Potential Brexit trade war bad for New Zealand


Fears are growing that a messy Brexit dissolution of the United Kingdom’s union with Europe could lead to open trade hostilities between the two parties. So great is the fear that Minister of Trade, David Parker, warned the United Kingdom and European Union against commencing trade hostilities.

Trade hostilities do no country any favours. They are the war like equivalent of two countries vying for some sort of supremacy or other advantage, except that tariffs take the place of bullets with exporters and importers being the casualties in the front line. And behind the front line, you and myself, the regular civilian consumers who can only make the best of the market conditions of the day as they can try, are the real losers. With increased costs passed on by importers, they will be more selective as to when they get out the EFTPOS card or the credit card or hard earned money that they will want to know is well spent.

The increasingly messy dissolution of the union between the U.K. and Europe as a result of the 2016 referendum has alarmed many. It stems from the desire of the two parties to divide up tariff rate quotas on agricultural products, The concerns are that this would have a negative impact on how New Zealand meat, butter and cheese gets into the E.U.

In a world with a slowing economy being buffeted by increasingly stormy conditions that exporters and importers have little say over what looks like an increasingly worrisome storm. The combination of E.U. discontent, high petrol prices due to increasing angst over the Iran deal and the desire of the U.S. and Israel to possibly launch military action against the Islamic Republic, to say nothing of a failure to address the causes of the last economic crisis all point to a potentially messy divorce.

In a part of the world where freedom of movement is celebrated by way of the Schengen free zone, people living in member nations can move freely within 27 separate countries.Would the Schengen free zone still exist in an economic sense when the issue is resolved? Would any dissolution of the zone or damage caused by tariffs affect non-European nations ability to conduct trade issues of the day?

None of this can be good for the global economy any more than it could be good for the New Zealand economy. This is shown by the number and range of countries that are opposed to the plan for tariffs. Alongside New Zealand are Canada, United States, Thailand, Uruguay and others.

Two years after that shocking June 2016 announcement that the United Kingdom would seek divorce from the European Union, the real economic costs are only now just starting to come out. And as they do, the criticism of the result whose implications probably not that many voterrs understood is only going to get louder and more diverse.

Was Brexit in a purely economic sense such a great idea now?

Foreign ministers to Trump: Appreciate your allies


Numerous present and former Ministers of Foreign Affairs from around America’s allies have signed a letter to United States President Donald Trump with a warning:

Respect your allies as there is not that many of them

Former New Zealand Minister of Foreign Affairs Don McKinnon is one of those who has signed the letter, said to be fiery in its warning to Mr Trump. The letter comes as Mr Trump arrives in Brussels for a meeting with North Atlantic Treaty Organization (N.A.T.O.)leaders amid deteriorating relations between America and its all important western allies.

Mr Trump has been critical of N.A.T.O. countries for failing to increase their defence spending, and claiming that the United States provides the bulk of the expenditure. This has touched off criticism as – aside from being untrue, it was also the United States that instigated the formation of the N.A.T.O. alliance during the Cold War as part of its containment strategy.

Germany has agreed to increase its expenditure. This however will not be lost on Germans who will no doubt still be wary of putting too much emphasis on defence policy individually, and instead preferring to align it with a general increase in spending across western European nations. In a continent still trying to get away from its colonial past and two hugely destructive World Wars, increases in defence spending are not the sexy beasts that they are perceived as by conservative politicians and commentators in the United States. Germany needs to remember this as it tries to figure out just how big its promised increase will be and on what it will be spent.

Meanwhile in Britain, the Conservative Government of Prime Minister Theresa May has hit the skids. Wobbling violently with two Ministers gone as well as the Vice Chairs of the Conservative Party, one watches with interest to see whether Mrs May can stave off a collapse or will she be forced to for the second time in 15 months call a General Election. Despite being a deeply conservative Prime Minister, Mrs May and her Government have tread the line of making savings throughout Her Majesty’s armed forces, but for how much longer?

