A little more than a decade ago, various parties boldly declared that the economic future of New Zealand lay in being some form of colossal, country-sized milking shed (and, to be fair, milk powder processing plant) for the People’s Republic of China. To that end, we signed up to a rather lopsided Free Trade Deal with China which forced us to abandon any pretense of mercantilism or dirigisme for our own domestic economic interests – while at the same time giving the Chinese literally decades to slightly soften and ameliorate their own protectionist economic measures.
It was a great deal.
For the Chinese, at any rate.
But what about little old New Zealand?
Certainly, a large portion of our primary produce exports are bound for the Chinese market; although it has not escaped the attention of many that in that direction, too, go commanding stakes in the ownership of a certain swathe of Auckland’s housing – and a not insignificant number of our best and most iconic farms.
Concerns about ‘free trade’ and associated legalistic ensnarements have been cited in both instances as justification by the Government to refrain from doing anything meaningful about either.
But where leaving serious matters of state up to the limp-wristed hand of the free market might do for the New Zealand National Party … the same cannot be said for our supposed friends in Beijing.
In reaction and response to news that the New Zealand Government has gotten a bit uneasy about decidedly sub-standard Chinese steel being put into our own domestic infrastructure projects (and accompanied by fraudulent safety standard certification, no less), the PRC is apparently considering raising punitive “reprisal tariffs” on Kiwi primary produce exports in order to force our government to move to protect Chinese interests rather than our own.
As yourself. Just what kind of “Free Trade Deal” is this when one party can act to unilaterally put the economic screws upon the smaller, weaker party for expressly and avowedly political purposes.
What’s the point of a bit of paper stating our commitment to abolish tariffs on Chinese imports if, when push comes to shove, our nominal trade “partner” sees fit on a whim to massively increase their own tariffs on our exports to there.
And worse, it now appears that the PRC was able to illicitly gain Ministry of Business, Innovation and Employment information about New Zealand’s prospective inquiry into this matter.
These tropes, all put together, are not the hallmarks of a healthy, bilateral and egalitarian trading relationship.
Instead, considered as part of a holistic plot, they put one in the mind of a noir Mafia film. Everything from the sub-standard product sold to us without regard for the potential human consequences through to the threats if we raise a fuss fits this rubric. ESPECIALLY the part of the story where going to law enforcement fails because the folk running this evident economic extortion racket appear to have a man or men on the inside passing them information, and pushing pointed punitive measures against those we care about in response.
And as the morally innocuous ‘straight man’ protagonist of a certain variety of Mafia movie, we now find ourselves having stepped into a murky world where the promises of power, influence and ‘get rich quick’ are underscored and bellied by that most uncomfortable fact – that we are now in a place and in an arrangement where we most decidedly do NOT make the rules, and find instead find ourselves the unwitting subjects of a seriously Faustian (at best) bargain.
Perhaps the only truly ‘winning’ move of this game would have been not to play.
But it’s a bit late for that.
And given the extent to which our economies are presently entwined, the sage advice of the ancient German proverb that when one sups with the Devil, one ought remember to use a long-handled spoon is plainly no longer applicable.
There are no easy ways out of this situation, in the short term at least. We will likely not win a substantive trade war with China. They simply comprise too much of our market (and us, too little of theirs) for ‘victory’ (whatever that might look like) to even be contemplated. Throwing the combined powers of the WTO or something at them would also be a move of questionable efficacy, as the Obama Administration has previously discovered to its irritation when it sought to do similar over the issue of the PRC’s artificially undervalued currency.
At best, there are longer term insights to be drawn from this in a potential bid to prevent a deleterious repeat from occurring.
First and foremost that export-lead growth as an enduring strategy is best pursued with a number of different ‘large basket’ trade partners simultaneously. Winston has already made the case for opening up greater trade relations with, for instance, the Russian Federation as a means and a mechanism to broaden our trade portfolio and remove some of the eggs of risk from the present, excessively overburdened Chinese basket of exchange.
