‘Enhanced Pacific Partnerships’

Address to the Centre for Strategic and International Studies Washington

16 July 2019 

‘Enhanced Pacific Partnerships’

Good afternoon. Welcome to Ambassadors and representatives from embassies in Washington, D.C. including Ambassador Rosemary Banks and the New Zealand Embassy, as well as US Government officials. Greetings also to members of civil society, academia and the business community, and a particular thanks to Mike Green from the Centre for Strategic and International Studies for hosting this event.  

We come to Washington with a dual purpose. On Thursday our delegation will be attending the Ministerial to Advance Religious Freedom. As a country that is a strong supporter of freedom of religion or belief, and of the right to freedom of opinion and expression, New Zealand stands with all countries who share this foundation stone of freedom.

In New Zealand we have also witnessed the debasement of these ideals when a stranger to our country unleashed his cowardly violence on innocent members of Christchurch’s Muslim community peacefully honouring their religious beliefs. We understand, in a way previously unimaginable for ordinary New Zealanders to grasp, the evil consequences of religious hatred and violence.

That tragedy, however, only reinforces our deeply-held belief in religious tolerance and freedom. So we come to Washington to listen and share our experiences.

We are especially admiring of the United States and the contribution two of its Founders made to the advancement of religious liberty and democratic freedoms.  

Thomas Jefferson, who could choose from any number of historical achievements to have chiselled on his tombstone, included instead his authorship of the Statute of Virginia for religious freedom.

As president, Jefferson elaborated on his commitment to freedom of conscience when he addressed the Danbury Baptist Association, saying ‘Believing with you that religion is a matter which lies solely between Man and his God, that he owes account to none other for his faith or his worship, that the legitimate powers of government reach actions only, and not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should make ‘no law respecting an establishment of religion, or prohibiting the free exercise thereof.’’

So, if politics and religion are two subjects usually best left to the conscience of each of us, sometimes the creative fusion of both can lead to freedom’s march for all of us. A good example was James Madison’s study of the early Puritan communities and their eventual fragmentation across the New England landscape.

Observing that a competitive balance was achieved among rival Puritan communities, one that prevented any one faction from dominating the others, Madison, in Federalist paper No. 10, unfurled the brilliant insight that republican government cast over the extended sphere of an entire continent would similarly achieve a balance of competing voices in the many states to avoid domination by any one particular interest or region over the whole.

Religious freedom and pluralism are therefore two pillars of the foundations underpinning both United States and New Zealand-styled democracy

One can also add a third and fourth pillar; namely, respect for, and protection of, human rights and promoting and maintaining the rule of law. Together, these strong foundations see our countries as two of only nine that have held continuous democratic elections since 1854.

There is a fifth pillar that connects our two democracies. That is the promotion of free and fair trade, which is our second purpose for coming to Washington. This objective is an old one for New Zealand, with former Finance Minister Walter Nash meeting President Roosevelt and members of the US State Department and Treasury in 1939 ‘with a view of paving the way ultimately for a reciprocal trade treaty.’ Some very good things, as is said back in New Zealand, take time, but as we said in Washington last December, time, tide and political change wait for no man or woman. Now is the time to act.  

At last year’s 6th US-ASEAN summit Vice President Pence conveyed President Trump’s offer ‘to make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade.’

We stand here to say New Zealand is uniquely ready in our fulsome record and attitude to ‘free and fair’ trade to take up the President’s offer.         

In a December 2018 speech here in Georgetown we laid out our perspective on the geo-strategic rationale for greater US engagement in the Pacific. Six months on we re-affirm the logic of that speech while noting real progress in collaborative efforts among like-minded partners including New Zealand and the US to work together to enhance regional security and developmental assistance in the Pacific.

For example, last year the United States, New Zealand, Australia and Japan announced a partnership with Papua New Guinea which aims to connect 70% of its population to electricity to the people of PNG - currently only 13% of the population have reliable access to electricity.

