02-02 Economics

Who is your best buddy? China or the US. Sound childish? Of course. But in simple terms the short and long-term relationship between the US and China is the hot issue for both New Zealand and Australia. They do not want to have to choose.
The problem is that China, as a quasi dictatorship, does not separate politics from commerce.
China, taking a current issue, has jailed two Canadians because Canada, doing its duty under an extradition treaty with the US, is holding the CFO of China’s large telecommunications firm, HUAWAI. And China has recently jailed an Australian, because Australia will not allow HUAWAI to supply the necessary equipment for the new 5G network in Australia. China, of course, denies the connection.
An ex son-in-law used to work for a competitor of HUWAI, and 5G networks are going to be the high-speed networks of the future that will keep us all inter-connected.
The potential conflict between China and the US, which could be called a trade war or a cold war, will impact the growth of the world economy, but with special implications for Australia and New Zealand. Australia sells China iron ore and coal and New Zealand sells them meat and dairy products. The graph is self explanatory, but interesting.
The people of Australia and New Zealand are conflicted. They are connected to the US, Canada and the UK in sharing intelligence, and have historic links to Britain and the Commonwealth. But their major trading partner is China.
And President Trump is not making things easier. He is showing little interest in the organizations designed to link the Asian nations together. Like APEC, Asia- Pacific Economic Cooperation or TPP, the Trans-Pacific Partnership.
And who is building new artificial islands and military bases in the South China Sea. And who is financing infrastructure in a whole range of island nations in the South Pacific. China, of course.
I have only visited Fiji, but these islands are all strategically important for both security reasons and resource development. China seems to be strategic while the US shows confusion and uncertainty to the world.
If I was to make an educated guess, the big danger is that American isolationism will turn the Asia Pacific Area over to China, an area that after WW2, was under the control of the US and Australia. President George W Bush referred to Australia as the American Deputy in the South Pacific.
I had a couple of interesting experiences during visits to Australia and New Zealand. It was the slaughter of lambs during the day in New Zealand and seeing them leave by plane to locations around the world the following morning. And it was fresh lamb in sealed packaging.
They said they opposed live transport of livestock which is a big industry in Australia. The photo is of a special ship designed for the transport of sheep and cattle for slaughter.
During my last visit to New Zealand in 2008, I did my bit for the economy of New Zealand. I bought a sweater that is 40% possum, 50% merino wool and 10% nylon. Light and warm.
And as a boy working during the summer in the family clothing business, I loved listening to my father talk about the finest men’s woollens that were always a product of New Zealand merino wool.