Time for NZ to be smart

I’m writing this column under the shadow of an impending and uncertain United States and China trade war. Economies throughout the Asia-Pacific are grappling with the possible ramifications. Some (the likes of South Korea and Taiwan) are worried about the tech components they sell to China for finished products. Other players may stand to benefit as they fill some of the predicted supply gaps.

Also in the news in recent days: Donald Trump has been flirting with the idea of ditching World Trade Organisation rules to enable him to have tighter control over trade policy.

Already, the Trump Administration has threatened the WTO dispute settlement system by preventing vacancies being filled on the Appellate Body, which acts as a court system for WTO global trade rules. This means the disputes body could grind to an effective halt next year because it is running out of judges.

To most New Zealanders, the WTO may well seem like an esoteric sort of thing – a bunch of bureaucrats in Geneva.

But our apples wouldn’t be in Australia without the WTO’s disputes system, and our beef wouldn’t be in South Korea.

Imagine the uncertainty if we could not actually have the rule of law applied when we came up against another unfair trade barrier. It wouldn’t only affect any disputes that eventuated; it would affect the whole system of trade if there were no final, fair and binding settlement process. So, we need to pay attention to these threats to the systems we have come to take for granted. And New Zealand businesses need to support the Government in protecting these systems, because they count.

In recent years, New Zealand has described itself as having a benign international environment; yet now we are in a part of the world that is being contested between the two great economic and military powers of the time – China and the US.

And the international norms we have relied on for decades are under stress.

The question, of course, is what do we do. We can passively watch, or – as is the New Zealand way – try to be smart and to exert a positive influence.

I would argue this is a time when our relationship with Asian countries will mean more than just exports. They have more experience in dealing with tensions between great powers than New Zealand does, and have felt these battles more acutely. Asean countries have had to navigate changing power dynamics for some decades, and we can learn from them. We already have a good structure in place to enable this through our existing integration partnership forum with Asean and Australia, and it is good to see the Government investing more in that.

These are interesting times. We all have a stake in the systems (trading or otherwise) that have developed internationally over the decades. Borrowing sentiment from the 18th century philosopher Edmund Burke (who said, ‘‘The only thing necessary for the triumph of evil is for good men to do nothing’’), the only thing necessary for us to lose the rulesbased trading system is for businesses to do nothing.