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Recent key developments in MAKE│NZ
In our never ending quest to bring you the latest in manufacturing news, locally and globally, we have anLast night’s Fireside Chat featured a panel of Community experts directly involved in dealing with tariffs and what that’s meant for them and their operations. Matthew Coleman, Global Operations Manager, Link Engine Management, Philip Benson, Operations Director, AW Fraser, and Rob McKenzie-Carrol, Operations Manager, Hamilton Jet, all took turns to share their thoughts and then answer questions from the room. In general, the impact on their respective businesses had to do with changes to supply chain management and, in particular, reviewing the HS Codes they are using in their Customs declarations. Especially for those potentially falling under the Section 232 50% tariffs on steel, aluminium or copper (content), it is really important to make sure that the correct HS Codes are used. That exercise alone has created a significant extra burden on processes.
The other thing that emerged from the presentations and the ensuing discussion is the impact the uncertainty created by the perturbations of global trade has on businesses. There may well be significant opportunities – as well as threats – arising from this. But pursuing significant opportunities usually requires investment, and investment requires certainty …
It was clear throughout the discussion that while it’s an unpredictable time, the focus should be on scenario planning as much as possible and simply trying to ride through these turbulent times in international trade.
If you think the above is a bit vague, you’re right. What was shared was a lot more specific, but we operate under strict Chatham House Rules. To get closer to the action, come to our Fireside Chats where you get the chance to ask questions and have conversations with other members. Become a member of MAKE│NZ get on the mailing list for our next event!
Recent key developments in New Zealand
•In a recent conversation with representatives from Competenz, an observation was shared that was worth noting: over the past 2-3 years, the amount of remedial literacy and numeracy training delivered to recent school leavers has gone up significantly.
Both in the political debate, and in observations made by manufacturers, a lack of ‘basic’ literacy and numeracy skills is a recurrent theme. For the latter, that lack often has an impact on operations and requires investment in training, which – unlike in other areas – is still reasonably well supported by the TEC (Tertiary Education Commission).
But if we compare the situation in New Zealand with that in other countries, how bad is it, really? The OECD has shed some light on that quite recently, in a study released in December 2024:
Not so bad, then, after all? Again, when we look at a detailed breakdown by levels of proficiency, the differences appear to be minor:
However, when we look at the breakdown of proficiency scores by age group (cohort), we do see major gaps opening up, with particular concerns around the youngest cohort:
Looking at the data in another way, comparing results from a previous assessment cycle (Cycle 1, 2014-15) with the most recent one (2022-23), supports the finding that “things have been getting worse recently” – especially at the lowest level:
Does it matter? The study provides an answer to that as well:
Of note in particular, from an employer’s perspective, is the stark difference in participation rates. At a time when labour becomes scarcer due to demographics, we are sitting on a resource we cannot access due – among other things – to their lack of basic skills, which in turn will prevent many of these people to access higher levels of training.
Recent key developments in the World
•A little snapshot from the latest GALLUP poll without comment:
•We live in a time in which the observance of foreign politics will be more rewarding for our manufacturers than usual, especially for those that export most of what they make, and to many countries. The simple (or not so simple) reason being that unfettered access to international markets appears to be increasingly depending on the relationships countries have with each other. Canada used to consider itself the USA’s closest friend and ally, now it faces a 35% tariff on all imports that don’t comply with the Canada-United States-Mexico Agreement (CUSMA) – 50% on aluminium, copper, and steel.
Countries manage their relationships with others broadly following two principles – a ‘values-based’ approach, or an ‘interest-base approach’. Claude Sonnet summarises the differences quite well:
“Values-Based Foreign Policy:
- Motivation: Driven by moral principles, ethical beliefs, and ideological commitments
- Goals: Promoting democracy, human rights, justice, and universal values globally
- Decision-making: “What is the right thing to do?” guides policy choices
- Tools: Conditional aid, sanctions for human rights violations, support for civil society
- Time horizon: Often focused on long-term moral outcomes over immediate gains
- Example: Refusing to trade with a strategically important country due to its poor human rights record
Interest-Based Foreign Policy (Realpolitik):
- Motivation: Driven by national security, economic benefits, and power considerations
- Goals: Maximizing national wealth, security, influence, and strategic advantage
- Decision-making: “What serves our national interests?” guides policy choices
- Tools: Military alliances, trade agreements, diplomatic partnerships based on utility
- Time horizon: Often prioritizes immediate, tangible benefits
- Example: Maintaining close ties with an authoritarian regime because it provides crucial resources or strategic positioning
Key Tensions:
Universal vs. Particular: Values-based policies assume universal applicability of certain principles, while interest-based policies focus on what specifically benefits the home country.”
Consistency vs. Flexibility: Values-based policies demand consistent application of principles, while interest-based policies allow for pragmatic adjustments
Moral authority vs. Practical outcomes: Values-based approaches may enhance soft power and legitimacy but potentially sacrifice immediate gains
Universal vs. Particular: Values-based policies assume universal applicability of certain principles, while interest-based policies focus on what specifically benefits the home country.”
Until quite recently, most ‘Western’ countries would have claimed to have adopted the values-based approach, often referred to as ‘the rules-based order for the world’, and many, especially in Europe, still do. For more than a dozen countries, and pioneered by Sweden in 2014, this culminated (if that is the right word) in proclaiming to pursue a ‘feminist’ foreign policy.
As far as international trade is concerned, this ‘rules-based order’ effectively was dismantled in December 2019, when the Appellate Body of the World Trade Organisation [WTO] lost the required quorum to hear appeals, rendering its dispute settlement mechanism inoperable. The US had started blocking some appointments to the Appellate Body in 2011, but the decisive and sustained refusal to support any new appointments began in 2017.
