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Murray McCully

20 October, 2011

The Major Economic and Foreign Policy Issues Facing New Zealand 2012-17

To New Zealand Institute of International Affairs.

“The Major Economic and Foreign Policy Issues Facing New Zealand 2012-17”

The theme of your seminar is foreign policy challenges for the next five years.

I thought I might address these challenges against the background of some of the achievements of the past three years – expressed, of course, in an appropriately modest fashion.

May I say at the outset that, despite the fact that there will be an election in six weeks’ time, there is nothing especially political about my comments today.

As Foreign Minister over the past three years it has been my practice to avoid the unnecessary intrusion of politics into foreign policy.

By definition this is an area in which New Zealand’s vital economic, trade, security and reputational interests are at stake.

The public, in my view, expect us to play a long game – pursuing those interests in a way that best accommodates bipartisanship.

And that is what I have tried to do.

Against that background let me reflect briefly on the opportunities and challenges for the next five years.

Our closest and most important partnership – our relationship with Australia – remains unique, shaped by a deep sense of interdependence, shared responsibility within our region, and common values, underpinned by an unusual combination of mateship and a professionalism that makes domestic political labels irrelevant.

It is my view that increasingly the focus of this relationship will move from the things we can do between each other, to the things we can do in other places together.

Top of my list of priorities in this respect is the implementation of the ASEAN Australia New Zealand FTA, which places our two countries firmly in a free trade area of over 600 million people, with some of the world’s fastest growing economies.

My colleagues and I have made no secret of the fact that we see trade and economic objectives as paramount.

If we are to become a wealthier country it will be because we become more successful in conducting trade and economic partnerships.

In that respect we have just got lucky.

For much of our history our geography has been our major strategic disadvantage – seeing us placed on the opposite side of the world from the markets for our goods.

Now we are in the Asia Pacific Century.

Our geographical location is our advantage; on the rim of the region that will be the powerhouse of world economic growth for the foreseeable future, and providing increasing numbers of middle class consumers of our products.

The challenge of the next few years is to turn that opportunity into successful functioning trading relationships.

A major piece of work in progress is the execution of the New Zealand Inc strategies, committed to by this Government in its earliest days.

These are an attempt to secure an agreed interagency strategy in relation to our major markets and prospective markets, including increasing private sector participation.

Cabinet has approved in principle strategy documents in respect of India and China, as well as an updated Latin America strategy.

Work is substantially complete on strategies for the United States and Gulf Cooperation Council, and work continues on Australia, ASEAN and the EU.

The Prime Minister in two hours’ time will launch the public execution of the India Strategy.

There is no need for me in this audience to underline the success of the relationship with China – now our second largest trading partnership, with exports up over 166% in the past three years and growing this year at 40% over last year.

While New Zealanders see this relationship predominantly through a trade and economic lens, China has a much broader view of the relationship – one that they expect us increasingly to reciprocate.

We need to consolidate this important relationship over a number of different spheres, including academia, the arts and sport, as well as conventional trade and diplomatic links.

Next year marks the 40th anniversary of this important diplomatic relationship and a good deal of thought has been going into refreshing the architecture of the relationship to mark the occasion.

In the past year we have entered a new phase in our relationship with the United States.

I hope you will allow me to claim this as an area of modest diplomatic success.

We welcome US re-engagement in Asia and the Pacific.

This provides a whole new range of opportunity for cooperation as we carefully redefine the New Zealand/US partnership.

I have already mentioned the importance of the FTA between the CER partners and ASEAN.

But that is only one of the significant strands to the ASEAN relationship.

Through the suite of annual ASEAN-led meetings, ASEAN has become a key regional broker on matters of security, diplomacy and trade, emphasised by the recent decisions of the United States and Russia to join the East Asia Summit.

It has been for this reason that I have given the highest priority to re-energising the ASEAN relationship over the past three years.

Intensive work over the past few years has seen us achieve 'strategic partner' status and hold the first ever ASEAN-New Zealand Summit between ASEAN leaders and Prime Minister John Key last year.

An important challenge lies ahead in the relationship: in each of the next two years, the chair of ASEAN will be held in capitals in which New Zealand does not have a mission – Cambodia and Brunei.

We have been doing some serious planning to make sure we can cope with that challenge.

It would be hard for me to over-emphasise the importance the Government attaches to the ASEAN relationship.

At some stage in the next few years we need to consider splitting the current joint roles of Ambassador to Indonesia and Ambassador to ASEAN.

Elsewhere in the Asian region there are other important relationships to be advanced in the years immediately ahead.

Despite setbacks in recent years, Japan continues to be a major economic force globally – it remains the world’s third-largest economy.

Japan is a good and longstanding friend of New Zealand. Next year we celebrate 60 years of diplomatic relations.

An important political debate has commenced in Japan regarding the process of regional economic integration, including the prospect of Japan joining the TPP negotiations.

We have already agreed to work together as aid partners in the Pacific and we now need to give more shape to that partnership.

It’s an area where we both have significant interests.

Korea, too, is an important focus for New Zealand.

Its economic growth, dynamism and innovation can only impress.

Korea and New Zealand have an important trading relationship, but our ties extend beyond that to include security, climate change, green growth and science.

Our number one goal with Korea is to conclude our FTA negotiations.