Second, that we would do well and wisely to learn the lesson obliquely presented here about the sheer folly of hoping that the happy-clappy good-will of New Zealand to such countries as we may enter into world-first trade deals with are necessarily shared by our erstwhile ‘partners’. International relations and especially transnational economic flows are a cut-throat, realpolitik driven business. States look out and after their own interests – nobody else views themselves as owing us a living, and we should perhaps come to expect this sort of slipshod perfidious conduct from those we do business with.
Third, the benefits and likely outcomes of trade deals are almost always oversold. And the political Cassandras who cast doubtful aspersions are mocked and derided for their foresight. Nobody generally wants to be straight-up and honest about the plain (if somewhat occluded) reality that the trade deal they’ve just negotiated contains nasty stings of this nature hidden in the tail.
And fourth, this whole mess eventuated princely and primarily because New Zealand entities made the curious decision to source cheap and sub-standard Chinese steel rather than buying from more local producers with a superior proven track-record of quality.
One obvious mechanism by which we might avoid similar situations from occurring in the future, then, is to mandate that where possible materials procured for domestic infrastructure projects ought, where possible, be sourced from local producers rather than offshore. Obviously, this will not be possible in every instance, and there will be clear occasions upon which materials from other nations will be both cheaper and better quality than that which we can produce here at home. But the net positive impacts upon domestic employment and industry from mandating that Kiwi government objectives be carried out primarily by Kiwi firms using Kiwi materials are palpable.
So palpable, in fact, that New Zealand First’s Andrew Williams put a Private Member’s Bill in the ballot about four years ago in order to accomplish exactly that.
In conclusion, then, it is perhaps possible to view what’s eventuated as being something of an inevitable crisis. Given China’s reputation for corrupt practices and shoddy, el-cheapo exports, it was arguably only a matter of time before something akin to the Melamine milk crisis would re-eventuate here on our own shores.
Fortunately, no lives have been lost here – and the deficiencies in some of the steel which was used to construct part of the Waikato Expressway were detected in sufficient time to alter designs for some bridges and source other replacement steel before the rest of it was used.
But this is not going to be the last time something like this happens.
We can but hope that future governments learn the appropriate lessons from this sad series of incidences.
To do otherwise would make a waste of decidedly more than just steel.
“Free Trade” has been the mantra and slogan that we have been preached for decades now, as without it, we are told, the world will end tomorrow, we will suddenly live in poverty and under austerity like people under a regime like in North Korea.
It is of course all spin, has always been spin, as “free trade” does not really exist anywhere at all, you may be able to talk of some “freed up” trade, or “free trading terms”, or improvements of such, but even most FTAs still come with clauses and conditions that mean some remnants of tariffs continue to be maintained.
Also are there other laws and rules that countries enforce, that affect trade, indirectly at least.
And with TRADE as such, there are ALWAYS some strings attached, like expectations from one party to the other, and in case of a smallish nation like New Zealand, there will always be a David and Goliath kind of situation, where the small trader ends up depending very much more on trade with larger partners, than the larger ones may on the smaller ones.
That is exactly where we are with China, same as with the US and some other trading partners, we are a small country, maybe productive and successful to a degree, but we are vulnerable, very dependent and have little clout to defend ourselves.
Hence we have overseas corporations go shopping here and buy up shares or whole stakes in companies, buy into agriculture, viticulture, horticulture, and dairy, and even establish whole supply chains they may control.
Big money comes, and the little boys and girls desire the dollares like kids do love lollies, but all comes with a price, the price is often dependence, which may lead to servitude, slavery and becoming a tenant in your own land.
Most Kiwis are a bit gullible, they do not ask too many questions, “get on with it”, whatever that means, just focus on doing their job, running their little business, and count the beans at the days end. They may want an own home, but may settle for renting, they do not tend to form large organisations or movements, and hardly go out onto the street to protest.
That is exactly what serves the interests of the powerful, they have willing little “hobbits”, ready to rush around, be busy and work when needed, but do not challenge the status quo.
We are just seeing the tip of the iceberg with steel dumping and what else may be happening, and with quality issues of certain products. I am looking forward to the next scandals of leaky home style botch ups at a massive scale with all the rushed construction going on, that will continue for years.
We are becoming one mighty fucked up country and nation, I fear.
