China Risks Make EU-US Trade Agreements Vital
New Zealand must prepare for possible trade and diplomatic problems with China by now focusing on trade deals with the EU and the US, writes Peter Dunne
For nearly 50 years under successive governments, New Zealand has pursued an independent foreign policy. There were some highlights – for example, the victory over France at the World Court on Nuclear Tests, and the anti-nuclear policy of the Lange government which became bipartisan after 1990.
More recently, there was the Christchurch Appeal, following the appalling terrorist attacks on the mosque in 2019, which has continued to gain growing international support. While there have also been a few weak spots along the way, the reality is that New Zealand’s foreign policy is no longer, as Norman Kirk once said, “the American policy announced in Wellington. with a New Zealand accent ”.
Whatever their political beliefs, New Zealanders seem to quite appreciate the fact that our governments are now defending New Zealand’s interests on the international stage. At the same time, they react negatively to what they see as attempts by other countries to intimidate or treat us with contempt.
The United States lost the nuclear argument with New Zealand more because of its intimidating reaction to our position, than the issue itself. Likewise, Australia’s openly contemptuous attitude towards New Zealand on the issue of “501” deportation arouses more indignation here than the issue of a country’s right to deport non-nationals who have been deported. a criminal record (which we ourselves have been doing for years).
What has emerged since the 1970s has been a quintessentially New Zealand approach to foreign policy that recognizes our historic ties, but with a greater focus on the dynamics of the Asia-Pacific region in which we reside. In accordance with our founding role within the United Nations, we believe more in the multilateral approach to international relations than in the domination of power blocs, although we maintain our traditional relations and alliances. While our background and history sets us apart as part of the so-called Western Alliance, we are not, sanely, blind followers, which unreasonably leads some to criticize our reliability.
However, as has emerged recently, challenges can arise when foreign policy and trade policy meet. As a small, isolated country, whose prosperity depends on our ability to sell goods on the world market, effective trading relationships are paramount. This has been a common thread in New Zealand history since at least the seal hunters and whalers era over 200 years ago.
Although for nearly 150 years after European colonization New Zealand could count on the luxury and confidence of the British market, there were nonetheless early times when bold attempts were made to diversify our markets. For example, in 1928 New Zealand signed a trade treaty with Japan, its first trade agreement with a country outside of Great Britain. Ten years later, the first Labor government struck a most-favored-nation trade deal with Nazi Germany. But these initiatives were rare and, in fact, not particularly successful.
More successful was our first true free trade agreement – with Australia in 1967 – which evolved into the 1983 Closer Economic Partnership Agreement, which subsequently underpinned our economic relationship. But, for the most part, our trade policy has remained focused on the British market (perhaps following Savage’s famous remarks about the outbreak of war in 1939: “where it goes, we go; where it stays, we stay ”) – until Britain joined the then European Economic Community in 1973.
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In many ways our trade response to Britain’s entry into Europe smacked of panic, although Britain had signaled for over a decade its desire to join the European Community. Although French President de Gaulle vetoed Britain’s entry in 1963, expressing doubt that Britain could abandon enough of its traditional trading partners like Australia and New Zealand to fully do part of Europe, the veto of France evaporated after his resignation in 1969. reached in 1973, New Zealand needed to diversify its markets quickly, having been terribly slow to do so during the 1960s when the issue was being debated.
Our first step was to develop relations with Iran. It was time for both countries to do so. New Zealand was looking for new markets for its lamb, wool and dairy products, and to secure its oil supplies. Iran was then seen as a modernizing country with which nations like New Zealand could do business. And as an oil exporter, Iran sought secure food supplies to support its development. Following a state visit to New Zealand by the Shah of Iran in 1974, relations between the two countries intensified. When the first oil crisis hit later that year, New Zealand appeared to be in a strong position – it had secured export markets for meat and dairy products in Iran, in return for oil supplies. . But, when the Islamic Revolution happened in 1979 and the Shah was overthrown, it was a return to the drawing board.
In the late 1970s, there was a similar type of arrangement with the former Soviet Union. In return for the export of meat and dairy products, we received an influx of Lada cars! Fortunately, the sanctions against the Soviet Union following the invasion of Afghanistan in 1980 put an end to this arrangement.
During the 1980s and early 1990s, New Zealand’s attention shifted to the rules that governed trade between nations. We played a key role in establishing what has become the Uruguay Round of trade negotiations which led to the creation of the World Trade Organization in 1995 to replace the General Agreement on Tariffs and trade, then almost 50 years old.
Since then, New Zealand has made efforts to develop bilateral free trade agreements with its major trading partners, but progress has been uneven and slow. The 2008 New Zealand China Free Trade Agreement was a big step forward. Not only was this the first such deal between China and a country, but it was also a huge step forward for New Zealand, giving it preferential access to one of the world’s largest economies. and rapidly growing world. It has been remarkably successful, with China now our largest export market, accounting for around 30% of our total exports.
But therein lies the problem of the collision between foreign policy and trade policy. Our economic dependence on China is becoming an increasingly difficult tightrope to walk successfully.
On the one hand, our traditional partners criticize us for being too lenient towards China when it comes to criticizing certain aspects of its human rights record towards minorities like the Uyghurs, while, d On the other hand, we are accused by China of blatant interference in its internal affairs when we denounce its actions in Hong Kong, Xinjiang or the South China Sea. Meanwhile, we fear provoking China lest it retaliate against our exports to the detriment of our economy and prosperity, our caution leaving us exposed to criticism of being China’s toy.
Against this background, given the government’s stated intention to maintain our independent foreign policy, Foreign Minister Mahuta’s warning to business about being cautious about diversifying markets to reduce our dependence on China is timely, even if it is a little unfair. After all, it was successive governments that encouraged closer economic ties with China, with prime ministers past and present too willing to lead trade delegations there.
All of this is reminiscent of our previous relationship with Britain and, briefly, Iran, where we ended up putting too many eggs in one basket and being severely exposed economically when that relationship broke down. Just in time as the Foreign Minister’s warning emerges, if China’s attitude hardens and relations with countries like New Zealand deteriorate, as is very possible, it might just be too much. late.
This is where advancing other potential free trade agreements that have been on the agenda for years, but appear to be stuck at present, becomes of critical importance. The biggest in terms of potential markets are those with the European Union and the United States. Despite the last foreign minister’s promises and veiled hints of progress, nothing has really happened in the past three years to make progress with the United States. A free trade agreement with the EU was proposed more than a decade ago, and although formal negotiations began in 2018, a positive outcome is still far from being achieved with “substantial differences” at stake. overcome. Prospects for a smaller, but nostalgically more appealing, free trade deal with a post-Brexit Britain appear stronger, as it seeks old friends again in its desperate attempt to find new trading partners, but such an agreement is unlikely to catch up. for any ground that could be lost if the agreement with China turns even slightly sour.
New Zealanders will generally support the government by continuing to promote an independent foreign policy, reflecting our interests and values. But this is unlikely to continue for very long if we were to suffer serious economic repercussions from China. Free trade agreements with the United States and the EU are potentially an effective bulwark against such a possibility. But, as with the deal with China, there is a lot more to these deals for us than for the other parties, so we have to be the ones making the effort to see them through. It will take a lot more ministerial commitment and energy than just telling companies it’s time to diversify their export business.