Henry Thomson's Letter from America

Henry Thomson tracks an inward turning America whose changing attitudes to global cooperation and multilateral trade agreements pose difficult issues for New Zealand and how we earn our way in the world

29th Jul 20, 11:54am by Henry Thomson

The Covid-19 pandemic has achieved the near-impossible: It has drawn Americans’ attention away from the upcoming presidential election and Donald Trump.

Only 99 days out from election day, virus-related stories continue to dominate the front pages of local newspapers. Although almost every other TV advertisement is a message from a presidential or senatorial candidate, the ongoing public health crisis has created a unique campaign season and it is likely that many voters are yet to engage deeply with any of the political campaigns.

Nonetheless, campaign season is upon us. The 2020 US presidential election promises to be particularly consequential for New Zealand, because it looks likely to be emblematic of a new attitude towards globalisation in America that is beginning to crystallise. Neither Trump nor his opponent, former Vice President Joe Biden, fully support the open, US-led multilateral trade system epitomised by the World Trade Organization. There is not a consensus between the candidates on this issue, but the political terrain is shifting in ways that pose risks for a small, open economy like New Zealand’s.

In a series of recent posts, Keith Woodford asked how the share of New Zealand’s exports to China came to increase from 6% to 24% in the space of a decade and whether promising alternative markets exist in East Asia, Southeast Asia, South Asia or the developed world. (Spoiler alert: it doesn’t look encouraging.)

The relative importance of the US market has stagnated as that of China has risen: America took the same 10% of New Zealand exports in 2018 that it did in 2008, predominantly animal and food products. This suggests significant, but relatively mild vulnerability to changes in US policy compared to that of China. As Keith points out, access for beef, lamb, wine and kiwifruit is good and access for dairy is unlikely. Kiwis may therefore think that mounting skepticism towards free trade from Trump and Biden is of little concern.

That would be a risky assumption. It is worth recalling that China’s rise as a trading powerhouse occurred only after the country became a member of the World Trade Organisation in 2001. Despite bilateral free trade agreements, the erosion of a multilateral trade regime lacking strong US support could have unpredictable consequences. China could, perhaps, provide more favorable terms to partners within its own Belt and Road Initiative, for example.

More concretely, although China takes around a quarter of New Zealand exports, the four next-largest destinations are Australia, the US, Japan and South Korea – all strong allies of the United States, in every sense of the word. And outside of this group, New Zealand divides its exports among a very large and diverse set of countries that all take only a small share of the total but together make up 41% of the total or USD 16.4 billion in 2018. This kind of broad market access is only possible within the framework of a strong multilateral trade regime.

Kiwis should be concerned that Americans are becoming increasingly opposed to free trade, and their presidential candidates are increasingly echoing that opposition. A declining share of Americans support international trade and business ties: 78% in 2002, 68% in 2014 and as few as 47% this April – a lower level of support than in the depths of the Global Financial Crisis in 2008.

Donald Trump’s myopic views on globalisation have been well known since he fulminated against bilateral trade deficits in his ghost-written 1987 biography Trump: The Art of the Deal. (I am grateful to an astute relation who gave me a used copy of this book before the 2016 election; it remains a remarkably revealing document and well worth a read.) Readers will be aware that after entering office, President Trump repudiated the Trans-Pacific Partnership trade agreement and re-negotiated NAFTA. His administration has also blocked appointments to the WTO’s Appellate Body, hamstringing its ability to resolve disputes among members.

More surprising is Joe Biden’s new anti-globalisation stance. Part of the Obama administration that negotiated the TPP, and a former supporter of NAFTA and permanent normal trade relations with China, Biden has now laid out a “Buy American” plan to counter Trump’s “America First”.

Biden’s plan would place new restrictions on government procurement to privilege US firms. It would encourage domestic production of medical equipment, pharmaceuticals and a raft of energy and high-tech manufactures. The plan explicitly favors the protection and promotion of US manufacturing, through new restrictions on trade if necessary. He has not voiced any support for re-engaging with the TPP, which in March 2018 was signed by a group of 11 Asia-Pacific countries including New Zealand.

The Democrat’s recent moves to push back against free trade are not surprising given public opinion and what some commentators call our current era of “deglobalisation”. They are also politically smart: Trump’s harsh criticism of NAFTA was a major rallying point for blue-collar voters in 2016. It would have been foolish for Biden to cede the economic nationalist field to Trump entirely.

However, Biden’s “Buy American” plan marks a turning point. Now it is not only Trump the outsider opposed to globalisation, but the establishment candidate, a 36-year Senate veteran and former Vice President.

