Why this mouse needs to roar — loudly
In the 1980s, New Zealand prided itself as the “mouse that roared”. It is now well past time for this Kiwi mouse to roar again — and loudly make its voice heard — as the United States and China plunge us all further into a global trade war.
China and the United States have been preparing for a trade war since President Donald Trump took office in January 2017.
On Friday, the United States increased tariffs on US$200 billion ($303b) of Chinese goods. On Monday, China retaliated by announcing it would raise tariffs on US$60b of American goods.
A prolonged US-China trade war will have huge ramifications for New Zealand business, the economy and global harmony. The potential impact is so severe it cries out for a top down public response from the coalition Government. But that top down response, led by the prime minister, is muted.
Jacinda Ardern’s focus is on the “Christchurch Call” as she prepares to co-host a summit with French President Emmanuel Macron, other world leaders, social media and tech company heads, to stop “extremist terrorist content” spreading online.
Ardern’s international celebrification has grown mightily since the Christchurch terrorism attack. But she would be amiss if she did not also use her platform in Paris and pull power among the G7 leaders present to highlight the impact of the
trade war on the global economy and reinforce to them the need for G7 members to raise their voices in favour of getting both major powers back to the negotiating table.
New Zealand, rather like Australia, has been careful not to be seen to pick sides. Our interests are obvious — an upgrade of the China-New Zealand free trade deal and the negotiations on a bilateral US-NZ free trade deal agreed by US vice-president Mike Pence and Foreign Affairs Minister Winston Peters last December.
But that does not obviate the responsibility our leaders also have to stand up for what matters — the survival of the international rulesbased trading system that has helped sustain global prosperity after the Global Financial Crisis.
In an address to the Pacific Economic Co-operation Council AGM, Trade Minister David Parker last week warned that while there were positive signs emerging on the US-China talks, “we still face a very real risk that the world could revert to the environment of the 1980s, where might was right and countries faced unilateral trade sanctions”.
This risk is now sharper. While the plum of a US bilateral deal is attractive, New Zealand should not lose sight of the bigger multilateral game and argue, carefully but publicly, for the US to resume a leadership role in global trade, get behind the multilateral trading system by joining efforts to reform the World Trade Organisation, dock with the CPTPP (rename it the Trump Pacific Agreement) and spearhead a new generation trade agenda that is forward looking and goes further than the scope of prior negotiating agendas.
It needs to recognise that when it comes to a US FTA, New Zealand’s interests are as much with those of the Tin-100 companies (high tech companies) as they are with the primary sector.
This requires careful choreography. But it is instructive that New Zealand is already — if quietly — working with like-minded partners to get on top of new agenda international commerce issues. Some will be on Parker’s agenda when he takes part in an OECD ministerial meeting in Paris along with an informal meeting of WTO ministers and a meeting of the Ottawa Group which is examining how the WTO can be reformed and strengthened.
The most promising initiative that New Zealand has been spearheading is a new digital economy partnership with Singapore and Chile.
Parker is not un-atuned to the power of the “Christchurch Call”, saying to achieve the full benefit of digital transformation “it is essential that consumers, businesses, citizens and governments can continue to make use of the internet in a safe, open and secure fashion without compromising human rights and fundamental freedoms”.
Peters is also alert to the domestic economic risk from the deepening trade war saying yesterday, “in the end there’ll be a knock-on effect and it could very likely affect New Zealand adversely.”
He said progress was being made on reducing bilateral trade barriers with the US.
The risk, if the two major powers do not ultimately cut a deal, particularly with our largest partner China, is considerable. If China’s economy slows it will have an effect on Chinese domestic demand for commodities — like NZ milk powder and forestry products, Chinese outbound tourism will slow and there will potentially be an impact on the export education industry.
The war could escalate if the China opts for the nuclear option and dumps US treasuries, and the EU and US move to put in place auto-tariffs.
This is time for New Zealand to throw off caution and let the mouse roar.