WEBVTT - What the US tariffs mean for our economy - is it time we pivot our trade strategy?

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<v Speaker 1>Kiota. I'm Chelsea Daniels and this is the Front Page,

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<v Speaker 1>a daily podcast presented by the New Zealand Herald. From tomorrow,

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<v Speaker 1>there'll be a fifteen percent tariff on New Zealand imports

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<v Speaker 1>four US businesses. The announcement of the arbitrary amount saw

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<v Speaker 1>US frantically send our chief trade negotiator over to Washington

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<v Speaker 1>in a last ditch effort to plead our case. Trade

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<v Speaker 1>Minister Todd McLay was also dispatched. But will that actually

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<v Speaker 1>do any good when larger economies have already signed on

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<v Speaker 1>the dotted line and accepted their fates.

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<v Speaker 2>And how should.

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<v Speaker 1>New Zealand be diversifying our trade portfolio to rely less

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<v Speaker 1>on the big players. Today on the front Page, University

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<v Speaker 1>of Auckland Emeritus Professor Jane Kelsey is with us to

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<v Speaker 1>discs what all this actually means for Kiwi businesses and

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<v Speaker 1>whether we need to reprioritize our trade relationships. First off, Jane,

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<v Speaker 1>what are the chances of a minister or a negotiator

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<v Speaker 1>this laid in the game actually being able to barter

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<v Speaker 1>a lower tariff.

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<v Speaker 2>For New Zealand when we have a Q as we

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<v Speaker 2>have of those wanting to see President Trump, we are

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<v Speaker 2>pretty far down the list and there is very little

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<v Speaker 2>that ministers or the Prime Minister can offer that would

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<v Speaker 2>be of interest to Trump, which doesn't mean that he

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<v Speaker 2>won't try to get whatever he can from them in

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<v Speaker 2>these behind door negotiations. And that's a bit of a

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<v Speaker 2>worry because we don't know what might in fact be offered.

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<v Speaker 2>But one of the things that we have seen in

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<v Speaker 2>all of the so called deals that have been made

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<v Speaker 2>is that one there's nothing in writing. Two there's nothing

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<v Speaker 2>publicly disclosed. Three there is disagreement as to what in

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<v Speaker 2>fact has or hasn't been offered. Fourth, Trump could well

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<v Speaker 2>say ah, okay, but I want more and not honor

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<v Speaker 2>the deal. So who knows. But the chances therefore of

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<v Speaker 2>our minister and Prime Minister coming out with a significant

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<v Speaker 2>deal are pretty negligible. Right.

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<v Speaker 1>So how significant will this fifteen percent tariff be on

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<v Speaker 1>New Zealand businesses?

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<v Speaker 2>Tariffs are kind of blunt instruments. It will mean that

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<v Speaker 2>exports from New Zealand imports into the US are higher

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<v Speaker 2>cost for importers in the US and consumers in the US.

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<v Speaker 2>That could affect how much New Zealand goods they buy.

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<v Speaker 2>So it's not that New Zealand exports pay the teriffs,

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<v Speaker 2>it's that it might affect them in the market. But

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<v Speaker 2>at the same time, if you look at the effect

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<v Speaker 2>of things like the exchange rate, that has a really

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<v Speaker 2>significant effect on the prices as well. What other countries

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<v Speaker 2>exports are and how they might be affected are also

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<v Speaker 2>part of this equation. So it's very hard to be

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<v Speaker 2>specific about what the consequences would be, and when people

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<v Speaker 2>put figures on that, you should be quite skeptical, especially

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<v Speaker 2>because we have no idea about all of these counterfactuals.

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<v Speaker 1>I mean, does it make it worse for our businesses though, say,

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<v Speaker 1>because we've got competitors like Australia in UK they've cut

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<v Speaker 1>a ten percent deal, we've got fifteen percent. Like if

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<v Speaker 1>I was a US based business, say if I owned

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<v Speaker 1>I don't know, like a diner or something, would they

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<v Speaker 1>then choose Australian beef over New Zealand beef.

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<v Speaker 2>There's a whole lot of differences already. Consumers have preferences

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<v Speaker 2>and importers have preferences, and there are different qualities of products.

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<v Speaker 2>I mean, if you just look at wine for example,

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<v Speaker 2>that they're not directly substitutable. There's a whole lot of

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<v Speaker 2>factors in play there, and yes, I can understand that

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<v Speaker 2>the New Zealand wine makers have some concerns, but we

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<v Speaker 2>need to view those in the big picture. We also

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<v Speaker 2>need to be clear that this is sending a message

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<v Speaker 2>about dependency on particular markets and dependency on the export

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<v Speaker 2>of particular products and the kind of economic model that

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<v Speaker 2>we have been working to in this country for a

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<v Speaker 2>number of decades that is a pretty basic export commodity model.

