Speaker 1: Kiota. I'm Chelsea Daniels and this is the Front Page,
Speaker 1: a daily podcast presented by the New Zealand Herald. From tomorrow,
Speaker 1: there'll be a fifteen percent tariff on New Zealand imports
Speaker 1: four US businesses. The announcement of the arbitrary amount saw
Speaker 1: US frantically send our chief trade negotiator over to Washington
Speaker 1: in a last ditch effort to plead our case. Trade
Speaker 1: Minister Todd McLay was also dispatched. But will that actually
Speaker 1: do any good when larger economies have already signed on
Speaker 1: the dotted line and accepted their fates.
Speaker 2: And how should.
Speaker 1: New Zealand be diversifying our trade portfolio to rely less
Speaker 1: on the big players. Today on the front Page, University
Speaker 1: of Auckland Emeritus Professor Jane Kelsey is with us to
Speaker 1: discs what all this actually means for Kiwi businesses and
Speaker 1: whether we need to reprioritize our trade relationships. First off, Jane,
Speaker 1: what are the chances of a minister or a negotiator
Speaker 1: this laid in the game actually being able to barter
Speaker 1: a lower tariff.
Speaker 2: For New Zealand when we have a Q as we
Speaker 2: have of those wanting to see President Trump, we are
Speaker 2: pretty far down the list and there is very little
Speaker 2: that ministers or the Prime Minister can offer that would
Speaker 2: be of interest to Trump, which doesn't mean that he
Speaker 2: won't try to get whatever he can from them in
Speaker 2: these behind door negotiations. And that's a bit of a
Speaker 2: worry because we don't know what might in fact be offered.
Speaker 2: But one of the things that we have seen in
Speaker 2: all of the so called deals that have been made
Speaker 2: is that one there's nothing in writing. Two there's nothing
Speaker 2: publicly disclosed. Three there is disagreement as to what in
Speaker 2: fact has or hasn't been offered. Fourth, Trump could well
Speaker 2: say ah, okay, but I want more and not honor
Speaker 2: the deal. So who knows. But the chances therefore of
Speaker 2: our minister and Prime Minister coming out with a significant
Speaker 2: deal are pretty negligible. Right.
Speaker 1: So how significant will this fifteen percent tariff be on
Speaker 1: New Zealand businesses?
Speaker 2: Tariffs are kind of blunt instruments. It will mean that
Speaker 2: exports from New Zealand imports into the US are higher
Speaker 2: cost for importers in the US and consumers in the US.
Speaker 2: That could affect how much New Zealand goods they buy.
Speaker 2: So it's not that New Zealand exports pay the teriffs,
Speaker 2: it's that it might affect them in the market. But
Speaker 2: at the same time, if you look at the effect
Speaker 2: of things like the exchange rate, that has a really
Speaker 2: significant effect on the prices as well. What other countries
Speaker 2: exports are and how they might be affected are also
Speaker 2: part of this equation. So it's very hard to be
Speaker 2: specific about what the consequences would be, and when people
Speaker 2: put figures on that, you should be quite skeptical, especially
Speaker 2: because we have no idea about all of these counterfactuals.
Speaker 1: I mean, does it make it worse for our businesses though, say,
Speaker 1: because we've got competitors like Australia in UK they've cut
Speaker 1: a ten percent deal, we've got fifteen percent. Like if
Speaker 1: I was a US based business, say if I owned
Speaker 1: I don't know, like a diner or something, would they
Speaker 1: then choose Australian beef over New Zealand beef.
Speaker 2: There's a whole lot of differences already. Consumers have preferences
Speaker 2: and importers have preferences, and there are different qualities of products.
Speaker 2: I mean, if you just look at wine for example,
Speaker 2: that they're not directly substitutable. There's a whole lot of
Speaker 2: factors in play there, and yes, I can understand that
Speaker 2: the New Zealand wine makers have some concerns, but we
Speaker 2: need to view those in the big picture. We also
Speaker 2: need to be clear that this is sending a message
Speaker 2: about dependency on particular markets and dependency on the export
Speaker 2: of particular products and the kind of economic model that
Speaker 2: we have been working to in this country for a
Speaker 2: number of decades that is a pretty basic export commodity model.
Speaker 2: So it's a time and a warning to rethink, not
Speaker 2: just to look at what the figures might look like.
