Gloom behind the grins for exporters
Thanks to moves on tariffs by the United States and the tit-for-tat with China and Europe, the headlines were enough to bring even any supreme award winner down to earth: ‘‘If trade wars escalate it will pull us all into a recession’’; ‘‘Markets rattled as Trump imposes tariffs on $200b of imports’’; ‘‘Biggest crash is coming’’.
New Zealand is a tiny player, which is why the sanctions being thrown around have serious ramifications for us.
The risk is that there’s a big chance it could lead to more protectionism as trade fragments and global markets are destabilised.
And though I was encouraged to see the Government step up its focus on trade this week, the success of its ‘‘Trade for All’’ review depends directly on these external factors.
You need only look at how much we rely on trade to realise the threat. Last year we exported goods worth $53.7 billion, with the Ministry of Foreign Affairs and Trade estimating that the jobs of more than 620,000 New Zealanders (16 per cent of the workforce) directly depend on exports.
We reached those numbers after a lot of hard work and with help from a strong World Trade Organisation and rules-based free trade without tariffs. Without those we would likely be muscled out of the game.
Another danger is that the US seems intent on changing those rules.
New Zealand has always been proactive when it comes to fighting its corner on trade, and I don’t doubt we’ll do so this time.
Though our exports to China may be booming (up 27 per cent last year to $12b), the feeling among experts is the tit-for-tat could mean we face increased and subsidised US competition in other markets.
It’s therefore crucial we continue to enhance the agreements we have while building new ones. If our talks with the United Kingdom and Europe were important before, they have just assumed vital proportions.
The same goes for the CPTPP. Japan, Mexico and Singapore have ratified it, and we’re close, along with Australia and Vietnam. Going well, it will come into effect early next year, and by then Thailand, Indonesia, Colombia, Korea and Taiwan could be close to joining.
It will be a game-changer. It’s expected to increase our GDP by $760 million from reduced tariffs and quotas on goods at foreign borders, between $363m and $1.2b from reductions in nontariff barriers, and up to $360m in improved trade facilitation measures.
That should be enough to keep the smiles coming at export awards dinners.