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<v Speaker 2>So it's a time and a warning to rethink, not

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<v Speaker 2>just to look at what the figures might look like.

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<v Speaker 1>Do we place too much importance on our trade relationships

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<v Speaker 1>with those big juggernaut players.

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<v Speaker 2>There's been a lot of talk about the need for diversification,

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<v Speaker 2>especially because of New Zealand's excessive dependency on China as

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<v Speaker 2>a market, but also on lower value added products like

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<v Speaker 2>export of whole logs or lower value added dairy products

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<v Speaker 2>and so on, and so it's not simply about diversifying

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<v Speaker 2>to other markets, but it's also about rethinking our own

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<v Speaker 2>domestic economic model, which currently is based largely on the

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<v Speaker 2>housing market and secondly on relatively low value added exports

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<v Speaker 2>to a relatively small number of countries, but we have

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<v Speaker 2>a great difficulty generating that discussion here. There was a

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<v Speaker 2>Productivity Commission report several years ago before the Productivity Commission

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<v Speaker 2>was disbanded that set out a process for diversification which

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<v Speaker 2>would flicken our domestic production, and that unfortunately seems to

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<v Speaker 2>have fallen on deaf ears. So you know, this, as

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<v Speaker 2>I said before, is a kind of wake up call

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<v Speaker 2>for us to start thinking differently, and maybe we have

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<v Speaker 2>President Trump to think for something.

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<v Speaker 3>We don't want to be any worse off than anybody else.

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<v Speaker 3>New Zealand exporters into North America. I check in with

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<v Speaker 3>quite regularly. They're actually doing really well. Whether it's the

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<v Speaker 3>zest breeze, whether it's the red meat guys, the wine

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<v Speaker 3>guys are obviously our second biggest exports there as well.

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<v Speaker 3>A lot of them are saying they're able to pass

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<v Speaker 3>it on to the American consumer, which is what has

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<v Speaker 3>been happening. And again a big market. Just remember three

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<v Speaker 3>hundred and sixty million people. If you find wealthy retailers

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<v Speaker 3>and wealthy consumers, you can still navigate your.

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<v Speaker 2>Way through it.

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<v Speaker 1>When we say a diversification of our domestic market, what

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<v Speaker 1>could we be doing, say to make that happen.

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<v Speaker 2>If we just look at a story I read this

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<v Speaker 2>morning about a large producer that uses a lot of

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<v Speaker 2>energy importing the products that they're going to use from

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<v Speaker 2>Vietnam when there are local producers here, or if we

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<v Speaker 2>look at reliance on the overseas big tech operators for

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<v Speaker 2>running server farms and so on, when we could do

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<v Speaker 2>that here. There are real opportunities here, and we seem

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<v Speaker 2>to have an aversion to taking those opportunities. At the

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<v Speaker 2>same time, we have some problems in some of the

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<v Speaker 2>trade agreements that we have negotiated over the years, which

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<v Speaker 2>restrict us, for example, putting local content requirements on foreign investors.

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<v Speaker 2>So if we look on our ports and we see

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<v Speaker 2>all of those logs being exported whole as opposed to

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<v Speaker 2>being processed here, there are limitations on our ability to

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<v Speaker 2>require foreign forestry investors to process logs here for added

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<v Speaker 2>value as opposed to exporting whole. That's going to be

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<v Speaker 2>reinforce by the Overseas Investment Amendment that's currently before the

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<v Speaker 2>Select Committee, which is going to make it harder, for example,

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<v Speaker 2>in relation to forestry investments, to set conditions such as

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<v Speaker 2>replanting and so on on on foreign investors in forestry.

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<v Speaker 2>We need to think about how we can address those

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<v Speaker 2>kind of constraints and not add to them. And that's

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<v Speaker 2>again a conversation that there seems to be an aversion

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<v Speaker 2>to having, but it would make a really significant difference

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<v Speaker 2>to the value that we get from our natural resources.

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<v Speaker 1>The New Zealand economy is already a bit flat at

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<v Speaker 1>the moment right Unemployment hit five point two percent in

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<v Speaker 1>the Dune quarter and many economists are predicting a contraction

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<v Speaker 1>or slower growth in the next quarter. Will tariffs make

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<v Speaker 1>our recovery and the cost of living more of a struggle?

