PM's biggest threat highlights Trump dilemma

National leader Bill English during his State of the Nation speech. 02 February 2017 New Zealand Herald Photograph by Dean Purcell.

Prime Minister Bill English has identified disruption of the international system of open trade as the biggest threat to New Zealand's economic prosperity right now.

Under fire from critics for his softly spoken approach to controversial policies unveiled by US President Donald Trump in the past week, the Prime Minister's comments hinted at some of the thinking behind his cautious approach.

In his first big speech since calling a general election for September 23, English steered clear of referring to Trump by name but warned of complexities and tensions building in global politics.

He cited "a newly assertive Russia and China, the ongoing refugee pressures around the Mediterranean, Brexit, a new US President and rising nationalism."

"Some people believe New Zealand's location protects us from the most immediate pressures," he said. "But in time, the effects of decisions made in Washington, Berlin, Moscow and London will wash up on our shores."

The global economy was looking stronger than last year but the political instability meant there was no room for complacency, he said.

"In this environment, I believe the biggest threat to New Zealand is disruption of the international system of open trade. Under my leadership, New Zealand will continue to advocate for free trade and aim to execute high-quality trade agreements."

"When we open doors for our exporters, they walk through and create opportunities and jobs for New Zealanders."

Having moved to scrap its involvement in the Trans-Pacific Partnership, the Trump administration has said it will look to do a series of bilateral trade deals.

NZ officials in Washington will be anxious to get our nation to the front end of the queue.

But English faces a big dilemma in election year.

With popular opinion in this country running strongly against Trump, he faces a moral hazard in not speaking out on the more extreme aspects of US policy and risks looking weak.

It will require a delicate political balancing act and for him to pick his battles carefully.

Given that Trump is just getting started, there may yet be issues where English has no choice to respond in ways that will not go down well with diplomatic officials in Washington.

For example, if tensions between the US and China were to continue to escalate then he and his advisers will have to choose their words very carefully indeed.

However, all the while he will face public pressure and opposition calls to take the moral high ground.

With the economy running smoothly, New Zealand's diplomatic challenge may now present the biggest threat, not just to our trade status, but to the Prime Minister's re-election hopes.