Headlines following Donald Trump’s election victory focused largely on the influence of personalities, such as Elon Musk or Robert Kennedy junior, and single issues, such as how US tariff hikes would affect New Zealand’s exports.
But this oversimplifies and diverts attention from the more systemic challenges a second Trump presidency will pose for Aotearoa New Zealand’s economy.
Yes, Trump is an unpredictable authoritarian and an economic disruptor. But his policies are not novel and need to be understood in a broader context.
Many of Trump’s trade policies are an extension of recent US-centric strategies to dismantle the global free trade model. Ironically, the US largely created this model, but it no longer serves US objectives.
The international trade regime, and the neoliberal model of free trade in general, now face an existential crisis that New Zealand cannot ignore.
Free trade backlash
Trump’s tool of choice for trade policy is high tariffs or border taxes, which make imports more expensive. His agenda is driven by two factors:
- increasing production and jobs in the US domestic economy and incentivising foreign firms to invest within the US border to avoid tariffs
- geopolitically, using super-tariffs to undercut China’s rise as a competing power.
Neither objective is new. The tariffs Trump imposed in his previous term, especially on China, were largely continued under Joe Biden. They were part of a broader backlash against free trade agreements in the US.
Trump withdrew the US from the Trans-Pacific Partnership Agreement (TPPA). The Biden administration did not rejoin and eschewed the Democrats’ traditional approach to free trade.
Biden’s Indo-Pacific Economic Framework (IPEF) promoted non-tariff strategies designed to boost US industrial, investment and security interests in Asia. Its “friend-shoring” approach aimed to strengthen economic and foreign policy alliances, including with New Zealand, while eroding China’s influence, especially over critical supply chains in the region.
Interestingly, Trump condemned the IPEF (incorrectly) as a reincarnation of the TPPA, so its fate remains uncertain.
WTO in crisis
There has been a similar cross-party convergence on US challenges to the “rules-based” international trade regime. Both Democrat and Republican administrations have systematically undermined the World Trade Organization (WTO), claiming it no longer serves US interests.
Successive US administrations, starting with Barack Obama’s, have paralysed the WTO’s two-tier dispute system by refusing to appoint new Appellate Body members. This means they can break the WTO rules with impunity – including by imposing unilateral tariff sanctions.
At this year’s WTO Public Forum in September, people were openly discussing the existential crisis in the organisation and possible responses if the US disengages completely.
Breakdown of rules
This is just one part of the WTO’s institutional disintegration. The Doha Development Round, launched in 2001, had effectively collapsed by 2008.
In large part, this was over the Agreement on Agriculture. Its foundations were laid in 1993 by the so-called Blair House Accord, which ensured the US and European Union did not have to reduce (and could continue to increase) subsidies for their farmers. They insisted that continue.
Meanwhile, the US and EU stymied demands from developing countries for alternative “safeguard” and “public stockholding” arrangements to support their farmers and ensure food security.
The US, EU and others blocked a waiver of intellectual property rights that would have ensured affordable access to vaccines, diagnostics and supplies during the COVID-19 (and future) pandemics.
Subsets of members, including New Zealand, have ignored the WTO’s own rules to negotiate plurilateral agreements without a mandate, and seek to dilute the “consensus” rule to have them adopted. Ironically, the main opponents, India and South Africa, are labelled the “blockers” for standing up for the WTO rules.
New Zealand’s challenge
So, the crises in the international trade regime (and the neoliberal model of free trade) predate Trump’s first term.
But successive New Zealand governments have put all their eggs in the “free trade” basket of the WTO and regional and bilateral trade agreements.
Current Trade Minister Todd McClay seems determined to secure new agreements as rapidly as possible, illustrated by the 100-day negotiation of a recent deal with the United Arab Emirates under strict secrecy and with minimal scrutiny.
The previous Labour government pragmatically engaged in the IPEF more as a geopolitical alliance with the US than as a trade forum, despite New Zealand’s export dependency on China and the lack of any clear economic benefits.
So far, the reaction to Trump’s re-election from government ministers, business, farmers and news media has given an impression of business as usual, albeit with the threat of unhelpful US tariffs. But what is really needed is a far-reaching debate about the risks of a failing international trade system.
New Zealand’s export share of GDP has not changed meaningfully over the past few decades, despite more than two-thirds of New Zealand’s exports being covered by free trade agreements. The primary problem is not a lack of markets, but rather firms’ export capability, weak innovation, and an over-reliance on low-value-added commodities.
The now-disbanded Productivity Commission’s work on improving economic resilience urged New Zealand to tackle head-on the challenges of an increasingly uncertain and volatile economic and geopolitical world.