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<v Speaker 2>I don't think they'll make that much difference, frankly, and

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<v Speaker 2>certainly know the difference between a ten percent and a

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<v Speaker 2>fifteen percent, which is what Australia, for example, has got

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<v Speaker 2>A ten percent is not going to make that much

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<v Speaker 2>difference in the overall picture. Whether we can stop closing down,

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<v Speaker 2>for example, the mills that we've had in Tocata and

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<v Speaker 2>various other places, those are the things that are affecting

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<v Speaker 2>our job numbers and losing skilled people, good good working class,

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<v Speaker 2>well paying jobs, and losing our people off to Australia

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<v Speaker 2>those I think are going to have a more significant impact.

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<v Speaker 1>In terms of trump tarent tariffs and the tariff chat

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<v Speaker 1>and thinking about our overseas trading portfolio, I suppose how

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<v Speaker 1>might these tariffs influence New Zealand's trade diversification efforts with

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<v Speaker 1>other countries, not just China, but like the EU or

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<v Speaker 1>that Southeast Asian market.

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<v Speaker 2>I don't think it's going to have much impact it

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<v Speaker 2>al I mean, there's a term called trade diversion, which

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<v Speaker 2>means that if you stop exporting so much to one

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<v Speaker 2>place because of tariffs, will you therefore start looking for

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<v Speaker 2>other markets. That's a positive part of trade diversion. Sometimes

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<v Speaker 2>it's used for more negative reasons. I don't think it's

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<v Speaker 2>going to have really that much impact it all. We've

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<v Speaker 2>seen already that, you know, the EU f TA, the

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<v Speaker 2>China f t A and so on are supposed to

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<v Speaker 2>have had really significant impacts, but it's very hard to

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<v Speaker 2>tell exactly what those have been as well. There's often

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<v Speaker 2>real overstatements about what the effect of those agreements are.

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<v Speaker 2>And frankly, my concern about the tariffs is not all

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<v Speaker 2>of these supposed economic impacts, but what the non tariff

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<v Speaker 2>demands that Trump might make ah and what the effects

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<v Speaker 2>of those are going to be. And I think it's

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<v Speaker 2>a mistake to view the Trump use of tariffs as

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<v Speaker 2>purely economic considerations. But even if we just look at

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<v Speaker 2>the tariff's issue with Trump, we've seen some very high

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<v Speaker 2>profile US economists saying, don't expect that this is ever

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<v Speaker 2>going to go back to the way it was, say,

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<v Speaker 2>ten years ago. Yeah. So with tariffs, we've already seen

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<v Speaker 2>Trump one imposing tariffs which were not all reversed by Biden,

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<v Speaker 2>and the Trump two tariffs you can expect are not

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<v Speaker 2>going to be fully reversed either, even though they are

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<v Speaker 2>effectively unlawful in the World Trade Organization and breach various

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<v Speaker 2>of the US free trade agreements. So the notion that

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<v Speaker 2>you have a rules based system governed by the WTO

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<v Speaker 2>or by free trade agreements was being eroded over the

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<v Speaker 2>last decade by Obama and then by Trump, and then

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<v Speaker 2>by Biden, and again by Trump now saying Okay, I'm

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<v Speaker 2>just going to break the system. And so I've referred

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<v Speaker 2>a couple of times to a wake up call. The

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<v Speaker 2>assumption that you can, okay, when Trump's gone, it'll all

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<v Speaker 2>go back to the way it was is nonsense. That's

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<v Speaker 2>not going to happen. Already, the World Trade Organization is

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<v Speaker 2>total and utter chaos.

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<v Speaker 1>And not just a WTOO, though I am hearing what

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<v Speaker 1>you're saying, and I'm thinking about the who. I'm thinking

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<v Speaker 1>about the UN as well. It's just as it's this

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<v Speaker 1>chaotic kind of turn of events where you think things

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<v Speaker 1>are happening, but what are these organizations for. Well, they're

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<v Speaker 1>to stop these things happening.

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<v Speaker 2>It's like, well, but they are, Yeah, but he's actually

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<v Speaker 2>played a different game with the WTO. He's withdrawn from

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<v Speaker 2>those other ones, and he's effectively screwed their budgets. When

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<v Speaker 2>the US joined the WTO, the legislation required them to

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<v Speaker 2>do a review every five years, and they've just done

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<v Speaker 2>that review, and they have talked about the WTO basically

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<v Speaker 2>being broken, but they haven't talked about withdrawing. What they're

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<v Speaker 2>doing instead is demanding a whole lot of changes to

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<v Speaker 2>how the WTO operates without any commitment that they stay

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<v Speaker 2>there or that they comply with the rules. So they

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<v Speaker 2>want no consensus based decisions anymore. They want changes to

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<v Speaker 2>special and differential treatment, especially for China, and so on.