Truly said Mike.`00%
Curwen a brilliant article mate, well done.
Chinese are not easy to deal with and never were for sure. They will bully us around and force Government to capitulate just wait and see.
It is naivity to the maxx, that some who are so passionate for “free trade” tend to ignore the things that come with trading inter-dependencies with particularly large nations.
Prepare for more pressure on Little Ol Niu Zilliland, when the tensions will increase over the South China Sea issue, which a UN Tribunal recently decided on, saying China has no special interests there, and basically supporting the position of the Philippines.
China thinks differently, and has already made this clear, when an embassador or spokesman of such spoke to Lisa Owen on The Nation on the last weekend.
They will continue laying claim to islands that other nations there also claim to have interests in, and the US and China will remain at logger-heads, also Japan playing a major role.
New Zealand may as well bury the FTA with China now, as in future, China will lay down the term, and say, if you do not as we expect, forget free trade terms with us.
That is how they play, and that is also how the US has played with some of their trading partners, and the world is fast moving back towards more nationalism, protectionism and “realpolitik”.
The Brexit will only have been the beginning of more dissolution of the EU, a weakening of that trading block, which some wanted to turn into an ideal of a Federal Europe.
Sadly the approach was flawed, sadly the ideal has not worked, and crisis is happening, one after the other, and even the last major one, the refugee crisis, is far from resolved.
New Zealand better prepares for this, a tougher wind from all directions, and simply continuing with making endless FTAs, and opening ourselves up for other, more financial interests, to walk in and take over business, land, homes and so forth, that will destroy the last bits of the New Zealand most of us will have known, from our younger years.
This is indeed a timely post by Curwen, it should raise more questions, generate serious thinking and consideration for needed changes in how we run the economy and do trade and other relationships with the world.
@ MIKE IN AUCKLAND … you post …
“Prepare for more pressure on Little Ol Niu Zilliland, when the tensions will increase over the South China Sea issue, which a UN Tribunal recently decided on, saying China has no special interests there, and basically supporting the position of the Philippines.”
And when the hostilities in the area begin and I think this will be the case eventually, is it possible John Key will “show some guts” and support one side? Or we will we see him sitting on the fence here, seeing the issue from both sides? Be interesting to see how he reacts.
I tell you how he will react. When time will come for making firm and clear decisions and commitments, he will no longer be leader and politically active. He will in any case within a few years be on a one way ticket to Honolulu and then off on another plane or ferry to his luxury home in Hawaii, to write his memoirs.
Once he feels he has done his job selling us out, he will no longer care about the flag or anything else to do with New Zealand Aotearoa, he will simply d a runner, and not even bother doing anything else anymore. Sitting on the fence is what he has done on many important issues since he took office, while being very active looking after his own clientele and voter lobbies, enriching them more and while on the other hand disowning many and whipping the beneficiaries and others he does not care about.
It will be the ones that come after Mr Key who will be faced with the hard and unpleasant decisions to make.
And still nothing but Orwellian tumbleweeds at the Herald over this.
They have actively avoided informing their readers about the substandard steel National has been happy to use on major Auckland and wider NZ infrastructure.
There is just no way this isn’t important news to the Herald’s core readership, so why are the Herald so terrified of their readers knowing what they are likely to be driving on?
As National look to brush this story off, their loyal propagandists at the Herald oblige them, by once again turning a blind eye, in a gross disservice to their readers and our democracy. After Fran O’Sullivan yesterday tweeted what an “important story” this is, today’s short piece in that publication is simply a summary of John Key’s press statement (not unusual for the Herald) with no Opposition comment, no attempt to balance, and absolutely no mention of the substandard steel being used on the Waterview connection and other major infrastructure.
This vulgar partisan publication has become an ugly joke. Please inform anyone you know who still reads it, let alone pays for it, that The Herald have sided with protecting John Key over informing their readers.
Well put there Neil. Absolutely agree with the contents of your post.
Funny isn’t it, that everyone else knows about the Chinese trade threats, re investigating substandard steel imported from China, yet John Key and his Trade Minister Todd McLay “have not been informed of the issue?” Heads in sand … lies … subterfuge … slipping and sliding around an issue … comes to mind here!
