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Murray McCully

14 December, 2009

New Zealand: A bridge between Asia and Europe

Thank you to the Swedish Institute of International Affairs for inviting me to speak this evening.  My topic tonight is New Zealand's relations with both Asia and Europe, and our potential as a bridge between the two.


I should first express my admiration for Sweden's management of the EU Presidency in a particularly important and challenging period of transition. 


We in New Zealand have been following the progress of the Lisbon Treaty with great interest.  The evolution of Europe's new institutions is something that we'll follow even more keenly: this directly affects our interaction with Europe. 


We want to take forward our relationships with the President of the European Council and the High Representative.  But we also want to preserve our links with the rotating Presidency - the reason for my visit to Stockholm - as a means of nurturing ties with member states like Sweden.


New Zealand has, of course, very close political, cultural, and personal ties with many European states. 


While these individual relationships are very important to us, our strategic engagement with Europe is also through that remarkably successful creation: the EU.


New Zealand is sometimes described as meeting all the conditions necessary for EU membership except for geographical location.


We are a small and very open country.  Our institutions and processes are for the most part based on European models.


A defining element of our national identity is that we are learning to meld aspects of the three main strands of that identity: European, Polynesian and Asian.


The European side of our national identity is based in the traditions we've inherited from Europe.   These are manifested in a broad range of values that we share with the EU: values of democracy, openness, the rule of law, and respect for human rights. 


Like Europeans, we see these as universal values, not just as European or New Zealand values.   


But our geographical location, and our youth as a nation, also gives us a special perspective. 


We are a nation built on imported capital.  And from our earliest days trade has been the lifeblood of our economy. 


It is in Asia - China, Japan, Southeast and South Asia - that we see outstanding new opportunity: not just economic, but also the potential to bolster economic opportunity by promoting security and cooperation.


It's clear that growth in the world economy is going to be driven mainly out of Asia for the foreseeable future.  Any country that wants to get ahead, or even hold its relative position, needs to have a strategy for engagement with Asia.


For New Zealand, our geographical location on the rim of the Asia-Pacific region - which for many decades was seen as a major strategic disadvantage - is rapidly, in this century, becoming our major strategic advantage.


We've been able to assert our claim to be a natural part of the Asia-Pacific region, and of Asian institutions.


One of the important issues facing the region is how its members should organise themselves to work together on regional and global issues.


The nations of Asia have a history every bit as turbulent as the nations of Europe. 


An EU-style Asian Union is not yet in prospect - but those who say about Asia that mistrust is too embedded, that the disparities are too wide, might well have said the same about Europe sixty years ago.


The incremental development of Asia-Pacific architecture is one of the most important phenomena of the post-Cold War era.  And it will grow in importance.


In the early 1990s, the countries of East and Southeast Asia chose to start developing that architecture inclusively, rather than exclusively.  They recognised the concept of the Asia-Pacific to be an inseparable part of Asia.


So far, the architecture has been built around the axis of the Association of Southeast Asian Nations: APEC, and meetings such as the ASEAN Dialogue and ASEAN Regional Forum.


As a long-standing dialogue partner of ASEAN, New Zealand is part of the important regional conversations on security, development, diplomacy and economic stability.


We are members of APEC, a gathering of regional economies that met a few weeks ago in Singapore.


There is also the very important East Asia Summit (EAS), which New Zealand joined when it was formed in 2005.   The EAS has some significant new dimensions: it extends to India, and it serves as a forum for leaders to discuss issues other than trade.


These various institutions have overlapping memberships, and inevitably there is duplication.


From a Minister's perspective, that means a lot of meetings and a lot of international travel.


The question is: can we manage these regional partnerships more efficiently?


Prime Minister Rudd of Australia has proposed that, over time, we develop an Asia-Pacific umbrella community which would address political, economic and security issues.


Prime Minister Hatoyama of Japan has proposed a similar idea of an East Asia community: his vision is of a network of functional communities promoting cooperation in practical, concrete ways.


These ideas represent a growing sense in the region that a greater level of cooperation and community is achievable, despite our diversity.


One constant in the regional architecture is that we can reasonably expect ASEAN to continue to play a central role.


New Zealand is focussing on the establishment of a network of trading relationships across the region as the key to our longer-term economic growth.


These not only assist our exporters and investors, but strengthen our capacity for international influence working with larger partners. 


The network of regional agreements in which New Zealand participates is often referred to as the "Asia-Pacific noodle bowl".  The way this noodle bowl develops will be a major factor for economies worldwide, including in Europe.


As a small but influential contributor to the noodle bowl, New Zealand has learnt to be flexible and creative in reaching agreements with our partners in the region.


We have now had in place for 26 years the world's most complete free trade agreement: Closer Economic Relations (CER) with Australia.


Last year we became the first developed nation to sign a Free Trade Agreement with China.  This was remarkable not only for the obvious asymmetry but also for its ambition. 


It effectively delivers full free trade in goods within a little more than 10 years, and most of it well before then.  And it is designed to help us over time to build a much closer relationship with Chinese regulators in areas that affect trade.


China is now our third-largest trading partner, and closing in on the EU for second place.  


Despite a depressed global economy, in the past year two-way trade between New Zealand and China increased by 23 per cent to reach just over $10 billion.  Our exports to China increased by almost 60 per cent in the same period.


