May Trade Update
As this is written there is a mixture of good and bad news on the trade front. The best news is that the threatened US-China trade war may have been averted (for now). The latest round of negotiations on the expansion of the Pacific Alliance is underway. And we now have a date for the launch of FTA negotiations between New Zealand and the EU. But the dispute over US steel and aluminium tariffs remains. Moreover the US decision to withdraw from the Iran nuclear deal is a worry for those New Zealand exporters and investors who took hope from the Obama Administration’s lifting of sanctions.
US Steel and Aluminium Tariffs
New Zealand exporters continue to be subject to higher steel and aluminium tariffs in the US. A number of other countries including Japan and China are also subject to these tariffs. While a number of other countries have been exempted temporarily from these tariffs it is unclear how long this exemption will be in place. The EU, for example, has rejected US calls for a voluntary export restraint agreement in return for removing the new tariffs permanently. The prospect of WTO action is looming. It is unclear whether New Zealand will join such action.
The Government has announced that FTA negotiations between New Zealand and the EU will begin in July. EU Trade Commissioner Cecilia Malmstrom will visit New Zealand in mid-June to meet her New Zealand counterpart Hon David Parker. For those experiencing difficulty accessing the EU market this is your opportunity to explain these problems to MFAT so they can be part of New Zealand’s negotiating objectives.
The latest round of negotiations between New Zealand, Australia, Canada and Singapore about joining the Pacific Alliance FTA is underway in Canada. This offers the possibility of CPTPP plus access to the Mexico, Peru and Chile markets and new access to the large Colombian market. This will be the first negotiation where the Labour/ NZ First/ Green coalition progressive trade policy is the subject of negotiations. It will be interesting to see what emerges.
Iran used to be a very important market for New Zealand, at one stage it was one of our top 5 export markets. But politics, internal and external, saw the market drop away. Sanctions made it impossible or very difficult to trade. But the Iran Nuclear Agreement negotiations between the EU, US and Iran saw the easing of sanctions. Many New Zealand companies were keen to resume trade links and the previous Trade Minister led a trade delegation to Iran with the explicit goal of supporting this interest. New Zealand banks were proving unhelpful as they were wary of continuing US financial industry sanctions, but some exporters were getting goods into Iran, some directly, others through partners in the Gulf region.
The re-imposition of sanctions by the Trump Administration and the threat of action being taken against companies and nationals of third countries trading with Iran threatens to damage these recently renewed trade links. While agricultural commodities and medical devices are not caught by the sanctions, it could still become hard to do business in Iran if the sanctions affect banks, ports, shipping lines etc. It is theoretically possible that New Zealand companies trading with Iran could be excluded from the US market and executives of these New Zealand companies could even be arrested if they travel to the US. It is far from clear whether this will actually happen but we recommend that you receive good advice on potential consequences should you be contemplating doing business with Iran at this point in time. In the first instance you should approach MFAT and NZTE and get good legal advice.