Under the current government, New Zealand still flies the ‘Rules-based’ flag, as reiterated only last week by our Minister of Defence. That hasn’t stopped (past) governments from taking a ‘more pragmatic’ approach, especially in our relationship with China, in line with the quote from German poet Berthold Brecht from almost 100 years ago: “Erst kommt das Fressen, dann kommt die Moral” – First, we have to eat …
What does a more straightforward interest-based approach look like? One doesn’t need to look any further than the current Indian government for that. Check any recent interview with India’s foreign minister, S, Jaishankar, or this recent one with the Prime Minister of Singapore, Lawrence Wong, after his recent visit to India.
Does any of this matter to New Zealand manufacturers? Apart from the fact that some manufacturers use a values-based approach themselves when they decide not to export to certain countries, New Zealand has for many years had export restrictions in place “… to regulate the export of goods which may be intended for use that could, directly or indirectly, be to the detriment of New Zealand’s security or national interests …”. Add to that sanctions on certain countries even for goods that are not ‘military or dual-use’. We are aware of several Canterbury manufacturers that have been materially affected by these restrictions.
Beyond that, things become a bit more speculative. The opposite to Mr Wong’s desire for trade not to be subjected to ‘block thinking’ is ‘friend-shoring’ – but who are the (groups of) friends here? In a recent report, the McKinsey Global Institute [MGI] made an attempt to answer that question:
The report also looked at the potential impact of friend-shoring on trade patterns, showing the potential for a significant reduction in trade volumes:
And then there are the indirect effects. We talked about green tractors before. A recent NY Times report shows the company being squeezed from two sides in its agricultural business. Cost: “Higher tariffs, primarily on steel but also on aluminum, have cost the company $300 million so far, with nearly another $300 million expected by the end of the year.” And revenue: “Prices are currently low, with corn selling for 50 percent of the highs seen in mid-2022. Soybean prices are down 40 percent over the same time frame.
John Deere said that it expected 2025 sales for large agricultural machinery — the source of most of its revenue — to fall 15 to 20 percent and that the malaise would continue into 2026.”
Between 2022 and 2024, US maize exports to China fell from 7.5 million metric tons [MMT] to about 1.4 MMT. As for soybeans, they present another stark example of what happens when business shifts from foe to friend:
The imposition of Chinese import tariffs in 2018 in response to the US introducing tariffs on Chinese goods had an immediate effect. And as reported by the American Soybean Association on August 20, “The combination of 20% retaliatory tariffs as well as VAT and MFN taxes have pushed China’s overall duty rate on U.S. soybeans to 34% in 2025. …As a result, China currently has zero new crop export orders for U.S. soybeans on the books for MY 2025/26.”
•Another development that may be a harbinger of the shape of future international relationships, but in itself probably won’t impact on New Zealand manufacturers directly:
•The International Maritime Organisation [IMO] is the United Nations agency responsible for developing a comprehensive regulatory framework for international shipping to ensure its safety, security, and environmental sustainability. To date, the IMO’s activities have been widely supported and considered to be an important contributor to international trade, about 90% of which is by sea.
Given that ‘environmental sustainability’ is part of its mandate, the IMO has developed detailed plan to reduce Greenhouse Gas [GHG] emissions to zero by 2050. The specific measures in this plan include a new fuel standard for ships and a global pricing mechanism for emissions; they were approved by the IMO’s Marine Environment Protection Committee in April 2025. These measures, set to be formally adopted in October 2025 before entry into force in 2027, will become mandatory for large ocean-going ships over 5,000 gross tonnage, which emit 85% of the total CO2 emissions from international shipping.
However, that adoption of the plan is now under threat from the US. In a joint declaration signed by Secretary of State Marco Rubio, Secretary of Commerce Howard Lutnick, Secretary of Energy Chris Wright, and Secretary of Transportation Sean Duffy, The US government “unequivocally rejects this proposal before the IMO and will not tolerate any action that increases costs for our citizens, energy providers, shipping companies and their customers, or tourists. We will fight hard to protect the American people and their economic interests. Our fellow IMO members should be on notice that we will look for their support against this action and not hesitate to retaliate or explore remedies for our citizens should this endeavor fail.”
And by now we are well aware of the “remedies” the US government considers to be fit-for-purpose should governments fail to comply with its wishes. As reported by Reuters, a State Department spokesperson said the U.S. was “actively exploring and preparing to act on remedies including tariffs, visa restrictions, and/or port levies should this effort succeed in the October IMO extraordinary session vote.” It will be interesting to see how this plays out.
You may, of course, not agree with the IMO’s planned measures. But that is not the point here. The point is that there is an attempt to replace the ‘rules-based order of international relationships’ with a ‘ruler-based order’. Next time, the US government’s ‘dislike’ might affect something you are in favour of, and/or have a material interest in. You may be a supplier to the Danish offshore wind developer Orsted, for example, who are in financial trouble after the US government put a stop-work order on a major US offshore windfarm development that Orsted and its partners have already invested $5 billion in and which is 80% complete. The order is based on – as yet unspecified – ‘national security concerns’.
The questions is – when the process is wrong, but it doesn’t affect us, when do we speak up? Eighty years ago There is a German pastor, Martin Niemöller, said this after the collapse of the Nazi regime: “First they came for the socialists, and I did not speak out—because I was not a socialist. Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist. Then they came for the Jews, and I did not speak out—because I was not a Jew. Then they came for me—and there was no one left to speak for me.”
In the quote, Niemöller condemns the complicity of German intellectuals and clergy following the Nazis’ rise to power and subsequent incremental purging of their chosen targets.
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