NZ best to stay clear of US-China tensions

The post-war global economy has been characterised by a continuous, albeit uneven commitment to trade liberalisation. The reality is that as a result of global trade liberalisation the world has enjoyed unparalleled growth in global prosperity along with the remarkable expansion of the Asian economies.

More specifically, New Zealand has been the exceptional beneficiary of the Asian economic miracle.

In 2018, New Zealand’s two-way trade with China was worth $26.1 billion with a $3.6b trade surplus. NZ two-way trade with the US was $6.999b with a trade deficit of $109 million.

Complementary to the Asian economic renaissance has been the emergence of China as a major global economic power committed to modern technological innovation at every level. Having dominated the global economy for the post-war period the US has taken fright, and we are now witnessing a sharp retreat to protectionist thinking as it attempts to contain the reality of China.

It is clear the US now has little sympathy for the globalisation initiatives of the post-war period that have been the life blood of the New Zealand economy. In the meantime “America First” is a defensive and unsympathetic reality of the current US trade policy.

The tactics, as personified by President Trump, are heavy handed and offensive to friends and foes alike. His full-throated abuse and intimidation of China is an intriguing aspect and the prospect of China tolerating, let alone capitulating to such behaviour is highly unlikely. China understandably remains deeply conscious of historical humiliation by the West and is unlikely to sympathetically tolerate President Trump’s behaviour.

We must assume that the relationship, already toxic, can only get worse.

The implications for New Zealand are dangerous at every level. Because of our exceptional trade dependency New Zealand is particularly vulnerable to trade discrimination by the major players.

We have to be very careful to avoid a partisan involvement in the current dispute as both countries are very capable of trade retaliation if they feel they are being unreasonably treated.

Northern Asia and China in particular has become the salvation and life line of the New Zealand economy and will continue to be so. Of course we share common cause with the democratic values of the Western world. We do not agree with China’s attitude to human rights and civil liberties but this does not justify us demonising China in the way the present American administration is attempting to do.

We must not allow ourselves to become a pawn for American strategic thinking in what is very likely going to become an increasingly acrimonious and adversarial relationship. China is not going to compromise its determination to economically expand and develop.

China is already a major economic power and will become more so.

China now regards the Asia-Pacific region as a legitimate area of economic and strategic influence and this is a reality that we must acknowledge.

China has sought to constructively engage with New Zealand for which we should be grateful. It is utterly ridiculous to suggest China has sinister plans to subvert and interfere in our society or for that matter our democratic institutions.

We are witnessing a repositioning of global trade authority that is fundamental and far reaching, and it is not appropriate to join with the US in demonising or for that matter containing China.

We must remain neutral with friendly and constructive relationships with both sides. In practical terms we have a reversal of the traditional post world order, with the Americans moving to an increasingly self-serving and aggressive protectionist trade policy that is confrontational and aggressive to friend and foe alike.

We also have China which, while similarly self-serving and nationalistic about advancing its own self interest, is an increasingly important and significant player in the global economy and, in sharp contrast to the US, is actively liberalising its economy albeit not as fast as some might like.

We must not take sides. At the same time we clearly need to commit ourselves to the cause of trade liberalisation and the integration of the global economy while respectfully and realistically acknowledging China’s entitlement to a comprehensive and responsible strategic and economic engagement in the region.