Speaker 1: Do we place too much importance on our trade relationships
Speaker 1: with those big juggernaut players.
Speaker 2: There's been a lot of talk about the need for diversification,
Speaker 2: especially because of New Zealand's excessive dependency on China as
Speaker 2: a market, but also on lower value added products like
Speaker 2: export of whole logs or lower value added dairy products
Speaker 2: and so on, and so it's not simply about diversifying
Speaker 2: to other markets, but it's also about rethinking our own
Speaker 2: domestic economic model, which currently is based largely on the
Speaker 2: housing market and secondly on relatively low value added exports
Speaker 2: to a relatively small number of countries, but we have
Speaker 2: a great difficulty generating that discussion here. There was a
Speaker 2: Productivity Commission report several years ago before the Productivity Commission
Speaker 2: was disbanded that set out a process for diversification which
Speaker 2: would flicken our domestic production, and that unfortunately seems to
Speaker 2: have fallen on deaf ears. So you know, this, as
Speaker 2: I said before, is a kind of wake up call
Speaker 2: for us to start thinking differently, and maybe we have
Speaker 2: President Trump to think for something.
Speaker 3: We don't want to be any worse off than anybody else.
Speaker 3: New Zealand exporters into North America. I check in with
Speaker 3: quite regularly. They're actually doing really well. Whether it's the
Speaker 3: zest breeze, whether it's the red meat guys, the wine
Speaker 3: guys are obviously our second biggest exports there as well.
Speaker 3: A lot of them are saying they're able to pass
Speaker 3: it on to the American consumer, which is what has
Speaker 3: been happening. And again a big market. Just remember three
Speaker 3: hundred and sixty million people. If you find wealthy retailers
Speaker 3: and wealthy consumers, you can still navigate your.
Speaker 2: Way through it.
Speaker 1: When we say a diversification of our domestic market, what
Speaker 1: could we be doing, say to make that happen.
Speaker 2: If we just look at a story I read this
Speaker 2: morning about a large producer that uses a lot of
Speaker 2: energy importing the products that they're going to use from
Speaker 2: Vietnam when there are local producers here, or if we
Speaker 2: look at reliance on the overseas big tech operators for
Speaker 2: running server farms and so on, when we could do
Speaker 2: that here. There are real opportunities here, and we seem
Speaker 2: to have an aversion to taking those opportunities. At the
Speaker 2: same time, we have some problems in some of the
Speaker 2: trade agreements that we have negotiated over the years, which
Speaker 2: restrict us, for example, putting local content requirements on foreign investors.
Speaker 2: So if we look on our ports and we see
Speaker 2: all of those logs being exported whole as opposed to
Speaker 2: being processed here, there are limitations on our ability to
Speaker 2: require foreign forestry investors to process logs here for added
Speaker 2: value as opposed to exporting whole. That's going to be
Speaker 2: reinforce by the Overseas Investment Amendment that's currently before the
Speaker 2: Select Committee, which is going to make it harder, for example,
Speaker 2: in relation to forestry investments, to set conditions such as
Speaker 2: replanting and so on on on foreign investors in forestry.
Speaker 2: We need to think about how we can address those
Speaker 2: kind of constraints and not add to them. And that's
Speaker 2: again a conversation that there seems to be an aversion
Speaker 2: to having, but it would make a really significant difference
Speaker 2: to the value that we get from our natural resources.
Speaker 1: The New Zealand economy is already a bit flat at
Speaker 1: the moment right Unemployment hit five point two percent in
Speaker 1: the Dune quarter and many economists are predicting a contraction
Speaker 1: or slower growth in the next quarter. Will tariffs make
Speaker 1: our recovery and the cost of living more of a struggle?
Speaker 2: I don't think they'll make that much difference, frankly, and
Speaker 2: certainly know the difference between a ten percent and a
Speaker 2: fifteen percent, which is what Australia, for example, has got
Speaker 2: A ten percent is not going to make that much
Speaker 2: difference in the overall picture. Whether we can stop closing down,
Speaker 2: for example, the mills that we've had in Tocata and
Speaker 2: various other places, those are the things that are affecting
Speaker 2: our job numbers and losing skilled people, good good working class,
Speaker 2: well paying jobs, and losing our people off to Australia
Speaker 2: those I think are going to have a more significant impact.
