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South Pacific economic relations

by Geoff Bertram

Despite the close proximity, New Zealand’s trade with its Pacific Island neighbours has never been very significant. New Zealand’s strong relationship with the islands owes more to political ties, migration, aid and tourism.


Pacific neighbours

To New Zealand’s north, forming a 6,000-kilometre ‘coral curtain’, are a series of islands and island groups. They include the large main island of Papua New Guinea, the Solomon Islands, Vanuatu, New Caledonia, Fiji, Tonga, Samoa, the Cook Islands, French Polynesia and many smaller groups.

Parts of the Pacific 

The Pacific Islands are divided into three main groups based roughly on the types of people living in them. Micronesia (Greek for ‘small islands’) is made up of hundreds of mostly tiny islands, ranging from Kiribati in the south to the US territory of Wake Island in the north. Polynesia (‘many islands’) forms a giant triangle bounded by New Zealand, Hawaii and Rapa Nui (Easter Island), and includes the Cook Islands, Samoa, Tonga, Niue and French Polynesia. Melanesia (‘islands of black-skinned people’) extends from Fiji through Papua New Guinea to the easternmost islands of Indonesia. 

New Zealand has had a variety of economic relations with these island countries since the start of European contact. In the early 19th century whalers, traders and missionaries ranged back and forth between the island groups and northern New Zealand. From the 1850s New Zealand-based missionaries were very active in Vanuatu (then called New Hebrides). New Zealand got most of its sugar from Fiji from the 1870s to the 1920s, and most of its phosphate fertiliser from Nauru and Banaba from the 1900s to the 1980s. From the 1970s the Pacific has provided a market for New Zealand meat exports and has absorbed over half of New Zealand’s overseas aid.

Governing the islands

Most island groups had come under direct European rule by 1900, but New Zealand gained control over the British-ruled Cook Islands and Niue in 1901. Western Samoa was captured from Germany in 1914 and was administered by New Zealand under a League of Nations mandate. The British Tokelau group (then known as the Union Islands) was administered by New Zealand from 1925 and annexed in 1948. Economically, the most important islands to New Zealand in the early 20th century were Nauru and Banaba (Ocean Island), which supplied rock phosphate for making superphosphate fertiliser.

Western Samoa became independent in 1962, but the other New Zealand territories remained associated with New Zealand (which means they are self-governing, but their citizens are also citizens of New Zealand). Their main economic links were not trade but labour migration, aid and remittances (money sent home by migrants living and working in New Zealand).

Trouble in Melanesia

From the 1980s the New Zealand government was concerned at military coups, violent protest and other political developments in Papua New Guinea, the Solomon Islands and Fiji. This triggered an increase in aid to those countries, and migration schemes were introduced. Trade relations remained very limited.


Sugar and phosphate

Sugar from Fiji

In the early 20th century trade with the South Pacific was dominated by imports of sugar cane from Fiji. The Colonial Sugar Refining Company built up sugar plantations and milling operations in Fiji, and opened a refinery in Birkenhead, Auckland, in 1884.

Ballad of the Stonegut Sugarworks

 

Poet James K. Baxter briefly worked as a cleaner at the Birkenhead sugar refinery in 1969. He later recorded his impressions in a poem:

Oh, in the Stonegut Sugar Works
The floors are black with grime
I think they must have built it
In Queen Victoria's time.

And all the sugar in the land
Flows through that dismal dump
And all the drains run through the works
Into a filthy sump.
And then they boil it up again
For the money in each lump.1

 

In the 1920s it became more profitable for the company to source raw sugar from other countries, and Fiji ceased to be the main source of supply. Although the Fiji trade revived briefly in the 1940s and again in the 1980s, most sugar has been imported from Australia since 1960. It is still processed at the refinery in Birkenhead.

Phosphate from Banaba and Nauru

The second major Pacific trade commodity was rock phosphate, which is formed from bird droppings or animal bones that have dried and built up over a long period. This is combined with sulfuric acid to make superphosphate, the main fertiliser used on New Zealand’s pastoral farms since the 1930s.

The trade began after large reserves of rock phosphate were discovered on Banaba (Ocean Island) and Nauru, then a German protectorate. They were found in 1900 by Albert Ellis, a New Zealander working for the Melbourne-based Pacific Islands Company. Similar large deposits were found soon afterwards on Makatea (Aurora Island) in what is now French Polynesia, and Angaur in the Caroline Islands (now Palau).

Originally guano (bird droppings) was imported, but this was replaced by rock phosphate in the first decade of the 20th century. From the early 1920s until the mid-1980s phosphate was New Zealand’s main import from the Pacific region.

Mining the phosphate

The privately owned Pacific Phosphate Company controlled the early phosphate trade on Nauru, Banaba and Makatea. The company’s interests in Nauru and Banaba were taken over by the British Phosphate Commission in 1919. A New Zealand government representative always held one of the three directorships on this commission.

The commission mined the deposits at a rate much faster than would have given the greatest return to the islanders, and the phosphate was sold at low prices – sometimes half the world market price – for the benefit of New Zealand and Australian farmers. Makatea’s phosphate had run out by 1966, Banaba’s by 1979, and Nauru, which controlled its own phosphate after its independence in 1968, stopped large-scale production in 2000. The British Phosphate Commission was wound up in 1981. New Zealand’s phosphate supplies now come mainly from North Africa.