A key point made in the Georgetown Address was that partners need to support each other economically – through free trade and by understanding each other’s economic imperatives – because only by doing so can we achieve our collective ambitions to strengthen the economic engines that drive our mutual ambitions to lead, compete better and, ultimately, see the Pacific region and each other prosper.

While the geo-strategic rationale remains as strong as ever we’d like to focus today on the economic grounds for advancing a bilateral free trade discussion between our two countries. We want to begin by saying to our friends in Washington that the United States’ limited engagement in trade agreements in the Indo-Pacific is of real concern to New Zealand.

First, however, let us acknowledge that the Indo‑Pacific region has benefited significantly from the US presence over the last 70 years. Indeed, the US commitment in our hemisphere has brought strategic stability, which has in turn allowed the region to address many of its internal fault‑lines – for example, through the establishment of the Association of Southeast Asian Nations, or ASEAN.  

That stable presence has allowed countries to focus on improving the living standards of their people, largely through domestic economic reforms, and also through negotiating agreements to reduce and remove barriers to trade and investment.

These agreements have been achieved through a range of different vehicles. Bilateral agreements have been one important platform for improving prosperity across the region. Examples include the United States’ Free Trade Agreement with Australia, or New Zealand’s FTA with China. 

Multi‑country agreements have also had their place. The ASEAN Free Trade Area is one example of a successful regional trade and economic agreement. The Comprehensive and Progressive Trans‑Pacific Partnership Agreement – a high quality deal between 11 countries across Asia-Pacific and the Americas – is another. 

Agreements such as these have a serious impact on patterns of commerce and investment in the Indo‑Pacific. Over the past two decades we have also seen a growing number of countries in the region conclude a significant number of trade and economic agreements with each other, all which reduce barriers to trade and investment between them.

The upshot is that, for those countries which have engaged in this manner, they are able to move goods, services and investment across each other’s borders with lower costs, and much more business certainty.

And the converse is also true; for those countries not participating in these negotiations, they are by definition becoming less competitive relative to those countries who are progressively removing barriers to trade and economic activity.   

While we seriously admire the boundless creativity and innovation that comes out of the United States–particularly your truly amazing ICT companies–the reality is that the United States also remains a huge producer of more traditional goods and services, much of which is destined for export markets.  

And this is where we have the real concerns for the United States’ future prosperity. While most countries in Asia have been actively negotiating trade agreements between them, with the staggering economic growth of China one obvious symbol of the greater trade engagement seen across Asia, the US has in the last 20 years only negotiated three FTAs in Asia: with Australia, the Republic of Korea, and Singapore. While these are significant countries in the region, they are by no means the biggest economies. In fact, taken together these three countries represent just 12% of Asia’s GDP. 

We point out that the impact of the US’s post-NAFTA record of concluding trade and economic agreements in Asia is having a serious impact on your share of trade in Asia.   

The trend of US exports to New Zealand is a case in point. Although New Zealand and the US enjoy a strong economic relationship, the reality is that the United States’ share of exports to New Zealand has been declining. This is consistent with the broader trend for US exports to the Asian region.

Notwithstanding the fact that US exports to the world have grown by 5.3% on average per year since 1990, the share of United States’ total exports to New Zealand over the same period dropped from nearly 18% to 10%.   

During that same time, imports from our regional partners with whom we have Free Trade Agreements have grown in relative importance. By example, China’s exports to New Zealand have grown on average by 17% per year, and China's share of total exports to New Zealand has grown from 1% to 20% during that time, becoming our largest source of imported goods. 

This trend is even more marked for the United States’ share of imports across Asia. In 1990, 17.4% of all goods imported to Asia came from the US. By 2018, that 17.4% had fallen to just 7.4%. That means that the US has lost half of its market share over a 28 year period, and gives you a sense of the significant scale of lost opportunities for US exporters and workers.    

