Something useful our PM could do

PM Jacinda Ardern and President Donald Trump

By Owen Jennings

Here is something useful that our prime minister could do.  It would be a major, long-lasting boost to our economy.  It would do more than a “well-being budget” could ever do, or a ban on oil and gas exploration or a massive tax on Kiwis proposed in the Carbon Emissions Bill.  Unfortunately, it wouldn’t mean a trip to Paris.  No hijab needed. Probably not even a TV appearance.  So the chances are slim to non-existent.

That most useful thing our prime minister could do would be to back President Trump on his trade war with China.

Why?  Because Trump will win his battle and force the Chinese to act more fairly in their international trading.  When that happens little old New Zealand needs to be on the coattails of the US.  There is exciting mileage for us if we are.

Some background.  As China emerged as a major international trader they deliberately indulged in a number of dirty tricks.  They artificially pitched their currency in their favour.  They invested heavily in industrial espionage, stealing ideas from factories and offices around the world and copying them.  They ignore copyright and trademarks.  Chinese companies illegally steal over $200 billion worth of American business secrets — known as intellectual property — each year, according to the IP Report to Congress in 2017.  They dump steel on the world market, undercutting traditional producers.

The Chinese act capriciously with foreign investors acting on whims without warning or explanation making it very difficult for businesses to establish a secure beachhead in their country.  Apple iBooks and iTunes Movies were suddenly shut down with little explanation two years ago.

Huge subsidies are unfairly pumped into Chinese businesses to allow them to compete in areas like semi-conductor technology – a deliberate act that contravenes the World Trade Organisation’s rules.

While not illegal they have imported raw materials, processed them and re-exported them profitably using cheap labour and subsidies.  What is wrong is that offshore companies find it hard to gain entry into China for added value products and, difficult if not impossible to set up processing in China to improve their own balance sheet.

President Trump understands this and has decided to take action.  He spent nearly a year talking, explaining America’s position and warning the Chinese of his determination to rectify matters.  The Chinese seemed to be listening.  After all America has the leverage and Trump understands how to use leverage.  However the dirty tricks kept going so, true to his word, Trump acted and slapped tariffs on Chinese goods.  China coughed and spluttered but retaliated with their own tariffs.  The war had begun.

The Americans are confident they can win because they have the resources to fight for longer and they have right on their side.  Its early days and President Trump is having to hose down many local fires among those getting hurt by the direct action, including many who voted for him e.g. American farmers.  However, the Chinese are in the wrong and it is in their best medium term interests to start playing by the rules.  Their advantage of cheap labour is disappearing quickly as wages climb quickly.  They have nowhere else to go.

How does it all affect us?  China is our biggest trading partner.  We send them raw materials like logs and whole milk powder.  In other words, we export jobs and profits.  We are poorer because we add little value to our biggest exports.  We face exactly the same unfair obstacles as the USA.  We do not talk about it much or complain too loudly because we are the little guy who needs them more than they need us.  We excuse them or just lie down and get walked over.  Our captains of industry get paid whatever the outcome, so don’t expect them to rattle the Sabres.

It needs our trade minister and prime minister to see the window of opportunity and move.  There has never been a better time or grounds for optimism.  However, it is difficult to see our government acting on such a promising deal, given their preoccupation with virtue signalling and flag waving.

What is even more interesting about President Trump’s initiative is that it goes well beyond just trade.  China is bulldozing its way around the world throwing money around in Africa, the Pacific, South East Asia, bribing and threatening its way to dominance and control.  It is time to call them out.  The US is the only country capable of doing it.  We should quickly align ourselves with them and reap the benefits that will certainly flow.  Do we have the foresight and courage necessary?  Sadly I doubt it.

More information for the interested:

A brilliant, erudite explanation.

785 words.