The Netherlands and Belgium, scenes of ferocious battles in World Wars 1 & 2, need only to attend a service at the Menin Gate in Belgium at 2000 hours every night to be reminded of the cost of war. Perhaps they would be doing well to drag Mr Trump to one of these ceremonies to remind him just how much some of America’s smaller allies suffered. All around western Belgium and northeast France lie memorials saluting the French, Australian, New Zealand, Canadian, British and other nations who suffered dreadful losses in battles such as Passchendaele, the Somme, Verdun and others – whether it makes any difference or not for Mr Trump to be reminded is another story altogether.

In a week where so much is at stake with the politics of N.A.T.O., it might be just as well the F.I.F.A. World Cup Final will distract hundreds of millions of people. Maybe Mr Trump and the other leaders can watch it instead of tearing each other to shreds. And reflect on a beautiful friendship between the U.S., and her allies like so many have been reflecting on their relationship with “the beautiful game”.

 

New Zealand and European Union begin formal trade negotiations


Whilst most people were more interested in Prime Minister Jacinda Ardern’s baby girl being born, I was watching the arrival of the European Union chief negotiator Cecilia Malmstrom. Mrs Malmstrom is from and is visiting New Zealand to formally launch trade negotiations with a view to completing a trade agreement between New Zealand and the E.U.

I do have some reservations about the potential F.T.A. that the European Union is likely to seek. They include but are not limited to:

  • the concessions that New Zealand will be asked to make, and what we will be granted in return.
  • that the competing factions inside the E.U. will make it difficult for New Zealand to get a level deal across all of the E.U. member states
  • That provisions around the Euro will leave the New Zealand dollar at a disadvantage

In terms of the member states, there are 27 separate countries, each with their own agenda. Some like France will be highly unionized economies with a degree of reluctance to shed the protective cloak that tariffs and subsidies can offer sectors that are not performing so strongly – their propensity for a good riot when some decision or another goes against them is well noted.

I also wonder if Mrs Malmstrom is the best suited person for this job. The first is she had a major role in promoting the Transatlantic Trade and Investment Partnership (T.T.I.P.), which is the European equivalent of the Comprehensive and Progressive Trans Pacific Partnership. Like the T.P.P.A./C.P.T.P.P. it has run into significant opposition over issues ranging from enacting laws that are allegedly going to harm corporate profitability to human rights, the environment and international copyright laws. The second is that despite claims made by her that the European Commission for Trade has unprecedented transparency, it is not possible for many European politicians to read important documents.

The European Union, however, are serious. This is a serious chance for New Zealand to negotiate a trade agreement that can help the economic development of this country. The shared respect we have for human rights and environmental issues will hopefully help to undermine the concerns that are held about Mrs Malmstrom’s past record.

So soon after their role in negotiating the damaging Trans Pacific Partnership Agreement which will undermine New Zealand sovereignty, it is rather rich of National to be talking about the need for a “fair” agreement. This is all the more so when an interpretation of “fair” presumes to mean no undue concessions by either side, respect for the others negotiating position and understanding of public concerns. None of this was recognized by National or A.C.T. when they were leading the negotiations on the Trans Pacific Partnership between 2010-2017.

New Zealand is lucky enough that although we lack constitutional safeguards to stop the undermining of our natural sovereignty, we have a degree of transparency that is not enjoyed in other nations. Had we had the transparency of a country such as Singapore, a semi-authoritarian nation-state, I doubt New Zealanders would know nearly as much as they do because of the mechanisms that protect our right to know.

So, whilst there are potential opportunities for New Zealand, there are potential pitfalls as well. Due caution around these negotiations is well advised.

No winners when U.S. absconds on trade


A few days ago President of the United States, Donald Trump announced that he would be imposing trade tariffs on key allies including Canada, Mexico and the European Union. The tariffs which come as part of his hard line “America First” doctrine which puts American needs and wants over and above those of its allies were aimed at “protecting” America’s national security and infuriated those that have been affected.

The probability of a trade war resulting from the United States trying to bully other nations by slapping tariffs on them in an effort to protect American suppliers has increased substantially since Mr Trump announced the tariffs a few days ago. France, Canada and Mexico have all launched or are planning to launch retaliatory measures against the United States. Canada and Mexico are going one step further and launching legal action at the World Trade Organization citing what Canadian Prime Minister Justin Trudeau calls “completely unacceptable” measures.

