Anxious wait for exports to US

NZ Farmers Weekly, Nigel Stirling

Exporters are watching anxiously to see if President Donald Trump will adopt a proposal for a 20% tax on all imports into the United States.

The so-called border adjustment would help pay for a cut in American corporate taxes and was a key plank of Republican Party tax reform plans long in the works.

Backers including House Speaker Republican Paul Ryan said it would help level the playing field for US companies hit with GST-style consumption taxes in foreign markets but not levied on imports entering America.

Trump had run hot and cold on the idea both during and since the presidential campaign but agreed it was one way the US could boost its exports.

He also said he sees it as a potential funding source for his plan to beef up the border with Mexico.

Trump trade adviser Peter Navarro suggested the tax could be used against countries the US ran large trade deficits with such as China, Mexico and Germany.

A former New Zealand diplomat now in Washington DC said whether the tax would be levied selectively on imports from countries the Trump administration wanted to punish on trade or across the board as proposed in the Republican plan was still up in the air.

“The feeling here there is with so many of these ideas floating around that something is going to stick in some way.”

Just how the tax would be applied and on whom was of major interest to a range of NZ primary exporters that could be winners or losers depending on the final shape of the measure.

Applied across the board it would dampen returns from the US and potentially force product into less lucrative markets.

Dairy Companies Association executive director Kimberly Crewther said the US was in the top five markets for the NZ industry.

The industry here was monitoring the development of the tax plans but with the detail still to be confirmed it was difficult to assess what impact it could have on NZ dairy exports to the US.

With an increasing share of US dairy production now for export the NZ industry believed it had an increasingly shared interest in trade liberalisation.

An example of that was recent co-operation in pressuring Canada to drop a proposed guaranteed minimum price scheme for its farmers, which the US and NZ argued had the potential to suppress global milk powder prices and ran counter to international trade rules.

Given that background Crewther said it would be disappointing if the US were now to erect barriers to trade in its own market.

The meat industry also had a significant stake in the US which was far and away its single biggest beef market.

A source from the NZ industry currently in the US detected general support among ranchers for Trump’s plans to cut federal regulation but that did not extend to his agenda on trade.

There was widespread dismay at Trump’s decision to withdraw from the Trans Pacific Partnership.

The agreement would have progressively lowered tariffs in the heavily protected Japanese market.

The source said there was no appetite among ranchers for a border tax.

“They are worried about what it will lead to because if they put a 20% tax on imports it is going lead to some sort of retaliation from trading partners and potentially against US beef.”

Similarly, NZ Winegrowers advocacy general manager and general counsel Jeffrey Clarke said he was aware of no groundswell among US producers for protection against foreign competition despite recent strong increases in imports from NZ.

“I would be surprised if this was an issue that hit wine but a lot of surprising things have been happening lately.”