Australia and New Zealand — losing an empire, who will protect us now? Part 3. New Zealand: Pragmatic trader

3. New Zealand: Pragmatic trader

With an Exclusive Economic Zone (EEZ) of some 4 million km2 (and continental shelf rights that cover another 1.7 million km2 beyond), much of New Zealand’s air and sea defence resources are dedicated to monitoring and securing the fisheries and resources in its surrounding seas and also to providing civil defence and other support to its Pacific island neighbours. Significantly, of New Zealand’s top five trading partners, China accounts for 24.9% of New Zealand’s total exports (USD9.6 billion) with Australia coming in behind at 14.8% (USD5.7 billion), the USA at 9.6% (USD3.7 billion), Japan at 6.3% (USD2.4 billion) and South Korea at 3.1% (USD1.2 billion).

New Zealand’s unexploited resources of minerals such as gold, copper, iron and molybdenum has been valued at some NZD140 billion, but given the impact to conservation land that exploitation of these assets would involve there is considerable debate on the value of digging it up. Having a world ranking of 56 in defence spending, in 2019, the New Zealand government announced a major increase to its defence budget of 23% taking it to USD3.29 billion which represents 1.6% of its 2018 GDP of USD305.02 billion or USD700 per capita. Notably, this increased defence spending is intended to mostly cover operational costs and restore existing capability, such as replacing its maritime surveillance aircraft with more modern equivalents. The New Zealand Defence Force (NZDF) has approximately 11,300 permanent and active reserve personnel. In contrast, Australia, which has an EEZ covering some 8.1 million square km2 (ie only double that of New Zealand’s) had a defence budget in 2018 of USD26.8 billion (world ranking of 13) which represents 1.87% of its 2018 GDP of USD1,432.2 billion or USD1,068 per capita based on its population of 25.1 million.

The geographic differences between New Zealand and Australia are huge, while New Zealand has quite a large EEZ, it has a relatively small land area with only relatively modest mineral and fossil fuel resources—its main resources commercial being agricultural commodities (such as meat, wool and fish) and services (such as tourism, IT and education). Furthermore, New Zealand is geographically isolated with it closest major neighbouring nation, Australia, being some 4,163 km to the west and the only things beyond New Zealand of any value being Antarctica and the Great Southern Ocean—the former being currently unexploited as a resource and the fishing stocks of the later able to be exploited remotely. Significantly, unlike Singapore, New Zealand does not sit at a key nexus of a vital international trade route, nor does it represent a glittering jewel of wealth among a collection of militarily well armed near-peer nations. As one of the three nations that dominate the southern Pacific, New Zealand has a unique role in the region. Almost 296,000 Pacific islanders live in New Zealand and these make up the fastest growing section of the population, with Pacific island communities projected to reach 10% of the total population by 2038. New Zealand exports around NZD1 billion of goods to the Pacific a year and some 30% of Pacific island exports go to Australia and New Zealand. Pacific seasonal workers in New Zealand remit around NZD41 million back home each year. New Zealand has also committed to invest at least 20% of it’s total Official Development Assistance in ‘Aid for Trade’ in the Pacific region, which is estimated to amount to potential investments of over NZD340 million in economic infrastructure and capacity building within the region. In May 2018, the New Zealand government announced a USD500 million (30%) increase in its foreign aid budget with most of that targeted at the Pacific.

While it is conceivable that a major nation could basically own New Zealand by parking a modern fully equipped Aircraft Carrier Group off its coast, for most feasible adversaries mounting a military invasion of New Zealand would necessarily involve a significant sea-borne endeavour with long vulnerable supply lines. If New Zealand were to acquire a stock of modern hypersonic anti-ship and anti-aircraft missiles, and perhaps even a couple of submarines from a friendly ally, even a major nation boasting a sea-borne carrier group might find such a task daunting and hardly worth the effort. Geopolitically, New Zealand is seen to be part of the Western alliance through its historical position as a core member of the British Commonwealth and its membership of the Five Eyes Alliance with the USA, UK, Australia and Canada. However, while New Zealand usually backs the US position in international forums such as the United Nations, it is seen to have an independent streak, such as in its stubborn rejection of US nuclear powered and armed ships from visiting its ports.

New Zealand’s pragmatic approach to trade, is evident in its vociferous support for free trade and the elimination of barriers to its vital agricultural export industries. This pragmatic trade-first stance, saw New Zealand exporting to Russia during the 1980s near the end of the Cold War on a swap basis when New Zealand meat, dairy and fertiliser exports to Russia were wholly or partly paid for in Belarus tractors, Stolichnaya vodka and Lada cars and the New Zealand Dairy Board was a distributor for Lada vehicles in the country. The pragmatic attitude was also seen in 2014 when Western nations imposed sanctions on Russia after it annexed Crimea:

“Prime Minister John Key said on July 22 this year in Parliament that New Zealand should ‘show solidarity’ with countries that had applied sanctions on Russia. At the time Peters said New Zealand should be ‘pragmatic and prosperous’ rather than  ‘principled and poor’. ‘What makes Russia any different from the current or past actions of trading partners like China, Saudi Arabia or Algeria?  If we look hard enough, there will be something untoward about any country we do business with,’ Peters said.”