Wonder what their reaction will be when a construction collapses as a result of the inferior steel used, possibly maiming and killing NZers? The usual old statement “we didn’t know” will not wash in such a disastrous scenario!
NZ produces steel, so let’s go back to doing it the Kiwi way, with much better standards.
“First and foremost that export-lead growth as an enduring strategy is best pursued with a number of different ‘large basket’ trade partners simultaneously”
Or best not pursued at all? I think it’s pretty clear that growth is over as an economic strategy. Like Mary Mellor, I think we need to abandon abstract talk about how to “grow our economy” and start talking about “provisioning” the people of our society, starting with things like healthy homes and healthy food for all:
https://www.youtube.com/watch?v=9F-DuD6T_i0
Aotearoa is capable of producing the vast majority of what we need internally. Sure, there are a few things like computers that we can’t make (yet), and the purpose of trade is to swap some of our surplus for some of those things. The problem starts when governments glorify trade as an end in itself, and are willing to sacrifice *anything*, even our sovereignty, in their attempts to increase it, without even seeming to care what impact this has on the people of this country.
If you take a look around Big Box stores like the Warehouse, most of what is imported at present is garbage, destined to end up in a landfill within a year of being bought. Any company can import this garbage and pocket the profits, but its the people (via the government) that are held accountable for making sure enough products are exported to pay for all this garbage (“balance of payments”). This is crazy. Either the government need to limit imports (traditionally done with tariffs), or we need to abandon the model of populations being held accountable (via governments) for maintaining a balance of payments.
Good points there Bruce.100%
“Fortunately, no lives have been lost here – and the deficiencies in some of the steel which was used to construct part of the Waikato Expressway were detected in sufficient time to alter designs for some bridges and source other replacement steel before the rest of it was used.”
My understanding from reading various news stories is that questionable steel has been used for quite some time. Steel and Tube was supplying steel reinforcing for a number of years with false documentation so no one knows for sure if the buildings that have used that are safe or not. If you haven’t got buildings that you can guarantee are up to acceptable standard, then they have to be either reinforced to ensure they do reach high standards or they have to be condemned. A huge number of buildings in Christchurch’s rebuild for example are likely to be in the questionable category. It will only take one building to be found faulty for the lot to be condemned. This may end up being more costly than leaky homes.
There are very few NZ Companies left our major companies have been raped and pillaged even Fletchers I believe is 80% overseas owned?
Shit is Fletcher’s now 80% owned overseas Jack how terrible, This government are driving us all out of business now by hollowing out our industrial base till we are nothing any more!!! What the hell are they doing to us all?
Ummm… Fletchers is still doing business here so I’m not sure how it is being hollowed out.
Sage words there, Curwen.
” Second, that we would do well and wisely to learn the lesson obliquely presented here about the sheer folly of hoping that the happy-clappy good-will of New Zealand to such countries as we may enter into world-first trade deals with are necessarily shared by our erstwhile ‘partners’. International relations and especially transnational economic flows are a cut-throat, realpolitik driven business. States look out and after their own interests – nobody else views themselves as owing us a living, and we should perhaps come to expect this sort of slipshod perfidious conduct from those we do business with. ”
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The naive Kiwi.
And those Kiwi’s who have something to gain from these so called ‘ Free Trade Deals’….
If anybody thinks for one minute that the rest of the world gives a damn about our national interests they display that same small town myopia born out of ignorance of the outside world. I’ve never supported ‘ Free Trade Deals’.
Because that is the dogma expounded by the neo liberal.
Globalism , pan continental , trans national – call it what you will. It always bodes ill winds to the concept of the sovereign national interest.
The naive concept that a small agrarian nation can compete against an economy that uses strength of numbers or technological superiority and still trust the other partner to play fair belongs in kindergartens – not geopolitical world trading.
Notice that those advocates for ‘ Free Trade’ are the same that have something to gain from it – at the expense of their own country.
The neo liberal.
Notice also that the same also resorts to using the word ‘racists’ if their plans receive opposition – a cheap , simplistic , emotive and very crude defense of what amounts to selling off of their own country’s best interests. Thus they are treasonous by nature and motive.
