Giving preferential trading rights to the USA

I see a looming preferential trade deal with the United States is enough for Matthew Hooten to declare Phil Goff New Zealander of the year.  High praise indeed.  Although US trade deals don’t seem to have worked out quite so well for the much bigger economy of Australia (bigger than New Zealand that is, not the US!):

Australia is one of the few industrialized countries that have a deficit in its trade with the U.S., and that deficit has worsened significantly since the pact was enacted. During 2005, the first year of the FTA, U.S. exports to Australia increased to US$15.8 billion, up from US$14.2 billion in 2004. Yet Australian exports to the U.S. dropped slightly to US$7.3 billion, from US$7.5 billion in 2004. Last year, the deficit worsened, as U.S. exports to Australia grew about US$2 billion to US$17.8 billion, but Australian exports to the U.S. increased only to US$8.2 billion from US$7.3 billion a year earlier.

Anyway for a summary of the issue we now face in these upcoming negotiations you can’t go past No Right Turn’s succinct analysis:

Labour is patting itself on the back over the announcement that it will begin free-trade negotiations with the USA. Meanwhile, the rest of us might like to ask how much it will cost and what we will have to give up in order for New Zealand farmers to make a bit more money. Fortunately, the US Trade Representative compiles an annual report on “Foreign Trade Barriers”, which is quite informative on the issue. Here’s a list of New Zealand policies the US considers to be unacceptable barriers to trade, culled from its New Zealand report [PDF]:

  • Restrictions on GM crops;
  • Our current pathetically weak labelling scheme for GM products (informing consumers is a barrier to trade!);
  • Import restrictions on potentially diseased food (stopping people from getting BSE is a barrier to trade!);
  • Sane copyright law which recognises the rights of customers;
  • Voluntary local content quotas for TV and radio (customer preferences are a barrier to trade!);
  • The Overseas Investment Act (requiring that investment actually be beneficial is a barrier to trade!);
  • Pharmac.

The question we should all be asking is how much, if any, of this we are willing to surrender so that farmers can get richer. My answer is “none”.

14 Comments Posted

  1. I read in the Herald that the US has become a net dairy exporter, so maybe an FTA will mean we can buy cheaper American cheese and put our own dairy farmers out of business?

  2. sdonovan,
    Its us, and many other countries, falling head over heals to get a free-trade agrement with the USA, not visa versa; there is not way, atleast on this plane of existance, that we would have the leverage to get them to join kyoto.
    Just like how we could never convince them that the economoic benefits of a economy free of subsidies far outweighs the costs because the american lobbies are so powerful. reguardless of kyoto, our manifacturing of non-agricultural goods could never compete with theirs so long as they have those subsidies. Reminds me of the book “catch 22” and the government subsidies not to grow alfalfa, ah, good old lobby groups.

  3. “we should be smart about ensuring that it creates a balance of opportunities for all parties.”

    Hardly likely given the ideological commitment to free trade at all costs displayed by MFAT. You’re not exactly going to play hardball when you believe that unilaterally dropping your own tariffs and subsidies is a good thing – look at the China FTA and all the protections China demanded – and got – while NZ got next to nothing.

    Can you really see the US joining Kyoto or dropping its farm subsidies in order to score a deal with the P4?

  4. What an eclectic range of comments.

    I agree with tvhe – the overall terms of trade are more important than the trade balance with any particular country. For example, maybe the FTA has allowed Australia to import a whole load of plant/expertise that is then deployed to increase exports to other countries? Another thing to consider is that Australian agricultural exports may have been hit hard by drought – exports which would have otherwise grown.

    Sure the US would enter these negotiations acting in their national interest; political leaders would be crucified at the polling booth if they didn’t. This doesn’t mean we should not engage with them on the idea of an FTA – more that we should be smart about ensuring that it creates a balance of opportunities for all parties.

    For example, one criteria we could place on any FTA is that our involvement is conditional on the US joining Kyoto so that NZ manufacturers were not at a disadvantage. In this way the FTA negotiation process may open doors for advancing progress on issues that extend beyond the movement of goods and services.

    I must say that I am not confident that the Green Party’s attitude to international trade is all that robust – although I’ll be voting for them all the same. I hope that future frogblog posts prove me wrong …

  5. Clearly there is nothing “free” about this so called free trade agreement and it should be rejected out of hand.

    But equally clearly, the Greens object to the agreement not because they support freedom for NZ consumers but rather because they want to impose their own selection of even more onerous restrictions on us.

    A plague on both your houses.

  6. Bilateral trade deficits are a ridiculous thing to look at.

    If we exported raw materials to Australia, imported them again as intermediate goods, and then exported a final product to Japan then greater demand for our products in Japan would increase our bilateral trade deficit with Australia – even though our trade position would be better.

    Not that there is even any problem with running a trade deficit in the first place – given that it means people are willing to loan us money to buy plant and machinery equipment that we could not have afforded otherwise.

  7. The following quote is very apt for this post
    “[The USA’s] overriding purpose, from the beginning right through to the present day, has been world domination–that is, to build and maintain the capacity to coerce everybody else on the planet: nonviolently, if possible; and violently, if necessary. But the purpose of [US] foreign policy of domination is not just to make the rest of the world jump through hoops; the purpose is to facilitate our exploitation of their resources.” Ramsey Clark, US Attorney General, 1991

  8. Kevyn, here are the NZ-US trade figures from Stats NZ over last 5 years.
    2004 exports – $4.3b
    2004 imports- $3.9b
    = +$0.4b

    2005 exports – $4.3b
    2005 imports- $3.6b
    = +$0.7b

    2006 exports – $4.5b
    2006 imports- $5.0b
    = -$0.5b

    2007 exports – $4.4b
    2007 imports- $4.2b
    = +$0.2b

    2008 exports – $4.1b
    2008 imports- $4.2b
    = -$0.1b

  9. Kevyn, I’d have to check but from memory NZ’s balance of trade with the US is and has been relatively even. I think this year it was about $4b each way?

  10. well america has all those barriers in the form of subsidies to crops that would be kept even if we did get them to drop the tariffs, so prehaps they get to keep their subsidies and we get to keep our “barriers”, quid pro quo, lol. but then again, if they droped their subsidies and tariffs and europe did likewise; it would be the best thing that could happen to third world countries. but that will never happen.

  11. How does NZ’s balance of trade with the US compare with Australia’s over that same period. That comparison should tell us how much of the change was caused by exchange rate fluctuations and how much was caused by the FTA.

  12. Another thing that Labour (who I really would like to like properly) are doing wrong.

    Thank you Helen Clark, for initiating the process and thereby giving away the “trade barriers” listed above. Because at this rate, Labour won’t occupy the Beehive, the US will quite happily demand all of the above, and National will quite happily give them.

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