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<v Speaker 2>Along the same lines. You may remember that Trump withdrew

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<v Speaker 2>from the TPPA or the CPTPP, and that the CPTPP

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<v Speaker 2>without the US, and then Biden, because those agreements are

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<v Speaker 2>so unpopular in the US, started the Indo Pacific Economic

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<v Speaker 2>Framework IPF, which was also anti China. It's no longer

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<v Speaker 2>called ASHIAP Pacific, It's called Indo Pacific. But Trump didn't

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<v Speaker 2>like that either, and it's gone into abeyance. And so

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<v Speaker 2>what he's done instead is instead of trying to construct

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<v Speaker 2>new instruments, he's just gone for using US leverage in

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<v Speaker 2>this very raw sense, and not simply to isolate China,

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<v Speaker 2>and not simply to supposedly boost the domestic economy and

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<v Speaker 2>jobs in the US, but for the interests of some

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<v Speaker 2>of the companies, like the big tech companies. And in

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<v Speaker 2>the past when a number of countries have been trying

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<v Speaker 2>to reign in big tech, to put taxes, digital services

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<v Speaker 2>taxes on or to constrain the monopolies that some of

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<v Speaker 2>the Google and the big search engines and so on have,

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<v Speaker 2>and they've been putting these domestic rules in place. Obama

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<v Speaker 2>and Trump previously use domestic law in the US to

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<v Speaker 2>investigate and then put sanctions on them. Trump instead is

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<v Speaker 2>now not going through that ritual at all and is

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<v Speaker 2>just saying we'll slap these tariffs on you unless you

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<v Speaker 2>repeal those laws. And that's worked with Canada, it's worked

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<v Speaker 2>to some extent with the EU. The EU deal with Trump.

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<v Speaker 2>Trump says they've agreed to remove all of those The

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<v Speaker 2>EU has said no, we haven't. Trump has said yes,

0:17:28.920 --> 0:17:32.600
<v Speaker 2>But the negotiations aren't finished yet. And so it gives

0:17:32.640 --> 0:17:33.720
<v Speaker 2>you a sense.

0:17:34.680 --> 0:17:37.400
<v Speaker 1>I can see, yeah, I can see why and how

0:17:37.440 --> 0:17:42.200
<v Speaker 1>he's using them as a tool to leverage things worldwide. Hey,

0:17:42.280 --> 0:17:45.080
<v Speaker 1>and that's something that a lot of political analysis have

0:17:45.680 --> 0:17:49.160
<v Speaker 1>pointed to as well.

0:17:49.359 --> 0:17:52.000
<v Speaker 4>MAGA leaders have quoted that Trump has won the trade

0:17:52.000 --> 0:17:55.560
<v Speaker 4>wars against the European Union, Japan, and South Korea. And

0:17:55.640 --> 0:17:59.480
<v Speaker 4>it's true that Donald Trump recognized that America has special

0:17:59.560 --> 0:18:02.720
<v Speaker 4>leverage against those countries because of the size of its

0:18:02.760 --> 0:18:06.680
<v Speaker 4>market as well as the security it provides to its allies.

0:18:07.359 --> 0:18:10.639
<v Speaker 4>So he used that geopolitical reality at a time of

0:18:10.760 --> 0:18:16.240
<v Speaker 4>rising geopolitical threats to squeeze America's closest friends to force

0:18:16.320 --> 0:18:19.800
<v Speaker 4>them to make concessions. But to view these small gains

0:18:19.800 --> 0:18:25.040
<v Speaker 4>as great American victories misunderstands economics. No, one wins a

0:18:25.080 --> 0:18:25.680
<v Speaker 4>trade war.

0:18:28.320 --> 0:18:32.520
<v Speaker 1>Lastly, do you think the New Zealand government has its

0:18:32.720 --> 0:18:36.719
<v Speaker 1>trade priorities in check? Are they correct or is there

0:18:36.760 --> 0:18:37.879
<v Speaker 1>anything that they can do.

0:18:39.400 --> 0:18:39.640
<v Speaker 2>Next?

