are bound to the same rules / outcomes as the prime contractor signing the contract with government agencies.
• What the Rules say is one thing. Actual procurement practices and decisions are where differences are made in favour, or to the disadvantage of domestic suppliers. We urge the government to move away from its “purer-than-driven-snow” approach when it comes to adhering to WTO Rules. Wouldn’t it be nice if we lived in a world where everyone adhered to these WTO Rules, and if they don’t, for example by heavily subsidising domestic production, they get punished by a powerful global judiciary system? If that world ever existed, it is well and truly gone now, and New Zealand can ill afford to stick to rules and principles others have abandoned – to the detriment of domestic manufacturers and other business.
Recent key developments in the World
• There has probably been just enough commentary by now on the so-called Tariff Hammer that is being wielded by the US government. Is it the right thing to do – or not, from a USA’s interests’ point of view, and when considering the interests of the global community? If the intent is right, what about the execution?
What we don’t hear or read so much about is the underlying political and economic strategy, and the set of beliefs and assumptions behind The Plan. An easy and at times quite entertaining introduction to that can be found in this recent episode of the Daily Show, when Jon Stewart interviewed Oren Cass (https://youtu.be/vgEQeLR-M0g ). Oren who?!
When we look for The Plan, we can’t go beyond the US Vice-President – and potentially the next POTUS, JD Vance. And when we look at sources of inspiration behind the Vice-President’s thinking on economic matters, we can’t go beyond Oren Cass. Cass’s American Compass is described as a “JD Vance-aligned think tank”, challenging traditional GOP free-market orthodoxy, focusing instead on worker-centric policies. A core theme for the ‘New Right, or New Republican Movement’ is the realisation that global free trade may have served large corporations well, including those in the US, but at the expense of a large part of the American workforce, the ‘working middle class’. The New Right seeks to redefine conservative economics by prioritising working-class interests, industrial revival, and scepticism of globalisation. As a consequence, they favour a strong push to bring manufacturing back to the US in order to create well-paying jobs, reduce the dependence on China when it comes to what the US needs and what American consumers want to buy, and reduce the huge US trade deficit.
Vance and Cass are united in their ‘new conservative vision’, merging economic nationalism with social conservatism. While Vance operates as a political figure advancing these ideas legislatively, Cass provides the intellectual framework through American Compass. Their synergy represents a deliberate shift away from libertarian economics toward a state-guided model emphasising national cohesion and working-class uplift.
• A sweet irony that may well have gone straight over the POTUS’s head is the fact that he may yet go down in history as the US President that has done more than any other to reduce global greenhouse gas emissions – talk about unintended consequences …
Nobody can predict with certainty what the medium to long-term consequences of current developments will be. And it’s not only the tariffs – think of the plans of the US Trade Representative to impose additional fees of up to USD1.5m on each US port visit by a ship that has ever been touched by a Chinese hand, for example.
Unfortunately, we do have a recent case study that can help to shed some light on the question of what happens to the emission of greenhouse gases when economic activity is reduced sharply on a global scale:
In that, however, manufacturing is just one contributor to these emissions, and the reduction in manufacturing activity in early 2020 was a small contributor only to the significant emission reduction in that period, at least as far as the EU was concerned:
Yet again, COVID-19 was a short-sharp shock to global economic activities, and we don’t yet know – and won’t for a while – what the impact of the Tariff Hammer on global economic output will be. A global reduction in economic activity – should it occur – will have an impact on human activity beyond just the production and consumption of goods; think about tourism and air travel, for example.
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