New Zealand is in a delicate position. Unlike the small, open economies ensconced in the European Union, it has no guarantor of market access aside from the multilateral WTO system. Its major trading partners are split between China and those led by an increasingly China- and globalisation-skeptical United States. If the world is indeed entering an era of deglobalisation and the Covid-19 pandemic is accelerating this transition, New Zealand might spend as much time fighting to maintain access to existing markets as it does searching for new ones.

Henry Thomson is originally from Amberley, North Canterbury and is now an Assistant Professor of Political Economy at Arizona State University. His research focuses on the political economy of authoritarian rule and transitions to democracy. You can read more about his research here and follow him on Twitter @HenryRThomson. His earlier letters are here.

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16 Comments

by murray86 | 29th Jul 20, 12:57pm 1595984271

Interesting, although if I remember correctly it is American companies who largely drove globalisation, as they looked for cheaper, easier ways to make a buck while avoiding having to tackle the more difficult issue of productivity. For the US to successfully quell trade with other countries, the reputation it once held for having affordable but (reasonable) quality items will change as most things get a lot more expensive.

by TuaWai Smith | 31st Jul 20, 1:53am 1596117230

Agree...trump tariffs and isolationist policies are already effecting prices in the USA. US isolationism policies and trade embargoes with Japan and Germany helped create WW2. It creates poverty, reduces GDP of all countries, raises prices, forces countries to take drastic measures to ensure the survival of their own people etc, etc....but if that is what the economically uneducated voters want...sure, lets repeat past mistakes. Like trump, it will only last a few years and the tables will turn again and life goes on...just brace yourself for the next few years if you want to vote in these policies.
Biden is only politicking, he knows isolationism doesn't work..its election year and he has to cater to the voters on the fence that are not as absolutely uneducated as hard core non reasoning trump supporters.!!

by buyandhodl | 29th Jul 20, 1:00pm 1595984453

There's a dark timeline possible here where international trade crumbles and New Zealand becomes very, very, very reliant on China. Such relationships historically tend to end in subjugation

by xingmowang | 29th Jul 20, 1:43pm 1595987039

The two forces -- the decline of the US and the rejuvenation of China, are inevitable.

It is propelled by history, and simply unstoppable unless a global scale nuclear war took place eliminating the entire human civilisation.

It is a time to really understand each others culture.

Jack Ma once said in a high level forum that he has read the Bible for five times and asked the western audience that how many have read any classic Chinese literature to understand the culture. As expected, silence and shaking heads.

While observing how all country deals with the COVID19 pandemic, one thing is for sure that there are far more factors to the US apart than bringing it together and it will worsen as the share of Anglo-Saxon population keeps declining.

By contrast, the solidarity exhibited in China is simply paramount.

by oldbloke1 | 29th Jul 20, 2:24pm 1595989491

The only inevitable thing is death, (and taxes, if you're a cynic). Look at the effect that the virus has had on the world, think of other unanticipated possible events, and ponder inevitability.
Any culture, which has its foundations in writings from 2000 or more years ago, is in for some nasty shocks in today's world.

by buyandhodl | 29th Jul 20, 2:35pm 1595990126

Nothing is inevitable. Least of all China under current leadership becoming a stable world hegemon.

Xi has shown his hand in India, SEA and Hong Kong.

Coalitions are building and as much as America is divided they are united on opposition to Chinese Imperialism.

China is likely to become increasingly isolated on it's current trajectory. Remove Xi. Build a democracy. Respect human rights and international law and China will eclipse the U.S.A.

Do none of these things and internal revolt and international pressure will stop the CCP, perhaps resulting in China (once again!) disintegrating into many different countries, I'm sure the Cantonese are sick of speaking Mandarin by now after all

by xingmowang | 29th Jul 20, 3:02pm 1595991773

You are clearly those people who never read any classic Chinese literature and have very very limited idea of what China is and what it means to be Chinese.

We are perfectly fine and lucky to be under Xi and CCP's leadership.

by Timmyboy | 29th Jul 20, 3:28pm 1595993285

Living in NZ and under CCP leadership.