Source: Fonterra plants can send milk products to Russia, 19 Aug 2015

Notably, when Russia subsequently banned dairy imports from a range of Western nations (including the US, EU, Australia, Canada and Norway), New Zealand was able to increase its direct exports to Russia by 170 per cent in the year to June 2017. Likewise, when most Western nations expelled Russian diplomats in the wake of the Skripal poisoning incident in the UK, based on “solidarity” with the UK rather than any actual evidence being presented, New Zealand declined to do so, with Prime Minister Jacinda Ardern being quoted as saying “We ran a check, we don’t have those in New Zealand but if we did we would expel them.” Meanwhile, the Australian government under Prime Minister Turnbull felt obliged to expel two Russian diplomats as Australia’s contribution to the effort.

New Zealand’s relationship with China also evidences a pragmatic trade-based approach based on relationships that have been painstakingly forged over several decades. The New Zealand–China Free Trade Agreement was signed in 2008, this being the first free trade agreement that China had signed with any developed country and seven years ahead of the comparable China-Australia Free Trade Agreement which was signed in 2015. Rather than the highly transactional commodity export relationship that appears to characterise Australia’s dealings with China—which mostly involves shipping minerals like iron ore and fossil fuels to fuel China’s rapid economic and infrastructure growth—New Zealand has focused on not just providing high value meat and dairy products (like premium quality baby formula), but also on working with Chinese companies to develop modern domestic production capabilities. Typical of this approach, New Zealand’s dairy giant, Fonterra, which is one of the world’s leading dairy exporters and milk processors, established its Chinese operation in 1999 and now has two farming hubs in China, situated in Yutian County in Hebei province and Ying County in Shanxi province, while a third hub in Shandong province is in development. This operation now has more than 30,000 cows and produces 350 million litres of milk each year, and by 2015 China was the third-largest milk producing country in the world. But, New Zealand’s relationship with China and, in particular with the Chinese Communist Party (CCP), is forged on a link that goes right back to the foundation of modern China in the shape of Rewi Alley, a New Zealander who:

“…left New Zealand in December 1926 ‘to go and have a look at the Chinese revolution’. He would stay for 60 years, becoming one of China’s best-known and best-loved foreigners… Before and after his death on 27 December 1987 the New Zealand and Chinese governments honoured Alley for his work in China. They have continued to do so in recent decades. In 1997 and 2007 events were held to mark the 100th and 110th anniversary of his birth.”

Source: Rewi Alley, Biography

As with Australia, the integration of Chinese into New Zealand commenced with the arrival of Chinese prospectors during the gold rush years of the mid-1800s. While over the years this relationship has for period been marred with racist policies that discriminated against Chinese migrants, in recent decades Chinese migration to New Zealand has seen a revival through the arrival of many Chinese students to attend New Zealand universities. Many of these students have stayed on to become permanent residents and citizens, often bringing their extended families to the country. The migration of mainly well-off Chinese has created some resistance and negative comment in the media and political forums—especially in relation to its impact on housing supply and home affordability.

With the US government ramping up its great power rivalry initially under Obama’s “pivot to Asia” and more aggressively under the Trump administration’s current trade war, anti-China rhetoric has increased in Australia and New Zealand, with Australia’s intelligence agencies and think tanks seemingly taking the lead against China as a part of their role within the US security alliance. New Zealand became included in this anti-China program when its vulnerability to Chinese Communist Party infiltration was the subject of a report entitled “Magic Weapons: China’s political influence activities under Xi Jinping” by Anne-Marie Brady, a US academic resident in New Zealand who is also associated with the Woodrow Wilson Center for International Scholars, which is a US think tank closely associated with the US Government. Brady’s report provided an expose or case study of how China had sought to infiltrate and gain influence over New Zealand’s political, cultural and economic spheres. While gaining some media coverage in 2017-18, which were revived in early 2019 with accusations of Chinese retaliation against Brady, this report seems to have quickly receded from the media focus. While more recent anti-China initiatives—such as the recent Xinjiang Uyghur propaganda campaign— seem to have received much less attention in New Zealand than in Australia, in 2018-19, New Zealand has joined the other Five Eyes member nations in pushing back on Huawei 5G mobile technology, ostensibly based on security concerns:

“Huawei said it had not had formal contact with the Government Communication Security Bureau (GCSB), which has cited national security concerns in declining a proposal from telecoms operator Spark New Zealand to build its 5G network using Huawei equipment. ‘Huawei is seeking an urgent meeting with the relevant ministers and officials to understand the government’s position and get clarification of the process from here,’ Huawei’s New Zealand deputy managing director Andrew Bowater said in an emailed statement on Thursday. He said New Zealand had not presented any evidence of wrongdoing and Huawei rejected the notion that it threatened local businesses ‘in any way’.”

Source: Huawei seeks meeting with New Zealand government following rejection of its 5G bid, CNBC, 28 November 2018

However, in what seems to represent a break from the US- led war on China in (which obviously involves the other Five Eyes alliance members to varying levels) and in line its more pragmatic attitude to trade, the New Zealand government announced in early May 2019 that it was ready to work with China to develop a win-win partnership on its Belt and Road Initiative (BRI). This is something Australia seems reluctant to do and, in fact, from the Chinese government’s perspective, Australia could be said to be undermining the BRI by supporting the propaganda attacks on its programs to address terrorist influences and Muslim minority integration in Xinjiang.

Continued in Part 4.

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