Our expanding engagement with China also brings significant gains in areas outside trade and regulation, such as increased knowledge-sharing and people-to-people links. 


And it has just been supplemented by our successful conclusion of an FTA with Hong Kong.


In addition, this year we not only signed a very complex FTA between New Zealand and Australia and the ASEAN group of nations, but we also concluded an even higher-quality bilateral FTA with Malaysia. 


We now trade in one week with ASEAN what we traded in one year in 1975, when New Zealand first became an ASEAN Dialogue partner.  One in every ten export dollars we earn comes from ASEAN. 


We have now launched free trade negotiations with India and with Korea, and are discussing negotiations with Japan.


But, however advantageous all these bilateral FTAs can be, we also believe it's time to start untangling the noodles in the noodle bowl and work on a regional trade regime.


Last month, President Obama announced at the Asia-Pacific Economic Cooperation (APEC) summit that the United States would join the Trans-Pacific Partnership negotiations.


The Trans-Pacific Partnership will build on the existing four-way FTA among New Zealand, Singapore, Brunei and Chile.  The US, Australia, Vietnam and Peru will join these four in negotiations - which could be a stepping-stone to an eventual trade agreement involving all Asia-Pacific economies.  What is significant about the TPP is not who is in it, but who can be brought into it.


This development offers New Zealand the opportunity to be part of the design team for what President Obama called a trade agreement for the 21st century. 


These steps are important as an indication of the path that the Asia-Pacific region is embarked upon: developing a robust regional architecture for its economic relationships, while also starting to consider the potential for an overarching process of which economic relationships would be one pillar.


At the East Asia Summit in October, leaders agreed to embark on a study towards a Comprehensive Economic Partnership in East Asia (CEPEA). If it came to fruition it would be the largest Free Trade Area in the world.  Crucially, it would include both India and China.


We know that the EU's interest in the Asia-Pacific region is growing. 


This year the EU completed its first FTA negotiations with a developed country, Korea.  Last month the EU signed a Partnership and Cooperation Agreement with Indonesia, the EU's first agreement of such breadth with an Asian partner. We are following with interest the EU's pursuit of FTAs with ASEAN and India.


China has now become the EU's second-largest trading partner after the United States.  Between 2000 and 2008, trade in goods between China and the EU's current 27 members more than tripled in value.


As Europe's engagement with the region grows, New Zealand can not only assist the EU with the projection of our shared values, but also offer the benefit of our own experience with the Asia-Pacific countries.


In that context I believe that New Zealand is well placed to make a positive contribution to the Asia Europe Meeting (ASEM). I hope that our friends in Europe will support the bid to join ASEM in time for the Brussels summit in October next year.


It is important to us that, as we become increasingly involved in the architecture of the dynamic Asian region, we do not take either of those paths at the expense of our relationship with Europe.


Indeed, I would argue that we bring so much more to the partnership with Europe as a result of our extensive and intensive engagements in the Asia-Pacific region.


We provide a gateway and we provide important insights into the complex, challenging, and highly dynamic markets of Asia.


There is wide recognition, including by major players such as the United States, that developing closer trading links with New Zealand can add value as part of their overall strategy, far and away beyond the size of the New Zealand market. 


And we bring a high level of engagement in the evolving architecture of the region.

We bring an opportunity for a growing development partnership in the Pacific, where, despite its remoteness from Europe, the EU currently commits around 100m Euros a year.


We are very conscious of Sweden's role as a substantial donor of ODA funding, and we are committed to improving the conditions for some of the poorest people on our planet, who live in our Asia-Pacific neighbourhood, through improved donor coordination and greater donor commitment.


We bring a strong partnership with our larger neighbour, Australia, in the way we co-operate in delivering aid and in jointly underwriting the stability and security of the region.


And, of course, in the United Nations, and other key multilateral institutions, it would be fair to say that New Zealand and the nations of Europe could hardly work together more closely to promote the principles of democracy, the rule of law, and respect for human rights.


As a Foreign Minister, called upon to authorise voting positions across the range of international institutions on a frequent basis, I am reminded virtually daily of the closeness of our thinking, and of the depth of our shared commitment to bedrock principles and values.


That commitment is tested currently in Afghanistan where we have led a provincial reconstruction team in Bamyan Province since 2003 and where we have in October deployed our Special Forces to Kabul, where they have replaced Norwegian Special Forces.


Our potential to be a platform into the Asia-Pacific region is, I believe, one of the reasons the European Union is interested in discussing a comprehensive bilateral agreement with us.


Earlier this year, Prime Minister Key and President Barroso agreed to take discussion of a comprehensive partnership to the next stage.


Some weeks ago we submitted a discussion paper to the Commission outlining opportunities for enhanced cooperation, which we understand is now in the hands of members.


Over the coming months we will engage in meetings and discussions to seek to advance a process that we believe can add value to both parties, and one that can add contemporary impetus and depth to a relationship of long standing.


This proposal is important to us. We want to do it justice in our discussions throughout Europe.  Developing such a new and wide-ranging agreement will be complex, and will take time.  It will involve getting into some sensitive areas.  We are prepared to be patient in pursuit of something so manifestly worthwhile. 


It has the potential to be a new model for relations among developed countries. 


Just as significantly, it has the potential to assist positive interaction among developed and developing countries - especially the developing countries that will play leading roles in global policy formulation in the decades ahead.


Thank you.

  • Murray McCully
  • Foreign Affairs