NZ exporters face uncertainty under Obama

Time will tell as to whether Barack Obama’s ascension to the US presidency is a blessing or a curse for NZ business.

Mr Obama made his staunch protectionist credentials a central theme of his election campaign, in stark contrast to Republican candidate John McCain, an ardent free trader.

Mr Obama talked tough on trade at every opportunity, chiefly to woo voters in swing states.

He appears to have successfully stoked the fears of working-class voters that a continuing expansion of free trade by the Republicans would exacerbate job losses and increase poverty.

The US is expected to begin negotiations early next year with NZ, Chile, Singapore, and Brunei to join the Trans-Pacific economic cooperation agreement.

It is unlikely, but not inconceivable that Mr Obama could pull the US out of the talks.

A pointer to this being less likely can be found in his attitude to the renegotiation of the North America Free Trade Agreement (NAFTA).

Mr Obama favours renegotiating NAFTA, ironically to strengthen provisions on labour and environment (which NZ routinely pushes for in its bilateral trade negotiations and successfully did so in its recent FTA with China).

He has warned that an Obama administration would pull out of NAFTA if Canada and Mexico refused to renegotiate.

However, doubts have been mounting in North America in recent months about whether Mr Obama would actually make good on those threats.

His actions on NAFTA early in his tenure may offer some clues as to how bilateral and plurilateral negotiations involving NZ will proceed.

Also in NZ’s favour is Mr Obama’s stated aim to repair the US’s damaged relations with many allies and ‘friends’ which have suffered because of the Bush administration’s war in Iraq and its conduct of the so-called ‘war on terror.’

His pledge to be an internationalist and repair US relations with the international community are potentially in conflict with his anti-globalisation rhetoric, which offers some hope for NZ exporters.

Mr Obama supports pressuring the WTO to better enforce agreements and halt government subsidies to foreign exporters and imposing other non-tariff barriers on US exports.

He also wants to revamp the President’s ‘fast-track’ trade negotiating authority to require pre-screening of potential US free trade partners based on their labour and environmental standards and other factors.

This bodes well for an eventual bilateral FTA with NZ, given that this country is a firm advocate of adhering to such standards.

It may take some time to transact, however, given the myriad of pressing issues confronting the President-elect and his administration.

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2 Comments & Questions

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You can't tell me that neither Obama, Biden nor anyone else in his administration has never heard of 'comparative advantage' and the reasons why trade always increases welfare in the long run. You're mistaken, Obama isn't a trade protectionist, he is a trade pragmatist. Obama pressuring the WTO to stop foreign government subsidies of their exporters, which is a fundamental distortion to free trade, and eliminating non-tariff barriers such as some forms of licensing, is in DIRECT SUPPORT of true free trade. Obama is in full support of free trade and globalization, but you can't go making FTAs and the like willy-nilly without making sure that your partners economy is playing in a fair and open manner. NZ will have no problems with the USA FTA, we are fair, open and free. Obama will overcome the once powerful US dairying lobbyists (who just recently wrongly accused NZ of having a dairy monopoly) because Obama has the broad support from the US people for it. And it will be better for trade. It is actually China (especially) that may start to have some more serious issues, because they have a whole host of non-tariff 'hidden' barriers and their overall standards are comparatively very lax. Even the NZ FTA was not able to cover these issues adequately.

Having said that, the Obama administration, is probably the best hope that China has of continuing its growing prosperity.

Finally, the title of this story piece contradicts the second to last paragraph/sentence. You did stoke the debate though didn't you.

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Thanks for your thoughtful, well-considered response. I find it difficult to quibble with much of what you say, except that I wouldn't go as far as you do in labelling Obama a trade pragmatist. I certainly agree that he has the POTENTIAL to be a pragmatist. Time will tell whether that happens or not. as I suggested in my commentary. You can't ignore the ferocity of his protectionist rhetoric during the primaries. I think the global economic crisis has certainly ensured that traditional thinking, including protectionism, is being challenged and re-shaped of necessity.That's perhaps one of the few silver linings in this whole affair. Hopefully, Obama's thinking will adjust accordingly as you suggest, as there is no doubt anti-distortionary free trade will go a long way towards the global economy's current woes.

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