This really would be an excellent way of marking next year’s 50th anniversary of diplomatic relations.

It goes without saying, I think, that India has now emerged as a global power, both politically and economically.

It has the second-highest growth rate among the world’s major economies, the world’s largest workforce, and a large and growing middle class.

Historically New Zealand has a very warm relationship with India and our trade is growing steadily, but we can do better.

In particular – and I seem to have a bit of a theme going here – we need to give a more strategic focus to the economic relationship through the conclusion of an FTA.

You’ll be aware by now of the critical importance I place on our relationships within Asia. But it cannot be our only area of focus.

This year we started negotiating on an FTA with Russia, Belarus and Kazakhstan, all countries with vast resources and potentially large markets for our commodity exports.

We’re making good progress and I hope we’ll be able to sign an agreement next year.

New Zealand’s reputation for high-quality FTAs has put us at the head of queue of more than 20 countries seeking similar agreements with Russia.

A similar point could be made with respect to the Gulf Cooperation Council.

The GCC is a region courted by all, but selective in how it chooses to reciprocate.

We have been able to negotiate a good-quality FTA that, when implemented, will give us significantly improved access into the markets of no less than six Gulf states: Saudi Arabia, UAE, Qatar, Bahrain, Oman and Kuwait.

Collectively these countries are our seventh largest trading partner, and with better market access we can take that relationship a lot further.

I am delighted that my colleague Sheikh Abdullah, Foreign Minister to the UAE, is in New Zealand right now – his second visit in my time in this role, reflecting the increasing closeness of our two countries.

In these times of uncertainty in many of the world’s most established markets, the fast-growing economies of Latin America are rapidly becoming important global players.

Brazil alone is heading towards being one of the world’s top five economies by 2050.

New Zealand is a natural agricultural partner for the countries of South America in meeting the increasing global demand for food.

We already have some valuable links into the region, particularly in the dairy sector, but it’s fair to say that we are only scratching the surface.

One of the keys to taking things further is better air links.

These in themselves are an area of opportunity for us.

There is a real opportunity for New Zealand to become a transport hub into the Latin American region, placed as we are between South America, Asia and Australia.

This is currently a work in progress.

I have in previous addresses to this organization been clear about my ambition to see New Zealand more closely engage in Africa.

We have laid some groundwork here with the appointment of an Ambassador to the African Union.

More diplomatic and Ministerial engagement needs to follow as well as effective delivery of agricultural capacity building from New Zealand’s modest aid contribution in Africa.

Now, I’ve been talking a good deal today about this country’s newer economic relationships – with Asia, with Russia, with the Middle East, with South America.

But before we finish I want to mention some of our most established relationships, those within Europe.

Not only is Europe the world’s largest economic bloc and our third largest trading partner, it is also a vital cultural reference point for many of us.

That makes it rather more than the sum of its parts.

While New Zealand must always be on the lookout for new opportunities, new partners in the fastest-growing parts of the globe, we will not overlook our oldest friends.

Europe will remain integral to New Zealand’s future.

In that respect we are looking hard at forging a new bilateral framework agreement that will define the future relationship between us and the European Union.

Finally in this rapid sweep around the world I want to come home to our own part of the world, the Pacific.

It has been no secret that I see this as a significant priority for the New Zealand Government.

The challenge the countries of the Pacific face is to turn a fairly large amount of economic potential into prosperity.

I believe that they key to this an increased focus on a small set of game-changing sectors: tourism, fishing and agriculture.

Managed well, these can lift the Pacific to another level of economic development.

But their ability to do so depends on parallel progress being made in a set of enabling sectors: energy, infrastructure and education.

New Zealand hosted the Pacific Islands Forum in Auckland last month and will be Forum Chair for the next year.

We were clear at the Forum meeting about our view of the priorities for the region.

We have challenged the countries of the Pacific and our development partners in the region to match that focus.

An immediate challenge is to use our time in the Chair to significantly advance the region’s prospects in these key areas.

Critical to this process are the changes we are making to the aid side of the Ministry.

You will note that despite challenging fiscal times we have continued to increase the aid budget to $588 million this year.

But we need to keep reducing our costs and improving our spend.

Ladies and gentlemen, before I finish there is one more foreign relations priority that I want to consider: the United Nations.

You will all be aware that a major focus for us over the next two years will be our campaign for election to the Security Council in 2015-16.

It is 20 years since we were last on the Council.

We think the time is right again to bring the perspective of a small, independent, principled Asia-Pacific country to the table.

Security Council reform is moving higher on the agenda.

Rather than sitting on the sidelines we intend to be actively involved in that debate.

But if we reform the Security Council to provide a longer-term role for major powers like India and Japan, we must also ensure a role for the small states that make up most of the UN’s membership.

Any reform package must ensure that they, too, can contribute at the Security Council table.

Today I reaffirm that New Zealand’s candidature for a seat at the Security Council in 2014 remains a real foreign relations priority for this Government.

We have a tough contest with Turkey and Spain ahead of us, but we are receiving good support from across the UN membership.

You can be sure that as on the sports field, New Zealand will be giving the campaign everything we’ve got.

New Zealanders expect no less.

Thank you.
 

  • Murray McCully
  • Foreign Affairs