Trade and trade policy are hugely important to the wellbeing of New Zealanders. Favourable trade policy outcomes such as the proposed agreement with the United Kingdom do have ongoing beneficial trade outcomes. But what will be the impact on trade policy of the attitudes of Mr Biden and his Democrats? After Trump, will things change?
The United States has driven world trade policy for the past 70 years – a situation that has benefited New Zealand. The United States has now relinquished this position, and there is no sign of a reversal under Mr Biden. “This is a fundamental sea change that continues to have repercussions in all trading environments”, said Chris Nixon, Principal Economist and lead author of the report. The United States, for example, will for national security reasons, still maintain aluminium and steel tariffs on New Zealand – yes you read that right.
But it is not all bad news. Ironically the best thing that Mr Biden can do is get his own house in order. This will take the heat off trade as the whipping boy for the ills of the United States. The proposed expenditure on infrastructure – in the trillions – is a good start. “Doing something about the ailing infrastructure in the United States will provide jobs and hopefully generate the need for skills over the longer run lifting productivity rates. Low productivity is the real cause of United States ills”, said Mr Nixon.
On balance, then the impact of Mr Biden could be slightly positive for world trade and New Zealand. At the margin, what would really help are support for institutions such as the WTO, a toning down of the rhetoric around China, and support and leadership for the ‘softer’ rules advocated by APEC. “However, it is most unlikely that the United States will embark on FTAs or attempt to reconnect with the CP TPP in the foreseeable future”, Mr Nixon commented.
The rise of China is a major challenge for all governments around the world. In many situations, China is the dominant source of imports. All countries have to factor in how they deal with China as it grows. “We all hope that the United States finds a way to compete constructively with the Chinese – but don’t hold your breath, the odds are that simmering tensions between the United States and China will continue”.
For New Zealand, it means keeping on keeping on. This is what ‘concerted open plurilateralism’ means: doing high quality FTAs such as with the Brits, being creative by bringing together like-minded countries on digital trade (signing the Digital Economy Partnership Agreement), and playing our part on climate change (e.g. our leadership of the Agreement on Climate Change, Trade, and Sustainability or ACCTS negotiations with the Swiss, Norwegians et al.).
“So while it might sound boring, New Zealand needs to stick to its knitting and keep at it”, Mr Nixon commented.