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<v Speaker 1>Is there is there a country that we should we

0:18:42.480 --> 0:18:45.920
<v Speaker 1>should be trading with that we're not. I noticed that

0:18:46.000 --> 0:18:49.320
<v Speaker 1>we don't trade very much within many African nations. Is

0:18:49.359 --> 0:18:52.800
<v Speaker 1>it because they don't have what we want? I mean LOSTO.

0:18:52.960 --> 0:18:56.200
<v Speaker 1>I went down Alesto rabbit hole and I was like, right,

0:18:56.240 --> 0:18:59.160
<v Speaker 1>I will, I'll buy jeans from the Soto because they've

0:18:59.240 --> 0:19:05.119
<v Speaker 1>been absolutely devastated by these Trump tariffs. And is there

0:19:05.160 --> 0:19:07.840
<v Speaker 1>anywhere anywhere like that that we should be pointing our

0:19:07.840 --> 0:19:08.399
<v Speaker 1>attention to.

0:19:08.920 --> 0:19:13.320
<v Speaker 2>Unfortunately, we don't have a trade policy that's based on ethics, well,

0:19:13.359 --> 0:19:19.119
<v Speaker 2>that's based off support for development. We have a pretty

0:19:19.400 --> 0:19:27.320
<v Speaker 2>crude commitment to the old neoclassical model of we'll focus

0:19:27.520 --> 0:19:32.560
<v Speaker 2>on what we think we do best and seek export

0:19:32.680 --> 0:19:39.760
<v Speaker 2>markets for those, and we will do various deals in

0:19:41.520 --> 0:19:46.399
<v Speaker 2>free trade agreements or in the WTO that mean we

0:19:46.480 --> 0:19:49.240
<v Speaker 2>can export more of our stuff and we'll do a

0:19:49.280 --> 0:19:54.440
<v Speaker 2>trade off with you just around the terms of trade

0:19:54.119 --> 0:20:00.920
<v Speaker 2>of tariffs or or labeling or quarantine standards or services

0:20:00.960 --> 0:20:04.000
<v Speaker 2>and so on, and that's locked us into these supply chains,

0:20:05.200 --> 0:20:11.240
<v Speaker 2>where COVID showed us that supply chains are very vulnerable

0:20:13.000 --> 0:20:18.080
<v Speaker 2>and in particular, having dependence on particular sources make us

0:20:18.119 --> 0:20:24.840
<v Speaker 2>even more vulnerable. And yes, we could have an ethical

0:20:24.960 --> 0:20:30.000
<v Speaker 2>trade policy, but that would require us to do a rethink.

0:20:30.600 --> 0:20:33.960
<v Speaker 2>We could, as I said before, do more stuff here,

0:20:35.359 --> 0:20:38.639
<v Speaker 2>but that would require us to rethink our trade policy.

0:20:39.080 --> 0:20:44.080
<v Speaker 2>Ministry of Foreign Affairs and Trade and the joint position

0:20:44.600 --> 0:20:49.800
<v Speaker 2>of the major parties for decades has been locked into

0:20:49.880 --> 0:20:54.879
<v Speaker 2>that model that is now clearly failing. But it is

0:20:55.280 --> 0:21:02.200
<v Speaker 2>very difficult to generate an alternative debate because the institutional

0:21:02.240 --> 0:21:08.320
<v Speaker 2>and political frameworks and much of the high value corporate

0:21:08.480 --> 0:21:13.760
<v Speaker 2>interests in New Zealand are so deeply embedded in that model.

0:21:14.359 --> 0:21:20.439
<v Speaker 1>Thank you for joining us, pleasure. That's it for this

0:21:20.560 --> 0:21:24.080
<v Speaker 1>episode of The Front Page. You can read more about

0:21:24.160 --> 0:21:28.639
<v Speaker 1>today's stories and extensive news coverage at enzidherld dot co

0:21:28.840 --> 0:21:32.680
<v Speaker 1>dot MZ. The Front Page is produced by Ethan Sills

0:21:32.760 --> 0:21:35.679
<v Speaker 1>and Richard Martin, who is also our editor.

0:21:36.160 --> 0:21:37.719
<v Speaker 2>I'm Chelsea Daniels.

0:21:38.119 --> 0:21:41.320
<v Speaker 1>Subscribe to the Front Page on iHeartRadio or wherever you

0:21:41.320 --> 0:21:44.960
<v Speaker 1>get your podcasts, and tune in tomorrow for another look

0:21:45.080 --> 0:21:46.560
<v Speaker 1>behind the headlines.