Stephen Jacobi, NZIBF Executive Director, speaks to the Confederation of Indian Industry Partnership Summit in New Delhi about The Future of Multilateralism.
Trade war – peace in our time?
The announcement of a ceasefire in the US/China trade war can be greeted with a sigh of relief by the international community but the agreement leaves a number of unanswered questions especially for New Zealand exporters.
All eyes were on Washington this week as the United States and China unveiled what President Trump hailed as the biggest trade deal of all time and President Xi said was “good for China, good for the US and good for the world”. Certainly, if this “phase one” deal delivers greater predictability in US/China relations that is something to be welcomed, but the 86 page document contains both a lot detail and a lot of ambiguity. What is clear is that both the US and China wanted this deal to be done – the Americans to offset the worsening impact of tariffs in an election year and the Chinese to forestall any further barriers aimed at them.
if this “phase one” deal delivers greater predictability in US/China relations that is something to be welcomed, but the 86 page document contains both a lot detail and a lot of ambiguity.
What’s in the deal?
The agreement contains a preamble, eight chapters and various side agreements. The chapters cover intellectual property, technology transfer, trade in agri-food products, financial services, foreign exchange, expanding trade, dispute resolution and final provisions. Each chapter requires a more detailed read. The main outcomes are that the Chinese have agreed to:
- new commitments on protecting intellectual property (including coming up with a new IP plan in 30 days)
- new rules for the import of a range of agri-food products including dairy, infant formula, meat and seafood
- refraining from devaluing their currency to export markets
- purchasing US$200 billion worth of US products including an additional $US32 billion in agri-food products over the next two years
- submitting these commitments to a dispute settlement process.
The Americans have agreed to:
- reducing (but not eliminating) about a third of the tariffs newly applied to Chinese goods.
How does this affect New Zealand?
New Zealand stands to be affected in various ways – none of them hugely positively.
We can join in welcoming the cessation of hostilities between these two global economic superpowers and the positive effect this will (hopefully) have on global markets. New Zealand is a major exporter of agri-food products to China especially dairy, meat, horticulture and seafood. To the extent that increased Chinese purchases of American products displace NZ offerings we stand to be adversely affected, but this is not a given – China is a huge market which New Zealand cannot in any case satisfy on its own. There may well be room for all of us, but there is no reason why New Zealand exporters should expect to compete on the same basis as US suppliers. That’s where the new import rules for US products need to be carefully evaluated. New Zealand has an interest in China’s intellectual property regime: to the extent that China’s commitments to the United States apply to all participants, we may even stand to benefit, although China has already been making improvements to its regime and whether these amount to significant changes remains to be seen.
What about the WTO?
This is the big unanswered question. Both the US and China have been at pains to emphasise that the deal complies with World Trade Organisation (WTO) rules. We sincerely hope that is the case. One litmus test of this will be the tariffs applied to those agricultural purchases and whether the new rules apply equally to all. The last thing we need is more undermining of the WTO’s “most favoured nation” principle. This phase one deal is unlikely to be considered to “cover substantially all trade” in the language of Article XXIV of the General Agreement on Tariffs and Trade (GATT).
This deal does not address all the areas the US Administration has previously highlighted as concerns in China including subsidies for state owned enterprises or cyber-security. Ironically the agri-food purchases China has agreed to are likely to be made by the very SOEs the Americans detest! The deal leaves untouched a large number of US and Chinese tariffs. It remains to be seen whether there will be follow-through and whether if required the dispute settlement mechanism can be made to work. Details on phase two and beyond remain sketchy.
More generally, the deal seems unlikely to be the last word in the strategic rivalry between these two economic superpowers. That’s why we call it a truce ending hostilities, rather than a treaty ending a war. There’s lots of room for others like New Zealand to get caught in the middle.
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum.
REGISTER WITH TRADE WORKS
Register to stay up to date with latest news, as well as saving and discussing articles you’re interested in.
Remarks to Confederation of Indian Industry Partnership Summit, New Delhi, 15 March 2023
"The Future of Multilateralism" by Stephen Jacobi, NZIBF Executive Director Namaskar Tēnā koutou katoa – greetings to you all in the language of the Māori people of Aotearoa New Zealand. It is an honour for me to speak to such a distinguished gathering today....
AMIDST THE STORM: ABAC MEETS IN AUCKLAND
Perhaps a cyclone was after all a fitting backdrop for the meeting of the APEC Business Advisory Council (ABAC) which was held in Auckland on 12-14 February – the global environment against which the meeting took place is decidedly stormy. In the event the wind...
