What Trump's trade stance means for Kiwi exporters

​This article was first published by Exporter Today on 30 July 2018.

In Washington DC for an international economic law conference recently, trade law consultant Tracey Epps caught up with some international trade lawyers, academics, consultants, administration officials and members of the diplomatic community. These are her observations.

There was a general mood at the conference of anxiety about the chaos that President Trump is unleashing on the global trading system, with no clear agreement on how the rest of the world should best respond.

I was told that in the capital itself, it’s rare to come across an official who agrees with what the President is doing on trade. But whether or not officials agree appears to be irrelevant to what the President does. 

So what does it all mean for New Zealand exporters? Here, in no particular order, are some key themes from the week.

  • We are not in the immediate firing line.  Our small size and geographical isolation are working for us in this instance.  President Trump is not concerned about New Zealand exporters flooding the US market so we are unlikely to be on the front lines of a trade war.
  • But we could get caught in the cross fire.  There are a number of ways this might happen:
    • The steel and aluminum tariffs, imposed on the grounds of national security, do apply to NZ exports, but not all steel products are affected. It is impossible to accurately predict what  President Trump might consider to be the next threat to US national security, although the likelihood of tariffs on cars will not directly affect New Zealand.
    • Tariffs on Chinese goods will affect New Zealand exporters who manufacture in China and export to the US.
    • New Zealand companies could get caught up in the retaliatory steel and aluminum tariffs imposed against the US by the EU, Canada and Mexico if they manufacture in the US, and,
    • Any broader global economic downturn will inevitably affect New Zealand exporters.
  • In some situations, Trump’s actions can work for us. A good example of the kinds of opportunities our exporters should be keeping an eye out for is Mexico’s imposition of 25 percent tariffs on American cheese which creates an opportunity for New Zealand to capture the Mexican cheese market ( worth over $500m annually).
  • The WTO matters and it is under threat. A phrase I heard more than once was that Trump, who is widely known to dislike international institutions, is trying to paralyze the WTO from within. As a small country, New Zealand values the rules-based order. The WTO’s dispute settlement system is particularly important. Take it away and we would be at the mercy of power politics – a bantam-weight trying to go head to head with heavyweights.
  • The global system hasn’t worked for everyone. This is widely acknowledged. But the solution is to find a way to fix the system rather than letting it collapse in the absence of US engagement. Last week’s leader in the Economist (A plan to save the WTO), suggesting that all is not yet lost in Geneva, is well worth a read in this regard.

Now, more than ever, New Zealand businesses need to be aware of what is happening internationally and thinking about how it might affect them. They also need to be talking to government about what matters to them. At this juncture, it is critical that countries that support the WTO stick together and make sure that the rules remain relevant to today’s economy.

Tracey Epps is a trade law consultant with Chapman Tripp.

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Related topics: International trade & investment; International trade agreements; Exporter Today

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