Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

NZ unscathed by US-China trade war, but...

NZ remains unscathed by US-China trade war, but that's no reason for complacency




While tariffs have a direct impact on exporters in the US and China, third-party countries like New Zealand are more affected by non-tariff barriers.
EPA/Aleksandar Plavevski, CC BY-ND

Hongzhi Gao, Victoria University of Wellington and Ivy Guo, Victoria University of Wellington

Despite disruptions to global value chains, the 18-month trade tensions between the US and China appear to have left New Zealand exporters unscathed so far.

As our analysis of StatsNZ’s merchandise trade data shows, New Zealand has managed an overall growth of 4.7% in merchandise exports over the year ending in August. New Zealand exports to top trading partner China grew by 19.6% (slightly less than 21.1% during the previous year).

There was also strong growth in exports to Thailand (18.7%, compared to negative growth in 2017/2018) and to the Philippines (15.5% compared to 7.2%).

It is not all good news, though. Exports to New Zealand’s second most important trading partner Australia dropped to -0.1% (from 5.8% in 2017/2018). More worryingly, there was a sharp drop from 43.9% to 4.4% for Hong Kong, 39.4% to -10.1% for Singapore, 23.4% to -18% for the United Arab Emirates, and many other countries. Export growths to almost all of New Zealand’s second-tier trading partners have fallen.

Should New Zealand exporters be worried about these shifts in exports? There are several ways we can drill deeper into the impacts of the trade war between the world’s two largest economies.

Politics in the way of trade

First, exporters may be concerned over politically motivated policies that would have an adverse effect on goods from New Zealand. While the impact of tariffs is immediate for US and Chinese exporters, the most worrying aspects for exporters from third-party countries like New Zealand are non-tariff barriers that can be politically motivated.






Read more:
How to get ready as the US-China trade war spills over to other countries





For more than 70 years, the dispute settlement system of the World Trade Organization (WTO) (previously GATT) provided a process for countries to resolve trade grievances. But the US-China trade war has sidelined these global principles and replaced them with tit-for-tat exchanges of tariffs and political power wrestling between the two big powers. As politics gets in the way of trade flows, companies are encountering an increasing level of political control or intervention (e.g. stricter checks at customs, stricter processes for issuing or renewing licences for importing, and stricter scrutiny over inbound or outbound foreign direct investment).

While many non-tariff trade barriers are not caused by the trade war, they are amplifying fear and worry about protectionist measures, with negative sentiment among customers and suppliers (especially from the US and China). New Zealand exporters need to calm their customers and reassure them that the current political stand-off between the two giants does not affect New Zealand’s commitments to their markets.

Patriotic consumer response

Second, consumer boycotts can become contagious during international political conflicts. A disagreement with political powers of a country can be interpreted as an attack on the identity of people in in-group cultures.

Some companies, such as the Danish company Arla, were boycotted in Middle Eastern markets because they were associated, through country of origin, with the Danish cartoonists behind the Muhammad cartoons, which offended Muslims. When it comes to China, consumer boycotts can be accelerated and politically directed because of the size of the market and political structure of the country. Consumers often collectively and emotionally follow the guidance of political forces.

China is an extra sensitive market because of its relatively closed society (with internet and other censorship), rising nationalism and strong collectivist and in-group culture. The current Hong Kong crisis could easily embroil any foreign company that has either intentionally or unintentionally supported the youth and democratic movements.






Read more:
University under siege: a dangerous new phase for the Hong Kong protests





The most recent example is the boycott of the Houston Rockets and National Basketball Association by Chinese official media and sponsors because the Rockets’ general manager Daryl Morey tweeted a message supporting the Hong Kong movement. Cathay Pacific was also targeted, and its CEO resigned following pressure by Beijing over participation by some of its employees in protests.

Rising costs of exports

Third, exporting costs rise as a result of political disruptions in global trade. A trade war creates uncertainty among managers about the global business environment. Information is largely asymmetrical, complex and dynamic. Firms have to spend more resources to communicate, coordinate and adjust to the threat from political disruptions.

Sluggish export demand, negative customer sentiment, decreasing export prices and volatile foreign exchange rates can all contribute to the costs of exporting.

Overall, the current trade war or the evident (or potential) political decoupling between the US and China has made global business and export environments especially sensitive.

Companies in New Zealand should watch closely how the trade tensions develop and avoid politically provocative marketing, communication and public relations while finding ways to address rising export costs.The Conversation

Hongzhi Gao, Associate professor, Victoria University of Wellington and Ivy Guo, Research Assistant, Victoria University of Wellington

This article is republished from The Conversation under a Creative Commons license. Read the original article.


© Scoop Media

 
 
 
Top Scoops Headlines

 

Ian Powell: Rescuing Simpson From Simpson

(Originally published at The Democracy Project ) Will the health reforms proposed for the Labour Government make the system better or worse? Health commentator Ian Powell (formerly the Executive Director of the Association of Salaried Medical ... More>>

Missions To Mars: Mapping, Probing And Plundering The Red Planet

In the first month of 2020, Forbes was all excitement about fresh opportunities for plunder and conquest. Titled “2020: The Year We Will Conquer Mars”, the contribution by astrophysicist Paul M. Sutter was less interested in the physics than the conquest. ... More>>

Richard S. Ehrlich: Coup Leader Grabs Absolute Power At Dawn

BANGKOK, Thailand -- By seizing power, Myanmar's new coup leader Commander-in-Chief Senior General Min Aung Hlaing has protected his murky financial investments and the military's domination, but some of his incoming international ... More>>

Jennifer S. Hunt: Trump Evades Conviction Again As Republicans Opt For Self-Preservation

By Jennifer S. Hunt Lecturer in Security Studies, Australian National University Twice-impeached former US President Donald Trump has evaded conviction once more. On the fourth day of the impeachment trial, the Senate verdict is in . Voting guilty: ... More>>

Binoy Kampmark: Let The Investigation Begin: The International Criminal Court, Israel And The Palestinian Territories

International tribunals tend to be praised, in principle, by those they avoid investigating. Once interest shifts to those parties, such bodies become the subject of accusations: bias, politicisation, crude arbitrariness. The United States, whose legal and political ... More>>

The Conversation: How To Cut Emissions From Transport: Ban Fossil Fuel Cars, Electrify Transport And Get People Walking And Cycling

By Robert McLachlan Professor in Applied Mathematics, Massey University The Climate Change Commission’s draft advice on how to decarbonise New Zealand’s economy is refreshing, particularly as it calls on the government to start phasing out fossil ... More>>

 
 
 
 
 
 
 
 
 
  • PublicAddress
  • Pundit
  • Kiwiblog