Falconer, now international trade professor at Lincoln University, did not buy into views the world would revert to 19th century type trade blocs with portions carved up between competing powers as Trump shut down regional trade pacts.
“It is one thing to look at the most extreme outcome and meantime not look at what is more likely, if less extreme.
“Sure, there are advisers around Trump who believe in voodoo economics,” Falconer, who served as a senior NZ trade official and as ambassador to the World Trade Organisation from 2005-08 and chaired the Doha agricultural negotiating group, said.
But the administration did not work in isolation. It required Congress approval and things were a lot less clear-cut there. Congress had to be responsive to industry needs.
And even a small country like NZ could help ensure some of the decisions made in the US delivered a positive effect.
“Sure, the US rejected the TPP. You could say that was unwise but it was not such a wonderful agreement and there were plenty in the US who were already negative on it.”
It was more a case of the free-trade Republicans being loath to give Obama any type of win, regardless of their own belief in it that sunk it.
“And they saw it not going far enough to liberate intellectual property rules.”
While he did not see it coming back any time soon, there was plenty of space around it to negotiate other deals and trading arrangements.
Industrial ties ran strong in agreements like the North American Free Trade Agreement (NAFTA) between Canada, the US and Mexico.
It affected cars and electronics production but even if it was reworked, they would just snap back to a most-favoured nation, lower tariff.
He saw a possibility of the US moving to a broad consumption tax that would change the appeal of the nation as an investment destination and tilt it more to exporting than importing.
“But I don’t think it will be such a massive kind of shift that will lead to an appreciation of the US dollar. I don’t think we will be seeing a huge increase in tariffs. The costs will be so great to the US, it would make no sense to the US economically.”
In terms of its relationship with China, Falconer pointed out despite Trump’s less than friendly attitude. It was not a relationship that was particularly warm before he turned up either.
“When Obama was trying to sell the TPP it was selling it as a strategy to contain China.”
He reassured attendees that what was happening on the political stage often bore little relationship to the real world economy, where business relationships continued regardless.
“There is some tweaking of supply chains going on but the current drop-off in world trade, about 50% of it is due to a secular decline in growth (not US policy). And the only reason growth was so high during the eighties and nineties was China coming on. The reality is there is no new China out there.”
Falconer said he was also not prepared to take the view that Britain’s departure from the European Union was a disaster.
“Eventually sanity will prevail, undoubtedly there will be some costs but it will be manageable and not on the global financial crisis scale, which we survived.”
From a NZ perspective he urged trade negotiators and industry not to “sit on the fence and moan”.
“Instead, ask what can we do to change the political dynamic in Washington? You have to create an incentive outside the Washington Beltway to make the US feel they are missing out.”
He cited continuing negotiations on the TPP without the US as a good step.
“You will get others to join including South Korea and countries of the Pacific Alliance (Chile, Colombia, Mexico, Peru). Australia is talking this up big time and Japan is in a position to take a lead on it and it is encouraging to hear how strong Vietnam is also pushing it.”
He also urged negotiators to push for free trade with Europe.
“Kiwifruit will be a beneficiary of that. Between Japan and Europe the duty collected is about $34,000 a grower. There is no reason a deal should not be achievable.”
He was puzzled about why NZ was shy on a United Kingdom trade deal or why NZ felt it had to go alone on it.
“It would be better to team up with Australia on it.”
He believed a strategy of aligning closer with the UK could be invaluable long term, with that country having the capacity to be a leader in global trade.
“Other countries including the Pacific Alliance countries will flock to a positive agenda from the UK.”