Speaker 1: In terms of trump tarent tariffs and the tariff chat
Speaker 1: and thinking about our overseas trading portfolio, I suppose how
Speaker 1: might these tariffs influence New Zealand's trade diversification efforts with
Speaker 1: other countries, not just China, but like the EU or
Speaker 1: that Southeast Asian market.
Speaker 2: I don't think it's going to have much impact it
Speaker 2: al I mean, there's a term called trade diversion, which
Speaker 2: means that if you stop exporting so much to one
Speaker 2: place because of tariffs, will you therefore start looking for
Speaker 2: other markets. That's a positive part of trade diversion. Sometimes
Speaker 2: it's used for more negative reasons. I don't think it's
Speaker 2: going to have really that much impact it all. We've
Speaker 2: seen already that, you know, the EU f TA, the
Speaker 2: China f t A and so on are supposed to
Speaker 2: have had really significant impacts, but it's very hard to
Speaker 2: tell exactly what those have been as well. There's often
Speaker 2: real overstatements about what the effect of those agreements are.
Speaker 2: And frankly, my concern about the tariffs is not all
Speaker 2: of these supposed economic impacts, but what the non tariff
Speaker 2: demands that Trump might make ah and what the effects
Speaker 2: of those are going to be. And I think it's
Speaker 2: a mistake to view the Trump use of tariffs as
Speaker 2: purely economic considerations. But even if we just look at
Speaker 2: the tariff's issue with Trump, we've seen some very high
Speaker 2: profile US economists saying, don't expect that this is ever
Speaker 2: going to go back to the way it was, say,
Speaker 2: ten years ago. Yeah. So with tariffs, we've already seen
Speaker 2: Trump one imposing tariffs which were not all reversed by Biden,
Speaker 2: and the Trump two tariffs you can expect are not
Speaker 2: going to be fully reversed either, even though they are
Speaker 2: effectively unlawful in the World Trade Organization and breach various
Speaker 2: of the US free trade agreements. So the notion that
Speaker 2: you have a rules based system governed by the WTO
Speaker 2: or by free trade agreements was being eroded over the
Speaker 2: last decade by Obama and then by Trump, and then
Speaker 2: by Biden, and again by Trump now saying Okay, I'm
Speaker 2: just going to break the system. And so I've referred
Speaker 2: a couple of times to a wake up call. The
Speaker 2: assumption that you can, okay, when Trump's gone, it'll all
Speaker 2: go back to the way it was is nonsense. That's
Speaker 2: not going to happen. Already, the World Trade Organization is
Speaker 2: total and utter chaos.
Speaker 1: And not just a WTOO, though I am hearing what
Speaker 1: you're saying, and I'm thinking about the who. I'm thinking
Speaker 1: about the UN as well. It's just as it's this
Speaker 1: chaotic kind of turn of events where you think things
Speaker 1: are happening, but what are these organizations for. Well, they're
Speaker 1: to stop these things happening.
Speaker 2: It's like, well, but they are, Yeah, but he's actually
Speaker 2: played a different game with the WTO. He's withdrawn from
Speaker 2: those other ones, and he's effectively screwed their budgets. When
Speaker 2: the US joined the WTO, the legislation required them to
Speaker 2: do a review every five years, and they've just done
Speaker 2: that review, and they have talked about the WTO basically
Speaker 2: being broken, but they haven't talked about withdrawing. What they're
Speaker 2: doing instead is demanding a whole lot of changes to
Speaker 2: how the WTO operates without any commitment that they stay
Speaker 2: there or that they comply with the rules. So they
Speaker 2: want no consensus based decisions anymore. They want changes to
Speaker 2: special and differential treatment, especially for China, and so on.