That's what worries us Xingmo.

by BadRobot | 29th Jul 20, 3:28pm 1595993313

Thanks for the totally empty statement. You are making an assumption that buyandhodl has not read said literature which raises the question what literature are we supposed to have read and how does it relate to the modern China.Clearly not all Chinese are happy with the CCP - look at Hong Kong. Your broad sweeping statement is only your opinion (and a biased one at that) - you are not speaking for ALL those of Chinese descent.

by ddporter | 29th Jul 20, 5:51pm 1596001911

Look at history, Hong Kong was a forced compromise by the British, unlike Macau.The lease is up and British have left, Hong Kong needs to make a deal with China, the riots have made things much worse. Time is running out. If the riots continue, China will have no choice and will take full control. they donot care about world opinion, they care about control and do not want riots spreading to other Chinese cities

by buyandhodl | 29th Jul 20, 3:52pm 1595994746

Actually you are wrong.

I have read deeply on Chinese history and Literature.

I have read the four books and five classics of Confucianism.

I have read the Romance of the Song (and was lucky enough to see it performed when I was in Hangzhou in 2015) and the Romance of the Three Kingdoms.

I understand why your capital is in such a god awful location (fun fact, Beijing is an excellent location to store China's wealth and riches before transporting it to Mongolia).

I spent 6 months in China in 2015 exploring (in order of preference) Shanghai, Hong Kong, Hangzhou, Chengdu, Xian and Beijing. When I finished university I considered applying for jobs in Shanghai and would be working there currently if Xi Jinping was not pursuing the path he currently is.

As for your insinuation that everyone in China is happy, loves Winnie the Poo and the CCP.. please.... that's a hard enough thing to achieve when people have a say, let alone when they are crushed into obedience, have their privacy and rights violated, have fellow residents be ethnically cleansed and watch their leader increasingly isolate himself on the world stage....

by Foxglove. | 29th Jul 20, 6:16pm 1596003414

Classic literature. Historical facts. Before his descendants subjugated China, Genghis Khan swept west enslaving and decimating all in his way including East Europe, and introducing too, the art of biological warfare at the siege of Caffa. The Chinese inherited the horrendous biological experimental Unit 731 from the Japanese post WW2. CV19 like the above founders of the Yuan dynasty have devastated and ruined the vast remainder of the world. Untold destruction and grief to unsuspecting and unprotected peoples by the millions. Not one word of responsibility, not one word of apology. That in itself sums up the CCP. Genghis Khan would surely applaud. Our friend Comrade X here, undoubtedly does from the sound of it.

by ddporter | 29th Jul 20, 5:40pm 1596001200

Thats very much a dream, BEFORE Communism 1949, China was in a terrible state even before WW2 and the Japanese invasion in the late 1930s, The poverty was beyond belief, the people had NO future, it was a few super rich warlords that ruled with a puppet Emperor. The rich were so greedy, they did nothing for the people, fled to Taiwan and much disorder. The present Chinese people remember this and NEVER want to go back to those days. China is now respected, it was not so in the past.

by BadRobot | 29th Jul 20, 9:33pm 1596015193

I'm curious - how is China now respected. Some have respect for the Chinese people and all the troubles that they have endured - but so have the Jewish people over the centuries or the Germans who were forcibly displaced after the second war. This is not however respect for China or more accurately the CCP.

You are making an assumption that only the CCP can offer security / control that the people seek. How about letting the people decide in fair and free elections - that is what scares the CCP - they may not be as popular as they think they are.

by murray86 | 30th Jul 20, 7:21am 1596050470

DD how is that past different from today? Instead of multiple warlords with separate fiefdoms, there is just one and he is also the titular emperor, and they are very rich compared to the people. In many respects China's history doesn't record a change in the nature of China, only the degree.

This is just a demonstrated variation of human psychology with people striving for power and control; influence over others and domination. The west has been through this too, many times. Much of it driven by religious movements, and here the Chinese antipathy towards religion can be understood. And Xing's exhortation to read ancient Chinese literature is understandable too. As a culture, the Chinese people understand what it is to be dominated, so much of their literature (at least that that I am aware of) deals with the nature of things, and the ways to survive the turmoils of the world around you (like peasants all over the world, adept at survival no matter what happens); for example the reed, bending before the wind but remaining firmly rooted and able to survive, even flourish. Chinese culture at the upper level,like many Asian cultures, is to a degree xenophobic. Not because they really dislike foreigners, but because, being aware of our history, they do understand just what kind of threat we pose to their culture.

by kiwichas | 30th Jul 20, 10:23am 1596061430

The Chinese people don't seem to remember the 120, 000,000 deaths attributable to Mao, or were never told, or think it too fantastic a number to possibly exist, just like the 6,000,000.No "truth and reconciliation" there, just written out of history, like the Tiananmen square massacre.
Orwell on steroids, I'm sure Xi has read and learned from "1984"the Bible for would-be Big Brothers.