It is not ‘ racist’ to drive a hard bargain ( as they purport to do them selves with their own country’s people with their neo liberal attitudes – hypocrites ! ) . And strangely – why is it racist according to them when it is to do with the Chinese but not the Americans?
Ahhh… but then they pull out the old ‘ communist protectionist ‘ line.
How very convenient for them.
And convenient for us because once exposed we can nail them in their own hypocrisy and subversion’s.
And this is one area where NZ First is a flagship on international policy. There are now many who side with NZ First in standing up against the TTPA and its obvious deleterious impact on our national best interests.
The type of people ( neo liberals) who advocate our selling off of our national sovereignty for the sake of their financial gain is essentially asking us to prostitute ourselves for their personal best interests – not ours.
There was a time when these individuals and their avarice were kept in check , – precisely to prevent them from doing harm to the people of their own country. There were serious trade laws in place and if they were broken the penalty was hefty. This was one of the major victory’s for these treacherous ideologues…
That they managed, through hijacking a major party of the Left (Labour) to permeate and create an all pervasive clique of self interest lobby’s that changed NZ law to enable them to plunder the commons wealth at will.
Lobby groups such as the NZ Institute ( once the Business Round table ) heading the way for this societal / economic coup, donating heavily to politicians and their party’s in a clandestine , anonymous fashion and utilizing think tanks to reinforce govt policy .
Subversion of the Keynesian based, Social Democracy of NZ was the name of the game , … and they did a good job of it.
It is now time NZ grew up and along with rejecting these neo liberal emissary’s messages start to stand on its own two feet and drive a realistic , hard bargain in the BEST INTERESTS of this nation’s peoples , – NOT solely for those of a select few.
It is interesting with the BREXIT vote , that this new found ( or should I say underlying ) sentiment of the people of England has found expression – that the people of that nation have had enough of being dictated to , of being preached a false message of ‘ prosperity and higher wages ‘ when in fact the exact opposite is true.
And interesting as well that this may well be a another avenue for trade – that we again resume trading with our historic trading partner for export purposes.
WE ARE NOT THAT POORLY OFF that we have to endure any longer the scaremongering and fear inducing message of trading at all costs even if it means we accept substandard terms from those whose only motive for instilling that fear in the first place is to induce panic – panic that goads people to accept what in reality – was only induced for the sole benefit of those at the top ( such as the NZ Institute and their latest messenger Jennings ) to reap the benefits at the expense of the rest of us.
John Key wouldnt know how to get a good trade deal even if he was the only one with the goods.
Key made a deal about our sales of dairy to China, in return he gave China the same rights as NZs to purchase houses ,land and businesses.
China moved into NZ bought up farms , produced milk and milk products
and exported them to China , depriving NZ farmers of profit because they lost export potential.So much for Keys deal!!!
China moved into Auck a bought up businesses and central city land ,then built high rise buildings.
Fletchers is now mostly Chinese owned.
China moved into NZ and bought up houses, mainly in Auck ,pushed house prices up to levels that excluded ordinary NZs,the rates skyrocketed so people sold out to China at huge profit.
Auck is now mainly owned by China, yes other nationals bought homes in Auck but China is predominant.
Most of John Keys trade deals was shafted by smarter China, now we have second rate steel,making our structures less safe than with NZ steel, and affecting the NZ steel business.
The TPPA (hopefully) cancelled or watered down by USA would have been a disaster, Tppa is not favoured by Donald Trump but the Herald is very negative about Trump,making up stories about Chris Christie who will get a strong position in Trumps government.
Trump had to take Pence to please the RNC ,thankfully he is a good choice.
Newt Gincritch was a VP favourite ,he has no gripe, neither has Christie.
The Herald ignors the stories they dont want the public to know,and beats up the stories they make up usually negative and untrue,and in favour of the Clintons and Democrats the establishment picks, who have given millons to Hillary Clintons campaign,in return they control the country.
The Herald is owned by American interests, so they will feed lies to a gullable NZ public ,if they are daft enough to waste money buying the Herald.