Footnotes
    • James K. Baxter, Selected poems. Oxford: Oxford University Press, 1982, p. 120. Back

The balance of trade

Imports from the Pacific Islands

New Zealand has never had a large amount of trade with the Pacific. From the 1890s to 1920 about 4% of New Zealand’s imports (by value) came from the islands – apart from a brief rise to 6% during the First World War, when imports from Europe slowed. From the 1920s until 1980 around 1% of imports came from the islands, again with a brief increase during and after the Second World War.

Once sugar and phosphate imports ended, only fruit and vegetables were bought from the islands. By the late 1990s the proportion of imports sourced from the Pacific had fallen to 0.5%. In the early 2000s New Zealand imported a few niche products from the islands such as tailored clothing from Fiji.

Importing fruit

There have been many attempts to set up a commercially viable fruit-import trade to New Zealand from its Pacific territories. The New Zealand government heavily subsidised banana exports from Samoa from the 1920s to 1940s, citrus from the Cook Islands in the 1950s and 1960s, and bananas from Aitutaki and passionfruit from Niue in the 1980s. However, none of these efforts remained commercially viable because of small-scale production, natural hazards such as hurricanes, and high shipping costs.

Exports to the islands

Only 1% of New Zealand’s exports were sent to the South Pacific between the 1890s and the early 1950s. However, the region did become a significant export market for certain New Zealand products. For example, the high-quality meat exported to developed countries has fatty low-quality by-products which have become favourites throughout the Pacific. Canned corned beef first entered the Polynesian and Fijian markets in the 1920s, and sales boomed after the Second World War. Later, in the 1970s and 1980s, exports of lamb and mutton flaps to the islands took off. After reaching a peak of 3.9% of total exports in 1983, the proportion fell below 3% in the mid-1990s and has remained there since.

Shipping links with the Pacific

From 1926 to 1975 the New Zealand government owned and operated its own ship (the Hinemoa, 1926–28; Maui Pomare, 1928–60 and Moana Roa, 1960–75) for the Niue and Cook Islands trade. Other ships were chartered to maintain contact between Tokelau and Samoa. For many years after this, government subsidies were paid to the New Zealand–Cook Islands Joint Shipping Service and the Pacific Forum Line to keep trade moving. Ships trading with the islands also included the Union Steam Ship Company vessels Tofua and Tahiti, which carried fruit and passengers throughout the South Pacific from 1908 until the 1970s.

These shipping links stopped small island territories becoming isolated from outside markets. However, the cost of subsidies was large relative to the value of the goods carried. From the 1990s shipping subsidies were phased out. This, and the high cost of air freight, has contributed to the low level of imports from the Pacific.


Aid, remittances and tourism

Aid

Since the mid-1960s the Pacific has consistently received about half of New Zealand’s total overseas aid. Some of that aid has been delivered in the form of tourist and general infrastructure projects such as airfields, wharves and communications systems. In the 1940s 100% of New Zealand’s South Pacific aid went to its own territories of Niue, Tokelau and the Cook Islands. This reduced to 50% in the 1980s, and 40% in 2007. Meanwhile, New Zealand progressively reallocated aid to the larger and more populous island groups of Melanesia (20% in the 1980s, more than 30% in 2007).

Migration and remittances

Many migrants send remittances (gifts of money, goods or services) to the Pacific Islands – standard practice since the 1950s. Migration from Western Samoa increased sharply at that time, when New Zealand’s growing economy offered employment.

After a series of military coups in 1987, 2000 and 2006, followed by military rule, thousands of Indo-Fijians migrated to New Zealand to escape discrimination and economic hardship. The population of Pacific Islanders in New Zealand had reached 266,000 by 2006. About half were from Western Samoa, although a clear majority of those had been born in New Zealand.

From 2007 the Recognised Seasonal Employer scheme allowed accredited employers to bring workers to New Zealand on seven-month permits to work in the viticulture and horticulture industries when no New Zealanders were available. The first large group to take advantage of this scheme was 1,600 workers from Vanuatu.

In 2007 annual remittances from Samoans in New Zealand amounted to about $80 million, Tongans $55 million, and Tuvaluans $1 million. Cook Islanders’ remittances, which were around $5 million each year in the 1980s, had fallen to around $1.5 million a year. In total, remittance flows from New Zealand to the Pacific Islands in 2007 were around $140 million, compared with aid of $180 million and New Zealand imports from the Pacific Islands of $170 million. For both Samoa and Tonga, income from remittances greatly exceeded that from imports and aid.

Flying the Coral Route

 

From 1951 to 1960 the economies of several islands in the South Pacific benefited from the ‘Coral Route’, one of the most glamorous airline flights in the world. The New Zealand-owned Tasman Empire Airways Ltd (TEAL) offered flights from Auckland through Fiji, Samoa, Tahiti and the Cook Islands on luxury flying boats that landed in the lagoons of small coral islands. The planes carried only 45 passengers, all first class, and their meals were cooked to order by an on board chef. A ticket for the five-day trip cost six times the average New Zealand weekly wage.

 

Tourism

In several South Pacific countries income from New Zealand tourists forms an increasingly important part of the economy. New Zealanders made up 270,000 – more than 20% – of 1.3 million tourists in the region in 2007. New Zealand was the second-largest national group of South Pacific tourists after Australia. While Fiji attracts the largest number of foreign tourists – 40% of the total – tourism has become the biggest foreign-exchange earner in several other island countries such as the Cook Islands.


Hononga, rauemi nō waho

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How to cite this page: Geoff Bertram, 'South Pacific economic relations', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/mi/south-pacific-economic-relations/print (accessed 24 July 2019)

Story by Geoff Bertram, published 11 Mar 2010