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Nov 07

Why the American Election 2012 Matters in NZ

Why the American Election 2012 Matters in NZ

American Election 2012: A contradictory sense of pride and trepidation enshrouds me every 4 years on the first Tuesday in November when the United States elects its president. Pride in that the soaring rhetoric of the candidates’ campaigns prompts a belief that the legacy of the United States a beacon of democracy and freedom will be carried forward. Trepidation in that I, like many in the rest of the world, fear the worst from each candidate respectively based on the calamities the other candidate has promised will occur if his opponent is elected.

From an American legal perspective in New Zealand, I can look back over the past two elections and honestly see very little change in American foreign policy towards this part of the world. Yes, when President Obama took control there was a more conciliatory diplomatic tone struck with the rest of the world. However, from a policy wonk perspective, not that much changed. The US continued its muscular military stance in the Middle East, if not becoming more militant. President Obama ordered American drones to invade the sovereign air space of countries with which there was no direct US declaration of war to track down and eliminate alleged terrorist suspects. This was only a logical continuation of the long term US strategic military plan in its battle against Islamic terrorists.

Yet, New Zealand’s military posture towards the US did in fact change, with the relations thawing from past chilly disagreements. For the first time in years, NZ planned joint military exercises with the US.

Also there was a noted increase in diplomatic commercial relations between the two countries. Of particular note, the US agreed to enter into the TPPA negotiations and has had both its Secretary of Trade and its Secretary of State pay official visits to New Zealand. Most assuredly this is because of a renewed understanding in the American hierarchy under President Obama of New Zealand’s positioning as an integral part of the global supply chain. This is routed in New Zealand’s work in free trade agreements in the region, and notably with its free trade agreement with China. Yet, this was not a significant change either from the US work in promoting free trade agreements that supplant the multilateral WTO and GATT systems to the extent that negotiations had stalled. Nor does it change what for now two decades has been US leadership in globalizing trade and corporate structures.

This brings me to my point of what is likely the most significant issue to Kiwis in the American election. While American foreign policy does not change significantly between administrations, there is one marked difference between the Candidate Romney and President Obama that touches directly on New Zealand. Candidate Romney has promised from “day 1” to label China a “currency manipulator”.

Under both the WTO and the IMF, labeling China as a currency manipulator triggers certain responsive measures that the US can unilaterally take. Further, it brings forward the possibility of dispute resolution procedures and further involvement of both the WTO and the IMF in resolving the dispute. In any case, this most definitely would be the opening volley of a trade war between the two countries that has the potential to significantly impact New Zealand.

New Zealand’s position as the only country in the world with a free trade agreement with China, its integration into the global supply chain, and its western democratic tradition create the possibility that New Zealand could act as a mediator between the two giants. Also, the very fact that much American industry thrives on cheap Chinese goods could see a redirect of trade into New Zealand, starting a trade triangle of sorts, if the US raises tariffs on Chinese goods which are needed into the US.

If President Obama is victorious, the idea of pressuring China to change its currency treatment will likely persist (as there is not apparently a large mandate for Mr. Obama if he should win this election). A changing Chinese currency will certainly affect the New Zealand dairy industry and may have an effect on the New Zealand dollar as well.

Either way, the new US policies indicated in the campaigns towards Chinese currency manipulation will reverberate in New Zealand. Finding innovative ways to navigate the international trade agreements amongst these countries will be in the interest of Kiwi businesses. Norris Echetebu Law can assist with structuring transactions to help Kiwi business take advantage of the upcoming trade climate change, no matter which way the political wind blows.

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