So, the question becomes: how has this come about, and what can be done to reverse this decline in US exports to New Zealand, and more broadly the Asia‑Pacific region?

For most economic commentators, the answer is clear. The deteriorating share of US exports has been the result of the growing network of bilateral and regional trade and economic agreements of which the US has not been a part.   

By example, New Zealand has been at the forefront of negotiating trade agreements across the region. We negotiated an FTA with Singapore in 2001. Thailand followed in 2005. Our first regional FTA with Brunei, Chile and Singapore came into being in 2006, laying the foundation for what ultimately became the CPTPP.   

In 2008 New Zealand added an FTA with China and our bilateral trade with China has tripled in just 10 years. Our second regional FTA with ASEAN (which also includes Australia) and a separate bilateral FTA with Malaysia were added in 2010. Further bilateral FTAs in North Asia were made with Hong Kong, Chinese Taipei and Korea in 2011, 2013 and 2015, respectively. 

Our most recent FTA, the CPTPP, came into being late last year. A new trade and development agreement has also been concluded with the Pacific, called PACER Plus, which we are working to bring into force.   

As a small trade dependent nation, New Zealand will never rest on its laurels. We have negotiated an upgrade of our original FTA with Singapore; we’re working on an upgrade of our China FTA and starting on an upgrade of our agreement with ASEAN.

Negotiations are also ongoing for new agreements with the Regional Comprehensive Economic Partnership, the European Union, the Pacific Alliance, along with a new Digital Economy Partnership Agreement with Chile and Singapore. 

This is just the trade negotiating activity undertaken by New Zealand. Most other countries in the Asia‑Pacific region have embarked on similar programmes.   

Bringing this back to the US context: the eventual CPTPP provided the US with a ready‑made platform to reverse the declining share of US exports to the Asia‑Pacific region. Although some were disappointed at the decision to withdraw by US from the TPP, we understand and respect the right of your administration to make this decision. Because until we fixed the shortcomings of the TPP and made it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership many of us in NZ had similar reservations.   

President Trump has expressed his preference for negotiating trade agreements bilaterally. As was said to Vice President Pence when we met last December, New Zealand is ready to work with the United States to achieve such a breakthrough in our bilateral trade and economic relationship.

Such an agreement would be beneficial to the United States and New Zealand in its own right. More so, it would have strategic and symbolic importance far greater than the undoubted mutual economic benefits. 

It would underline the strong friendship between the United States and New Zealand – and signal to our exporters and our investors that our two governments are absolutely committed to further strengthening our bilateral relationship.

More importantly it would send a signal into the Indo‑Pacific that the US is in the region to stay and provide substance to the President’s offer for free and fair bilateral trade engagement. It would signal that US involvement in the region will be broad and comprehensive, with an ambitious economic programme to mirror the US’s strategic and security objectives.   

And it would signal to other countries in the region that the US is open for business, and looking to conclude ambitious, high quality and comprehensive free trade agreements with other countries in the region.

It would also reinforce a noticeable feature of the United States’ trade history during the past three decades. Whether by historical accident or irony, it is a fact that of 16 trade negotiations the US has entered into since 1985, Republican presidents started 12 of them and signed all bar one, marking the GOP as the party most open to pursuing free and fair trade deals.

To conclude, New Zealand believes there exist compelling geo-political and economic rationales for the United States leadership to shift gears by launching a bilateral trade agreement with New Zealand.

Over the past two decades, the US-NZ relationship has only grown stronger, more dynamic and more vital. Whether it’s on military co-operation and shared service, people-to-people connections, visa access, or high-level dialogue on vital foreign policy issues, our two countries are much closer than we were at the turn of the century.

However, one glaring gap remains in an otherwise exemplary bilateral relationship. We have not made the progress on a bilateral trade agreement that we should have. New Zealand wants that to change.

We earnestly hope the US shares that ambition. For New Zealand’s ability to play its part in promoting our shared values in our part of the world very much depends upon it.

ENDS