Fox news is the only one telling the true story of politics in America,
you can get it online
The establishment is terrified of Trump because he wont play their game,so NZ Herald only prints what establishment wants people to believe.
Key is an establishment man, so is supported by the National news letter Herald.
A video is due on 23rd July called Hillarys America,how through the establishment the Clintons run America mainly to profit themselves.
Key is run by America, so NZ is run politically by Democrats and owned by China, scary thought, we are the meat in the sandwich.
This isnt a critisism of Chinese people, they just accept opportunities as any other nationalty would do.
China is the largest dictatorship on the planet and will make Nazi Germany look tame (check the statistics on how many they execute for organ harvesting and the genocide and ethnocide of non-Han ethnic minorities). And it was Labour that signed us into this deal with the dictatorship that is colonising us. It is this deal that will ultimately bring No Zild to its knees, and see armed resistance here on the ground. (Oh, we can’t cwiticise this frothing at the mouth, rabid, open for all to see gigantic bull and neo-colonial master, bwecause they are not Caucasian… that would be wascist… PLEASE. Get a new song sheet)
It is quite clear that the writer of this article and many of the commentators don’t understand the purpose of Free Trade.
No Gosman
It’s that you don’t know the meaning of FREE trade.
If you did you wouldn’t be lauding the TPPA as a free trade agreement.
We know more about free trade than Gosman may know about free (informed) expression.
Yes, Gosman, we understand “Free” trade more than you realise.
“Free” trade means shifting production from a First World nation (eg; Aotearoa), to a Third World or developing nation (eg; People’s Republic of China); exploiting cheap labour to produce goods; then exporting/importing them back to our country to sell to the public – some of whom are unemployed.
Why are they unemployed you might ask? (Go on, ask.)
Actually, I’ll tell you.
Because the shoes, shirts, and socks we used to produce here in our country (and which employed thousands of people, keeping them of the dole) is now produced elsewhjere.
In return for (sometimes) cheaper goods, we have higher unemployment than we ever had pre-1984.
There you go, Gosman. That is “Free” trade.
Except,it’s not “free” at all.
We have to pay for it. Through welfare to unemployed workers who no longer have jobs. All because some poor bugger working in a sweat shop in Pakistan, China, Vietnam, etc, is now earning $1 a day doing work that a New Zealander did, for minimum wage or better.
There y’go. Unfree Trade 101, made simple for neo-liberals who hold an unrealistically naive view of the world. (And which I grew out of thirty years ago.)
Lol. Still trying to palm off your new trade theory as free trade eh goose 🙂
Our MSM continue to be the loyal court reporters, kind of, or shapp we call them “court jesters”, reporting warmly and positively about our ‘Esteemed Leader’ and his skill of making deals:
http://www.stuff.co.nz/national/politics/82236152/john-key-praises-engaging-meeting-with-indonesia-president-confident-of-end-to-beef-restrictions
So Key thinks an issue about NZ beef exports may be resolved without needing a WTO ruling:
“”On the basis of the conversations we’ve had today, I feel exceedingly confident that we’re going to get there: what ‘there’ actually looks like, we’ll see in the fullness of time, but there’s very good momentum.”
Widodo highlighted Indonesia’s interest in receiving breeding cattle from New Zealand, and Key said he was keen to see progress.
“It’s a matter of the protocols being finalised, it’s really just making sure they adhere to all the things we expect of countries where we do export cattle.
“It has to be for breeding purposes, we have to have confidence in the way the animals are treated after they get off the boat, all of those things, but we’re confident we’re making progress there.”
New Zealand already had a history of exporting live cattle and sheep for breeding, and any deal with Indonesia would be relatively small compared to the country’s overall herd numbers, Key said.”
Oh well, so we do now help the Indonesians to produce their beef themselves, not needing much in the way of imports in the future. It is a bit like, the barn has burned down, so we may as well sell the construction plans for others to build something similar along the lines for themselves, to get a bit of income.
More selling of the furniture and the carpet from our feet, to “pay” for our debt fueled living.
And read the nonsense about human rights and so, it is laughable, what this man does “achieve”, yet our MSM think he is so “great”, and lick his shoes, so that they shine and shine.
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