Up periscope – and let’s take a peep at the 2019 global outlook

With the Black Caps in magnificent record-setting form is there any need to worry about 2019?  Well, yes there is and we have harnessed the resources of our world-wide network of correspondents to assess prospects for the next 12 months.

In a  three part  series  Point of Order  pushes   up  its  periscope  to  scan the  horizon.

First, how does it look  internationally?

Global trade, European security, China-US relations all cloud the scene.

In the US, our New York correspondent reports, the Democrats are anxiously pawing the ground waiting their takeover of the House of Representatives on January 3. Speaker-elect Nancy Pelosi will have her work cut out corralling the dozens of inquiries members want to launch into the multifarious activities of President Donald J. Trump and his immediate family.

Number One will be his tax records.   He has enough to worry about with seven separate inquires already under way into various aspects of his presidency.  One victim has already been claimed: his New York-based Trump Foundation.  In Manhattan a new District Attorney is preparing further assaults.

Will the Democrats seek to impeach him?  It depends on what happens to the inquiry by Special Counsel Robert Mueller.  Trump may order his newest Attorney-General to shut it down but, given the elasticity of the current US system, its contents are bound to leak.

Given the hints already appearing on what Mueller may report, from Russian interference to Trump’s intersection with Russian interests before and during the election campaign, the disclosures could be devastating.

Pelosi could certainly secure a majority in the House to impeach him. With the Republicans in charge of the Senate, a two-thirds majority to convict him is out of the question.  One idea in circulation is that, given the scale and enormity of the inquiries swirling around him, Trump may resign and President Mike Pence might pardon him. 

One win he has recorded, though, is with China over trade.  He apparently reached an accord with Premier Xi Jinping in December, but this entails China’s dismantling its system of state intervention which the US says distorts trade. Already the new tariffs are beginning to bite. This also hurts US industry. 

However, the two sides continue talking. This past weekend, President Trump reported “positive progress” among officials from both sides.

Internal stress in the Chinese economy might prove a more effective weapon.  According to the Financial Times, the US trade war coupled with a crackdown on shadow banking made China the world’s worst-performing stock market in 2018 shedding an estimated $US2.3 trillion value.

Intimations of growing internal dissent are matched by increasing autocratic shutdowns of criticism on social media, mainstream media and civil society activities including religion. This suggests rising internal stresses which may induce China to take a less-belligerent line on strategic activity in the South China Sea. 

From Africa through Asia to the Pacific, governments are waking up to the consequences of climbing aboard the Belt and Road campaign.

Even in New Zealand, which signed the first free trade agreement with the modern Chinese economy, there has been a gradual realisation that some Chinese activity is not necessarily benign.  Point of Order  contacts insist that the GCSB was not merely following a Washington/Five Eyes line in blocking Huawei. Its conclusions were based on hard information gathered by its intelligence officers at home and abroad.

Climate  change  is a  problem  of unprecedented   scope and intractability.  New  Zealand  has its own  headaches,  with  the need  to  reduce  agricultural  emissions  without  damaging the  export income  on which the  country   depends. Policymakers  have tools to bring about change  but  each of them — ranging  from  a carbon tax, regulation, subsidies, command and control —  carries  political  risk.

Global  sharemarkets  became highly   volatile   through  2018  and some reports  suggested  bearish  fund managers  are piling into cash   and building  defensive  positions.  Volatility  may continue to be  the order of the  day  unless  China  and  the  US  somehow claw  their  way  out  of their  threatening  (and debilitating)  trade clash.

For the Ardern government’s trade policy advisers, the  achievement of the past year  lay in the massive  Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The CPTPP provides NZ with trade agreements for the first time with three significant economies: Japan, Canada and Mexico.

Tariffs in those countries began  to be  trimmed  from December  30. Mexico and Canada cut tariffs again on  January 1, giving a further boost to the competitiveness of New Zealand products in those markets.

When Viet Nam joins the agreement on  January 14, it will make an immediate double tariff cut to catch up. Japan’s second tariff cut will take place three months later on  April 1.

The CPTPP has the potential to deliver an estimated $222m of tariff savings to NZ exporters annually once it is fully in force, almost half of this – or $105m – now available in the first 12 months.

 The CPTPP  reinforces  the  need for   for  further  FTAs. Hopefully the year  will  yield conclusive progress on a FTA  with the EU but may or should also extend to the US, even though some aspects might not be politically palatable.

The UK remains important but this depends on Brexit and what happens by March 29. One correspondent reckons that, faced with defeat in the Commons, the British Government may seek a second referendum on severing EU ties with a proper discussion of the consequences. 

Ironically, the furore over Northern Ireland’s boundary with Ireland  may be the catalyst.

A Labor government seems certain across the Tasman.  Wellington is well-placed to link immediately with the new administration with High Commissioner Dame Annette King already well-known to Labor front benchers while at home, the new Secretary of Foreign Affairs and Trade, Chris Seed, has an intimate knowledge of how the Australian system functions.

And  what   odds  are  available  on   Helen  Clark  being named  as  High Commissioner  to the UK,  in  succession to  Sir  Jerry Mateparae?

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