Asia-Pacific business leaders call for action on climate and economic inclusion
APEC NEWS RELEASE Issued by The APEC Business Advisory Council (ABAC) Auckland, 14 February 2023 - Members of the APEC Business Advisory Council (ABAC) met in Auckland, New Zealand this week to develop a work plan that calls on policymakers to leverage trade and...
ASIA-PACIFIC BUSINESS LEADERS GATHERING IN AUCKLAND, 12-14 FEBRUARY 2023
Media Release - 8 February 2023 Equity, sustainability and opportunity are key themes of one of the largest gatherings of senior Asia-Pacific business leaders held in New Zealand for some time. The APEC Business Advisory Council (ABAC) is due to meet in Tāmaki...
A YEAR FOR RECONNECTING
As I write this end of year dispatch, NZIBF is preparing to host the first meeting for 2023 of the APEC Business Advisory Council (ABAC). We are looking forward to welcoming the 200 or so business leaders and senior officials from APEC member economies across the...
MAJOR GATHERING OF ASIA-PACIFIC BUSINESS LEADERS TO BE HELD IN AUCKLAND, 12-14 FEBRUARY 2023
Media Release - 14 December 2022 Sustainability, digitalisation and resilient, inclusive trade will be key themes of a major gathering of senior Asia-Pacific business leaders to be held in Auckland early next year – the first such event to be held in New Zealand...
NZ Herald: Time to lift our game in India
Following his recent visit to India our Executive Director Stephen Jacobi penned this article advocating a more strategic approach to the further development of the relationship. The article was published by the NZ Herald on 9 December.
APEC Rolls out Priorities for 2023
Issued by the Informal Senior Officials’ Meeting - Honolulu, The United States, 13 December 2022 Aiming to provide tailwinds for member economies to strengthen recovery and resilience, as well as advance broad-based economic growth, the United States rolled out its...
NZIBF 2022 Chair Report
ANNUAL GENERAL MEETING 2022 CHAIR’S REPORT I am pleased to present my second report on the activities and achievements of the NZ International Business Forum (NZIBF) for 2022-23, our fifteenth year of operations. At the outset I would like to thank Members for...
APEC Leaders Issue 2022 Declaration and the Bangkok Goals on the Bio-Circular-Green Economy
Issued by the APEC Economic Leaders' Meeting Bangkok, Thailand, 19 November 2022 The Leaders of the 21 APEC member economies issued the 2022 Leaders’ Declaration following the 29th APEC Economic Leaders’ Meeting chaired by the Prime Minister of Thailand,...
NZ BUSINESS LEADERS AT APEC 2022
New Zealand business will be represented at the APEC Leaders’ Week in Bangkok, commencing 13 November, by members of the APEC Business Advisory Council (ABAC). New Zealand’s three members – Rachel Taulelei, Malcolm Johns and Anna Curzon – supported by Stephen Jacobi...
Submission to the Ministry of Foreign Affairs and Trade: Re-Development of the Framework for Integrating Labour Standards and Trade Agreements
Submission by NZIBF – October 2022 This submission is made on behalf of the NZ International Business Forum (NZIBF), whose members are listed at Annex A. NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global...
Address to the 51st One Stop Update for The Accountant In Business, 25 October 2022
ADDRESS TO THE 51st ONE STOP UPDATE FOR THE ACCOUNTANT IN BUSINESS AUCKLAND, 25 OCTOBER 2022 STEPHEN JACOBI EXECUTIVE DIRECTOR NZ INTERNATIONAL BUSINESS FORUM GLOBAL ECONOMIC UPDATE Thanks to Brightstar for inviting me back to address this conference once again. When...
Submission to MPI on Modernising Our Export Assurances Systems: Legislative Options
Submission by Export NZ and NZIBF - 29 September 2022 1.0 INTRODUCTION 1.1 Export New Zealand (ExportNZ) and the New Zealand International Business Forum (NZIBF) welcome the opportunity to comment on the Ministry for Primary Industries’ (MPI) Modernising Our Export...
Submission to MFAT for CPTPP Review
30 September 2022 Phil Mellor Economic Division, Ministry of Foreign Affairs and Trade, Wellington (By email) Dear Phil, Thank you for your email of 1 September, seeking our comments on the three year review of the Comprehensive and Progressive Agreement for Trans...