11,000 kilometres from American soil, New Zealand should be concerned. Whilst not directly involved in the current round of trade tit-for-tats, it might get caught in the cross fire if some of our bigger trading partners, such as the European Union, Britain and China become involved in the fracas.

There are no winners in this nonsense. A lot of trust will be lost between America and  nations that are supposed to be good mates with the U.S. Divisions will be rent. WIth out doubt America’s rivals for geopolitical influence, China and Russia will be looking at ways of making those rifts widen and assert their influence in places that they currently have little to do with.

The Trump administration might well think that the tariffs address problems he has with how U.S. big business is being run. His primary concern is that trade with these countries somehow affects the national security problem that the United State finds itself confronting.

Yet the situation could not be more different. With Middle East allies fretting a major trade related conflict will eventually turn to and exacerbate overall tensions across Europe, Americans are being led up the Golden Path – perhaps to Dr Scrooge (from the programme “Duck Tales” and happily seen swimming in his vast fortunte. Flipping the bird at established norms, demonstrates that the very phenomena all countries fears in America is coming to pass.

Maybe it is time to stop being such close friends with the United States. Whilst the E.U. and so forth share much in common regarding security of the continent, the well being of its member nations America has always had demands emplaced at the last minute, which have left trading partners gnashing their teeth in frustration.

A not so surprising Brexit


When I got home from work on Friday, aside from being tired, I had drawn the conclusion that trying to write a blog article on this would just lead to a muddle of thoughts that would not be altogether coherent, but would probably also not get the right message out. Thus this was deliberately set down for today, and those who read the daily article for Saturday would have been treated to some nice news instead.

I am not altogether surprised that this happened. I have however been surprised by the immediacy of some of the reactions – the resignation of British Prime Minister David Cameron, who has announced he will step down in October and numerous senior E.U. officials in the United Kingdom. I thought that Mr Cameron might have waited until Monday to assemble his Cabinet and discuss the most immediate steps. Perhaps he was bothered by the spectacular plunge of the Pound to a 31 year low and the wiping of hundreds of billions of Pounds from the value of the market.

Nations have always sought to retain their identity and probably always will. The idea of a basic economic union is good in theory, and to a limited extent in reality. By opening borders the freedom of travel throughout the continent and Britain was significantly improved, especially once Cold War restrictions began to be eased and former Soviet Bloc nations were allowed to apply to join. It also enable easier flow of goods from one country to another and passport requirements were waived for those moving between member nations in the E.U.

However when nations start thinking that their people are being forced by politicians in another country that they cannot control to, anti-____________ sentiment is going to start rising. In some parts of major British cities, high levels of youth unemployment especially among immigrants who are becoming disaffected with British society, create ghetto-like environments that have elevated levels of crime and undesirable activity. Relaxed controls on immigration have meant that large numbers of migrants who have not been properly screened, or provided for are able to arrive. This in turn leads to separatist parties beginning to form like United Kingdom Independence Party, but also hard line parties and movements like Britain First and the National Front who openly despise minorities. In some respects this was a necessary correction to stop the more rabid elements gaining a foot hold, or heaven forbid, access to high office.

For New Zealand the only thing we can do is wait and see. Most of my political contacts were absolutely delighted with the result, thinking that it was a great day for British democracy and that by parting ways with the E.U., Britain will get its sovereignty back. However almost to an individual my U.K. contacts and U.K.-based contacts were very much against Britain leaving.

It is too early to tell what kind of repercussions a Britain outside of the E.U. will mean for New Zealand in terms of issues across the board from travel visas, to doing business, to geopolitical relations. The volatility will last for a few weeks whilst markets readjust, and the scale of the losses is assessed. Further high level political resignations may follow as politicians who banked much or all of their careers on staying weigh up whether to stay on. If one is planning to travel like I am next year, perhaps buy up a few hundred Pound whilst the New Zealand dollar is higher against it – it could be awhile before another such spectacular rise happens again.

So now as the dust begins to settle on what probably felt like a magnitude 8.0 earthquake in terms of the political changes wrought, and the aftershock sequence clearly well underway, these are some very interesting – though possibly not for the right reasons – times for the United Kingdom.