That apparently fell on deaf ears. But Trump’s re-election is an opportunity to open that debate and confront those challenges.
At least we can be confident that NZ will choose a course of action that will be the absolute cheapest and most expedient over the short term.
Don’t bet on it. What is said and what is done are not necessarily in sync! Possibly you are being ironic here.
Thanks to Jane Kelsey for bringing her expertise to the fore – again. But gummint and advisors don’t want it, they are on a roll, a sausage roll! Their role is to stay schtum about reality and keep us spinning.
Except we have no noble, spiritual background to it not as the Turks do. (See how fast I can spin from one point to another, it is the wonder of modern tech that does that!) Sufi can bend, bow and pray – are our towering intellects amongst the wealthy able to bow down to anything beyond their image in a large mirror? Or maybe they are cowering before the Money God?
https://www.youtube.com/watch?v=sljP0Yv0Hto
Greywarbler – Prof Jane Kelsey was brought by the John Key Government which granted her a $900k study grant after weeks of her bad mouthing the Government…not a word came out of her mouth after this …
Her Fire Economy book was mostly taken from other academics’ work.
lil ‘ole NuZull that punches above its weight is only ever capable of that ‘short term’
I can just remember JFK’s assassination in 1963, Keith Holyoke Prime Minister the All Black tour to the UK in 1963/64, when nobody in the street had a TV
and when a kids ticket to the pitchus cost sixpence or 5 cents.
So I goes back a bit.
I can tell you for free that The USA Europe Russia Japan and China
have been having trade wars for ever.
Dont worry about trade “wars”
Its all sabre rattling, posturing political mind games and media beat up.
99% of the time nothing actually changes.
BTW I love China and just ordered me some more goodies from Mr Temu.
My advice to you all is go have some serious pre Xmas retail therapy today.
Just use your credit card.
The countries been in mega debt since 1967 and we aint been hurt none.
Go on you know you wanna.
Indeed. Keep shopping! There is no tomorrow, and there’ll always be some Dalit to deliver your wares in a rebranded courier brand-compliant vehicle.
And if it’s not to your satisfaction, you can always throw shit at the messenger rather then the cistern under which he/she/it/them/their operates.
(All the while whilst he/she/it/them/their eye up the next Public Service gig they intend moving on to)
I’m still struggling to believe the last wasted opportunity some master-of-the-Universe with an imagination bypass had to act as an [all-of-gummint] and banking interface to the Whurld] had.
No doubt they’ll be moved on (in the fullness of time, in this space, going forward), but in the meantime.
We ekshully probably need a register of names. That is, in the absence of possibly warranted, but cruel accountability.
Rather that than a Mussolini type hanging. (Think of the poor bastards that had to stand under that specimen)
I’d hate to have to stand under a fucking Seymore. Even worse, A fucking Jones or a NcKee.
Hopefully it won’t happen, but me and most of my male family have their penises at the ready
Send Damien and Chippy to negotiate a deal I’m sure Trump will give them audience.
Every year NZ thinks it has had growth .How can that be so when we import more than we ever sell and have done so for decades .Common sense would say that means we have actually been shrinking .
When the belly’s full all else is art.
I see that many of the loopy’s above are puffing out gasses they can’t quite infuse with common sense which, interestingly, is the problem. Do you know what a car is without an engine and gearbox? A chicken coup. I just made that up. Ba ha! AO/NZ without the truth to guide it will plunge off the cliff of truths.
The comforting thing about your low fat dissertation above @ Prof JK is that while I’m sure the details are correct you miss out about 98% of the story.
The whole story is less than complimentary of our inbred politics. A politic of greed, cunning and of an exploitative psychopathy spread by the penis through the secretive, convoluted shenanigans of the ‘ in the know’ urban menagerie who have farmer money got by the menagerie being unhindered by Class and powered by greed.
There’s another old saying. Those who choose to ignore history are doomed to repeat it. And that’s where we’re heading. There will be those worthless meat packs plotting to do what their daddies did, and their daddies did before them. Make a shit ton of money at the expense of those who earned it while running the country into poverty and depression. Aye Boys?
“Current Trade Minister Todd McClay seems determined to secure new agreements as rapidly as possible, illustrated by the 100-day negotiation of a recent deal with the United Arab Emirates under strict secrecy and with minimal scrutiny.” You don’t even know what todd mcclay’s job is do you? Wow. I mean wow.
His job is to hide past crimes. His job is to wall paper over the truth. The truth being that our farmers have been shamelessly exploited since the formation of national in 1936 ( Bit earlier actually.)
That’s 88 years of swindling farmer money away into the pockets of the sleazy Remuera Clans.