Looking beyond tariffs as AI reshapes global trade

New Zealand should look beyond US tariffs and the US-China trade conflict as it considers the future of its trade policy, says trade expert Sir Crawford Falconer, who sees AI, national security and the changing structure of the global economy as bigger long-term challenges.

Now an in-house consultant to MFAT, Falconer was New Zealand’s top trade official between 2008 and 2011, and the UK’s top trade official from 2017 to 2025.

He will be a keynote speaker at the Auckland Trade and Economic Policy School, an all-day event on 3 September hosted by the Public Policy Institute at the University of Auckland Business School.

He says the focus on US President Donald Trump’s tariffs risks obscuring wider changes in international trade.

“The media view tends to be it's all about tariffs, it's all about Trump being protectionist, and that's a big part of it, but it's by no means the only part.”

Falconer says despite the disruption caused by tariffs and wars, global trade had surprisingly continued to increase.

“In the big picture, international trade is expanding, despite it all, which is quite extraordinary.”

One of the main drivers, he says, is rapid expansion of artificial intelligence and digital infrastructure, with countries trading the large volumes of equipment needed to build data centres and expand computing capacity.

“The massive trade that's occurring is all the infrastructure stuff that goes with your data centres and upgrading yourself to deal with AI.”

The shift had implications for New Zealand, he says, even though we’re unlikely to become a major producer of AI technology.

“We're never going to be a significant player in AI; however, we will always be a user of AI, I’d assume.”

The priority, he says, should instead be ensuring New Zealand can access and use AI across its existing industries, including agriculture, fisheries and forestry, to improve productivity and international competitiveness.

“The gains that are going to come from AI are presumably going to be applicable there as well. Those efficiencies are what will make us more internationally competitive in the future, and if we don't do it, others are certainly going to.”

Falconer believes New Zealand needs economic and regulatory settings that encourage investment and ensure access to technology on reasonable terms.
And it also needs to recognise that trade and national security are becoming increasingly intertwined.

“By that I mean the way in which so-called national security issues have always been there, but they are now much more closely aligned to day-to-day trade policy judgements in a way they weren’t even five years ago.”

Governments are increasingly having to consider the security implications of buying critical technology and infrastructure from companies based in countries that could become strategic adversaries, he says.

For New Zealand, Falconer believes there’s no simple formula for balancing crucial but delicate relationships with the US and China.

“There's no nice, neat formulaic answer. These are judgements you have to make almost case by case.”

New Zealand should maintain its established trading relationships with the big players while seeking stronger links with other major economies, particularly India, Latin America and parts of Africa, he says.

“You've got to try as best you can to get relationships with significant players that you don't already have. India's the most obvious one.”

Falconer sees the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as a key piece in New Zealand’s longer-term strategy.
The partnership has 12 member economies besides New Zealand: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, the UK and Vietnam. It previously included the US, but Trump unilaterally (without consulting Congress) out of it in 2017.

Falconer says the CPTPP provides a rules-based alternative for countries looking for closer trade ties at a time when the US and China are increasingly operating outside established trading norms.

“It's a serious alternative model for countries that really want to have trade-friendly rules.”

And while the CPTPP couldn’t replace New Zealand’s trade with either the US or China, it could broaden our options and strengthen a wider rules-based trading system, he says.

A closer alignment between the CPTPP and the European Union could eventually become a major strategic opportunity for a small, isolated country like New Zealand, Falconer believes.

“That's the big strategic game in town it seems to me.”