Trade coercion

The Herald reports:

The Government is concerned that hostile foreign powers, likely our top trading partner China, might seek to use trade as a weapon against New Zealand by blocking our exports – leaving billions of dollars of trade in jeopardy.

The threat runs deeper than just trade, with officials making sure that supply chains and communications cannot be weaponised against New Zealand in a wider diplomatic, economic or security spat.

The Government, in particular Trade Minister Damien O’Connor, has been working to bolster resilience to “economic coercion” – when a country tries to use trade as weapon to achieve diplomatic or security goals.

China has a record of using trade as a weapon either in an overt or covert sense.

It blocked lobster and wine exports from Australia, apparently in retaliation to the government’s harder line on Chinese interference.

I’m very pleased the Government is looking into this area. I think we are incredibly exposed to trade coercion where we may feel unable to stand up to China, because they could wreck our economy.

It has become clear that not all authoritarian countries become less authoritarian just because we trade with them. In fact the opposite may occur, where they think that if other countries are dependent on their trade, they won’t stand up to them. We saw this with Russia and Germany and may face this ourselves.

Former intelligence and defence policy analyst Paul Buchanan warned New Zealand was more vulnerable than Australia to China weaponising trade.

He noted that when using economic coercion with Australia, China only blocked things like wine and lobster.

“They did not go after strategic minerals which they depend on. They need Australian minerals to continue their growth to great power status,” he said.

Buchanan said New Zealand had no equivalent of iron ore that would be safe from being blocked. Most of New Zealand’s exports are “creature comforts for their rising middle class” which can be sourced from other countries.

I’m not actually that worried about our exports. If China blocked some exports, that would be a loss of revenue for the country. But as we saw with Covid-19, the economy can withstand a drop in income. The Government borrows to cushion the blow, while exporters find other markets.

The area I worry about is imports. If China stops imports to NZ, then multiple supply chains come crashing down. Think widespread shortages for everything.

What would be useful work for the Government to do is identify industries of critical importance, and work with industry to set targets that no more of x% of that industry comes from a single country. That way we don’t end up with entire industries that can be closed down by trade coercion.

I understand Australia is already someway down this path, so we could work with them on increasing our reselience.