Speaker 2: Along the same lines. You may remember that Trump withdrew
Speaker 2: from the TPPA or the CPTPP, and that the CPTPP
Speaker 2: without the US, and then Biden, because those agreements are
Speaker 2: so unpopular in the US, started the Indo Pacific Economic
Speaker 2: Framework IPF, which was also anti China. It's no longer
Speaker 2: called ASHIAP Pacific, It's called Indo Pacific. But Trump didn't
Speaker 2: like that either, and it's gone into abeyance. And so
Speaker 2: what he's done instead is instead of trying to construct
Speaker 2: new instruments, he's just gone for using US leverage in
Speaker 2: this very raw sense, and not simply to isolate China,
Speaker 2: and not simply to supposedly boost the domestic economy and
Speaker 2: jobs in the US, but for the interests of some
Speaker 2: of the companies, like the big tech companies. And in
Speaker 2: the past when a number of countries have been trying
Speaker 2: to reign in big tech, to put taxes, digital services
Speaker 2: taxes on or to constrain the monopolies that some of
Speaker 2: the Google and the big search engines and so on have,
Speaker 2: and they've been putting these domestic rules in place. Obama
Speaker 2: and Trump previously use domestic law in the US to
Speaker 2: investigate and then put sanctions on them. Trump instead is
Speaker 2: now not going through that ritual at all and is
Speaker 2: just saying we'll slap these tariffs on you unless you
Speaker 2: repeal those laws. And that's worked with Canada, it's worked
Speaker 2: to some extent with the EU. The EU deal with Trump.
Speaker 2: Trump says they've agreed to remove all of those The
Speaker 2: EU has said no, we haven't. Trump has said yes,
Speaker 2: But the negotiations aren't finished yet. And so it gives
Speaker 2: you a sense.
Speaker 1: I can see, yeah, I can see why and how
Speaker 1: he's using them as a tool to leverage things worldwide. Hey,
Speaker 1: and that's something that a lot of political analysis have
Speaker 1: pointed to as well.
Speaker 4: MAGA leaders have quoted that Trump has won the trade
Speaker 4: wars against the European Union, Japan, and South Korea. And
Speaker 4: it's true that Donald Trump recognized that America has special
Speaker 4: leverage against those countries because of the size of its
Speaker 4: market as well as the security it provides to its allies.
Speaker 4: So he used that geopolitical reality at a time of
Speaker 4: rising geopolitical threats to squeeze America's closest friends to force
Speaker 4: them to make concessions. But to view these small gains
Speaker 4: as great American victories misunderstands economics. No, one wins a
Speaker 4: trade war.
Speaker 1: Lastly, do you think the New Zealand government has its
Speaker 1: trade priorities in check? Are they correct or is there
Speaker 1: anything that they can do.
Speaker 2: Next?
Speaker 1: Is there is there a country that we should we
Speaker 1: should be trading with that we're not. I noticed that
Speaker 1: we don't trade very much within many African nations. Is
Speaker 1: it because they don't have what we want? I mean LOSTO.
Speaker 1: I went down Alesto rabbit hole and I was like, right,
Speaker 1: I will, I'll buy jeans from the Soto because they've
Speaker 1: been absolutely devastated by these Trump tariffs. And is there
Speaker 1: anywhere anywhere like that that we should be pointing our
Speaker 1: attention to.
Speaker 2: Unfortunately, we don't have a trade policy that's based on ethics, well,
Speaker 2: that's based off support for development. We have a pretty
Speaker 2: crude commitment to the old neoclassical model of we'll focus
Speaker 2: on what we think we do best and seek export
Speaker 2: markets for those, and we will do various deals in
Speaker 2: free trade agreements or in the WTO that mean we
Speaker 2: can export more of our stuff and we'll do a
Speaker 2: trade off with you just around the terms of trade
Speaker 2: of tariffs or or labeling or quarantine standards or services
Speaker 2: and so on, and that's locked us into these supply chains,
Speaker 2: where COVID showed us that supply chains are very vulnerable
Speaker 2: and in particular, having dependence on particular sources make us
Speaker 2: even more vulnerable. And yes, we could have an ethical
Speaker 2: trade policy, but that would require us to do a rethink.
Speaker 2: We could, as I said before, do more stuff here,
Speaker 2: but that would require us to rethink our trade policy.
Speaker 2: Ministry of Foreign Affairs and Trade and the joint position
Speaker 2: of the major parties for decades has been locked into
Speaker 2: that model that is now clearly failing. But it is
Speaker 2: very difficult to generate an alternative debate because the institutional
Speaker 2: and political frameworks and much of the high value corporate
Speaker 2: interests in New Zealand are so deeply embedded in that model.
Speaker 1: Thank you for joining us, pleasure. That's it for this
Speaker 1: episode of The Front Page. You can read more about
Speaker 1: today's stories and extensive news coverage at enzidherld dot co
Speaker 1: dot MZ. The Front Page is produced by Ethan Sills
Speaker 1: and Richard Martin, who is also our editor.
Speaker 2: I'm Chelsea Daniels.
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Speaker 1: behind the headlines.