Q+A: John Ballingall interviewed by Corin Dann

Trade war ‘very worrying’ for NZ – NZIER Deputy CEO

John Ballingall, a senior economist and trade expert at economic think tank NZIER says, there’re a number of ways New Zealand could be impacted by a tariff war.

‘First of all, despite what the president thinks, tariffs do not make an economy grow faster. The global economy will slow if there is a tariff war. That means less demand for what we sell to the world. Secondly, it creates enormous uncertainty for business, and when businesses are uncertain, they don’t invest and they don’t hire. And thirdly, and perhaps most importantly, New Zealand is always trying to reduce tariffs, to reduce transaction costs so that we can trade more easily. A tariff war, a trade war goes in exactly the opposite direction, and for a small open economy, that’s very, very worrying.’

John Ballingall told Q+A’s Corin Dann that it is slightly concerning New Zealand hasn’t been exempted from US steel and aluminium tariffs.

‘We export around $65 million worth of steel and aluminium to the US each year. We’re not a threat to the US national security. We have balanced bilateral trade, which President Trump seems to think matters, so it’s hard to think that New Zealand is the target of these tariffs. So it is slightly disappointing that so far we haven’t been exempted.’

John Ballingall told Corin Dann that, ‘The first thing we can do is continue to work on exemptions. And I have no doubt our diplomats are working very hard offshore to do that. Secondly, we can continue to control the controllable. Things that we can control include pushing for more trade agreements around the world, with the UK, with the EU, in Asia. We need to keep working on those, because will insulate us from some of the worst of this trade war. And then lastly, we need to try and have faith in the World Trade Organization.’

Q + A
Episode 4
JOHN BALLINGALL
Interviewed by Corin Dann

CORIN To the looming trade war now between the US and China. Unlike New Zealand, Australia and the EU are going to get a temporary exemption from President Trump’s controversial new steel tariffs. That’s right, New Zealand has not got that exemption. What does that mean? I’m joined for more on this by John Ballingall, senior economist and trade expert at economic think tank the NZIER. Good morning to you, John. Is it alarming that New Zealand, despite Jacinda Ardern writing to Donald Trump asking to be exempted from these tariffs – we do have some steel exports, don’t we – has been left off?

JOHN It is slightly concerning. We export around $65 million worth of steel and aluminium to the US each year. We’re not a threat to the US national security. We have balanced bilateral trade, which President Trump seems to think matters, so it’s hard to think that New Zealand is the target of these tariffs. So it is slightly disappointing that so far we haven’t been exempted.

CORIN We’re supposed to be their very, very good friend, not quite an ally. Do you think we just got missed over somewhere along the line?

JOHN I think this is just a case of global superpowers are flexing their muscles at the moment, and New Zealand is at risk of being caught up as collateral damage. This is not about New Zealand. This is about Trump being consistent with what he campaigned on. He feels that the US economy is being ripped off by other countries. He feels that the US is losing in global trade, and he’s now introducing these tariffs to try and right those wrongs.

CORIN All right, let’s put aside the exemption issue. As you say, the bigger issue here. What is the end effect on New Zealand here? It’s weaker global growth, isn’t it? It’s less demand for our exporters. It’s more hassles and barriers for our exporters, and that ultimately means we’ll all be poorer, doesn’t it?

JOHN That’s exactly right. So there are a few ways that these tariffs, or a tariff war, might impact on New Zealand. First of all, despite what the president thinks, tariffs do not make an economy grow faster. The global economy will slow if there is a tariff war. That means less demand for what we sell to the world. Secondly, it creates enormous uncertainty for business, and when businesses are uncertain, they don’t invest and they don’t hire. And thirdly, and perhaps most importantly, New Zealand is always trying to reduce tariffs, to reduce transaction costs so that we can trade more easily. A tariff war, a trade war goes in exactly the opposite direction, and for a small open economy, that’s very, very worrying.

CORIN What on earth do we do?

JOHN We have fairly limited powers. We are relatively small, obviously. The first thing we can do is continue to work on exemptions. And I have no doubt our diplomats are working very hard offshore to do that. Secondly, we can continue to control the controllable. Things that we can control include pushing for more trade agreements around the world, with the UK, with the EU, in Asia. We need to keep working on those, because will insulate us from some of the worst of this trade war. And then lastly, we need to try and have faith in the World Trade Organization. We need to work with like-minded countries to make sure that the trade rules are applied consistently by the World Trade Organization. It’s so important to us that the rules of the trade game are clear.

CORIN But he’s ripped them up, hasn’t he? This is the interesting thing about this, coming back to exemptions, where we started. If you look at the fine print on the exemptions, and certainly out of Australia, there seems to be a suggestion that they’ve given the Aussies a bit of an exemption on the steel, because that’s more important, I suppose, to them, but they’ve sort of signalled, ‘Oh, but you’re going to get a quota on that. We might have some strings attached.’ Maybe we actually dodged a bullet there.

JOHN We know that the current administration is not a huge fan of the World Trade Organization. So we are in a really unusual situation right now in that the rules of global trade are being disregarded, and that is very, very concerning for New Zealand. We need to work hard with other countries to make sure that that the World Trade Organization takes a firm stand on some of these spurious reasons for imposing trade barriers.

CORIN That’s a really interesting point. It is really concerning. And let’s just go back and remind ourselves, we’ve kind of taken all our tariffs away, haven’t we? That’s the point here, isn’t it? We are an open, liberal trading nation, so we don’t have any mechanism. We went so far down this road, for the world to flip like this, it must be causing a lot of concern at head office at MFAT, surely.

JOHN Sure. I mean, yes, the fact is New Zealand has very low levels of tariffs. That’s been a very good thing for our economy. It’s one of the main reasons why our economy is so responsive and flexible to the global trading environment. So we certainly shouldn’t be looking to think about things like retaliation. That is going to serve absolutely no purpose which is good for New Zealand. Our best hope is to work with other countries and make sure that we work alongside bigger countries—

CORIN Hey, let’s unpick that. Why not? Why don’t we put a tariff back up on steel and protect our steel industry? I mean, there is an argument for protectionism. Why not?

JOHN There is absolutely an argument for it; it’s just not a very good one. If we look in America, for example, there are around 140,000 workers in steel and in aluminium production. There are about 6.5 million workers in industries that consume steel, like automotive or aeronautical. So it’s been modelled for every one job is been saved through these tariffs on steel and aluminium, another five will be lost somewhere else in the economy. That’s not the sort of game we want to be playing. And also it goes against New Zealand’s reputation for being one of the good guys in global trade. We are an open economy, and we benefit from that. We will gain nothing by imposing tariffs ourselves.

CORIN All righty. John Ballingall from The NZIER, thank you very much. Let’s hope that it’s not a case of good guys coming last when it comes to trade wars. Thank you very much for your time.

JOHN Thanks.



Transcript provided by Able. www.able.co.nz

Please find the full transcript attached and the link to the interview here.

Q+A, 9-10am Sundays on TVNZ 1 and one hour later on TVNZ 1 + 1.
Repeated Sunday evening at around 11:35pm. Streamed live at www.tvnz.co.nz
Thanks to the support from NZ On Air.
Q+A is also on Facebook + Twitter + YouTube

© Scoop Media