The United States is about to sneeze and the rest of the world will catch a cold as a golden era of free trade comes to an end.
Trade is one of the few areas of common ground in the United States presidential race, and it does not bode well for New Zealand.
Both incumbent President Joe Biden and his challenger Donald Trump have policies to introduce tariffs and support domestic industry, and while their primary target is the perceived unfair competition from state-supported manufacturers in China, Trump is talking of a 10% tariff on all imports.
As we report this week, the direct impost of a 10% increase in the price of our exported goods is significant, but equally so will be fallout from the inevitable geopolitical tension and tit-for-tat retaliatory behaviour.
Also of significance is the further dismantling of the World Trade Organisation (WTO) and its efforts to create a rules-based global trading environment.
It has been limping along since the US refused to ratify new appellant judges, meaning the body lost its ability to hear allegations of breaches of trade agreements.
Inevitable rising geopolitical tensions will also mean strained or less inter-government communication on areas such as trade.
Respected trade official Vangelis Vitalis has been warning for several years that this was coming.
His message has been that after two decades of expansion and countries adhering to the same rule book, global trade is becoming shrouded in uncertainty.
Vitalis, the deputy secretary for trade and economic with the Ministry for Foreign Affairs and Trade, says NZ has benefited hugely from this era of rules-based global trade through the growth of free trade agreements and the lowering of quotas and protectionism.
NZ has successfully taken 11 disputes alleging unfair or illegal trade behaviour to the WTO, winning them all. We now have 76% of our trade covered by FTAs.
But the world has become much more complicated since the covid pandemic, with growing nationalism, concerns about the environment and labour standards and the Ukraine-Russia war and conflict in the Red Sea.
The notion of free trade has fallen out of favour and increasingly non-tariff barriers have been imposed, which cost NZ exporters alone an estimated $20 billion.
A clutch of small lightly populated islands at the bottom of the Pacific Ocean, NZ relies more than most on exporting to survive.
We also rely more than most on using our natural environment to change the format of protein which is then put in shipping containers and exported around the world.
Being part of a multi-country FTA can ease tension during negotiations over what products are included and what are excluded, as countries make trade-offs to get the best deal.
It is likely future FTAs will not be as comprehensive as we have had in the past, as countries are more strongly positioned to trade off what products are in and what are out.
The world is a very different place and for the sake of our economy we hope our trade negotiators can traverse this more nationalistic, unsettled political and economic environment.
