25th January 2017

The world looked very different a year ago. The UK was holding together well, having escaped (albeit narrowly) a Scottish referendum proposing its own independence. The US seemed certain to settle into a Hillary Clinton presidency, despite blips on the radar coming from Bernie Sanders as well as a particularly unconventional challenger in the Republican Party. Europe was managing internal discontent from the cries of southern nations like Greece and Spain, as well as the strain from Middle Eastern immigrants and refugees.

The TPP, TTIP and TiSA seemed to be likely bets, at last standardising trade relations between the major powers in addition to several rising economies. As with the other issues mentioned above, the cracks were papered over and soon the world’s attention moved away. Elsewhere, several Middle Eastern hotspots were in conflict (as they remain today), but Western nations had largely withdrawn and seemed unlikely to return. Times weren’t perfect, but to many people they seemed well within the bounds of what is normal and manageable.

Since then, it has been a rather interesting 12 months. Ballot victories for Brexit and Trump have fractured longstanding international relationships, and are likely to kill off some or all of the abovementioned trade agreements. The political futures of the US, UK, and other countries like France (where the economically protectionist right-wing National Front Party, headed by Marine Le Pen, leads preliminary polling for April’s election), have exacerbated rifts within institutions such as the EU – creating sore spots that groups like ISIS have sought to further inflame. 

Change can bring difficult times, but it can also bring opportunity. Particularly in an environment with no clear modern precedent, it is worth paying close attention to every utterance about trade deals (Prime Minister Bill English, for example, has vowed to press forward with Trans-Pacific Partnership negotiations even though US President Trump has already turned his back on it), new national policies and international alliances, as well as what seems to have been entirely left out of too many planning sessions around the world lately: Public opinion.

Whether the future brings a version of the TPP or the RCEP (Regional Comprehensive Economic Partnership) is yet to be determined, but the former trade agreement includes the US and 4 other countries in the Americas, while the latter excludes those but includes India, China and South Korea. Perhaps no deal will fill the void, and it is even conceivable that the next large-scale political disruption in Europe will break apart the Eurozone entirely.

Whatever the case, the ripple effects from recent earthquakes will continue to be felt in New Zealand, as the nature of trade relationships abroad will dictate the environment in which the country will produce goods for itself, as well as import and export other goods.

A company’s entire business strategy can (and often should) change depending on whether it has a comparative advantage in the Eurozone or in China – or whether its competitors from those areas will have a competitive advantage over it in New Zealand. These are the types of economic conditions that are still very much up in the air, and since they are as yet undetermined, national and business leaders may be open to certain amounts of persuasion by those who present their message well.

 

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