Friday, March 29, 2024

ALTERNATIVE VIEW: Trade winds blowing wrong way

Avatar photo
As we know, nobody wins in a trade war.
Reading Time: 3 minutes

The circus was started by the United States backtracking on the Iranian deal and in doing so indicated all agreements with the US are distinctly negotiable.

The removal of the trade embargo against Iran, conditional on that country giving up its nuclear weapons proposal, was welcomed by the world as a massive step forward.

Iran has the potential to be an important market for us.

Then we had Israel claiming Iran is making nuclear weapons and the US agreeing and cancelling the treaty.

There are several issues at play, not the least of which is who to believe. I don’t trust Israel and remember the Iraqi weapons of mass destruction over which America went to war.

Further, I don’t see a lot of difference between Israel having nukes and Iran having them.

After the Iranian fiasco we had oil prices rise, which will hurt the American economy.

That was followed by the much publicised historic “agreement” between the US and North Korea.

They even have a signed piece of paper confirming the “agreement”.

While I support any moves towards peace it is important to remember British Prime Minister Neville Chamberlain promised “peace for our time” in September 1938. He’d just returned from Nazi Germany having signed the Munich Agreement and Anglo-German Declaration with Adolf Hitler.

Further, if the Iranian treaty isn’t worth the paper it’s written on neither will any North Korean deal be. 

That was followed by the fiasco that was the G7 where, according to everyone else there, they agreed on a joint declaration in support of free trade. American president Donald Trump disagreed and launched an hysterical personal attack on Canadian Prime Minister Justin Trudeau.

The basic Trump message appeared to be my way or the highway.

He talked about America being the world’s biggest economy.

If it is now it won’t be for long. 

The European Union is the world’s largest economic entity and China’s economy is about to rival that of the US. That said, annoying six of the world’s seven largest economies doesn’t seem smart.

In the completely farcical stakes you had America hit Europe with tariffs to support American jobs. Europe retaliated, as you’d expect, then Harley Davidson said it was moving manufacturing offshore to avoid the tariffs, thus costing American jobs.  

What is most concerning, however, is the American vitriol towards China.

While the US buys more from China than it sells, trade wars hurt everyone. 

Rather than have rampant tariffs as the US claims China does, the fact is it has tariffs on just 10% of its imports.

Calm heads would suggest negotiation is better than a trade war where no one wins.

In addition, China is driving the Regional Comprehensive Economic Partnership that includes the ASEAN countries, most importantly Indonesia, Malaysia and Singapore along with Japan, South Korea and India, as well as Australia and New Zealand.

The market is huge with between three and four billion people and a total GDP of $49.5 trillion.

The Trump administration rejected the Trans Pacific Partnership so if the RCEP goes ahead the US will be isolated.

Add into that mix the Belt and Road initiative China is driving to support its trade plans and America looks increasingly on its own.

I was slightly bemused to hear Defence Minister Ron Mark tell us when he released his Defence Strategy that the Belt and Road plan is part of Chinese expansionism. For heaven’s sake, NZ is a signatory to Belt and Road and I’m pleased we are.

Why we’re going down that track is beyond me.

Forgetting China, the US banging tariffs on its neighbors Canada and Mexico didn’t seem smart to me and won’t achieve much other than costing more American jobs.

It also violates yet another trade agreement.

If aluminium and steel become more expensive, as counter tariffs will ensure they do, it then makes American manufactured products more expensive. That isn’t good news for jobs or the economy.

So, you have an international shambles of gigantic proportions and my belief is that it’s going to get worse.

On the bright side I was heartened by the recent discussions between the EU and NZ over a post-Brexit trade agreement.

With EU trade being worth $19.6 billion and a trade agreement having the ability to boost that by 50%, as the pundits are picking, it is positive.

European Commissioner for Trade Cecelia Malmstrom, after a visit to Trade Minister David Parker, made the point that together we can conclude a win-win agreement that offers benefits to business and citizens alike.

That’s one positive happening among a whole pile of chaos.

Total
0
Shares
People are also reading