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Murray McCully

7 May, 2013

Speech to NZ Institute of International Affairs

Thank you for the opportunity to provide such an important gathering with an update on New Zealand’s Foreign Policy.

I want to use this occasion to provide a quick review of the status of our relationships and from that base to look forward at some of the issues we will need to confront in the years immediately ahead.

I think I can report to you that all of our important relationships are in good repair.

Starting with our largest and most important relationship, Australia, I can report a continuation of the sort of cooperation that exists only between our two countries.

This manifests itself especially strongly in the shared leadership role that we play in the Pacific.

New Zealand exports to Australia, which have softened a little in the past two years, remain around the $10 billion mark – well ahead of our other markets.

While federal elections in Australia in September will call for a quieter period in the relationship over the coming months, I have no hesitation in asserting that this unique relationship will re-gather its normal momentum regardless of the election outcome, later this year.

Similarly, there has been a quieter period in our relationship with the United States as the second Obama administration continues to take shape.

The relationship with the US today is a fundamentally different and better one than was evident five years ago.

I believe the Key Government’s strategy of removing this relationship from domestic political contention and slowly building trust and confidence has served our interests well.

The initial interactions with Secretary of State John Kerry have been extremely positive and I will visit Washington in two weeks for our first formal talks.

Hopefully we are poised to make a major breakthrough in terms of our trade relations.

Our exports to the US have been bumping around a little over the $4 billion mark for around a decade now.

It is heartening to see the level of ambition being brought by the Obama administration to the Trans-Pacific Partnership negotiations which bring the promise of a reinvigorated trade relationship in the immediate future.

In China too, leadership changes have imposed a more subdued approach to the diplomatic relationship over recent months, followed by the highly successful visit by the Prime Minister last month for his first formal engagement with the new leadership.

Five years into the Free Trade Agreement with China, our export figures are now sitting around the $7 billion mark, the result of a period of spectacular growth.

We are broadly on track to reach the highly ambitious target of $20 billion of two-way trade by 2015 – by which time we are likely to see our exports to China match our exports to Australia.

The recent decision to open a new mission in Western China alongside our missions in Beijing, Shanghai and Guangzhou is recognition of this spectacular trend.

Maintaining diplomatic relations with Japan has proven to be a livelier matter than I had anticipated. I am now on my sixth Japanese Foreign Minister.

I am very much looking forward to Minister Kishida visiting in the coming few weeks.

After many years of flat-lined trade and economic relations, with our exports sitting a little over the $3 billion mark, Japan is on the brink of major changes.

The decision to join the TPP negotiation is a game changer for Japan and for the region, signalling a level of confidence and ambition we should welcome.

Our relationship with South Korea remains strong, and we welcome the enormous restraint with which they deal with the provocative behaviour from the DPRK.

But our trade relationship will continue to underperform until an FTA puts our exporters on an equal footing to many of their competitors.

Last month I met with Russian Foreign Minister Sergei Lavrov.

While solid progress is being made in the Russia FTA, there is a lot more to the relationship than that.

We also recognise that Russia is a huge player in world affairs and we need to ensure that we maintain solid engagement.

I am hopeful that we will be able to find dates for the Prime Minister to make an official visit to Moscow at President Putin’s invitation before this year is over.

In 2011, the Government launched its India strategy, providing a framework to develop the enormous trade opportunities that will be available as the country’s huge population becomes wealthier.

We hope for further progress towards an FTA with India in the near future.

In the 2001-2010 period, six of the world’s fastest growing economies were African. Huge business potential exists with returns to match.

And this growth is spread over the entire continent, not just in the northern half.

Since 2010 the average growth rate for sub-Saharan Africa was around 5 per cent and is expected to be above 5 per cent over the next 12 months.

While this clearly justifies our decision this year to open a full-time mission in Addis Ababa, it also asks the question as to where else in that huge continent we will soon need representation.

Consolidation of New Zealand’s relationships in ASEAN has been a key focal point for this Government.

While being part of an FTA with ASEAN is hugely beneficial to New Zealand, so too is our place at the table of the East Asia Summit and other ASEAN-brokered meetings.

While the opportunities for trade and economic growth with ASEAN are huge, they will only be realised with a serious and significant investment of effort from both public and private sectors.

The Cabinet recently signed off on our New Zealand Inc ASEAN Strategy as a basis for this renewed effort and I look forward to the Prime Minister launching this strategy soon.

There are four other regional relationships which deserve some reflection.

First, the European Union, which, despite its well-publicised financial difficulties, remains a key player in world affairs.

New Zealand’s heritage and international personality have been shaped by our commitment to European values – democracy, the rule of law, and human rights.

The EU is our bedrock partner in the pursuit of these values internationally.

It is my hope that we will be able to see the trade and economic relationship achieve the same high levels of partnership through, at some point, the conclusion of a NZ/EU FTA.

Europe’s current challenges have diminished the appetite for a Comprehensive Partnership Agreement, embracing agreements on trade.

In 2011 I announced that we were instead negotiating a Framework Agreement – alongside our neighbour Australia.

Most elements of that agreement are now concluded.

I take this opportunity to reiterate the important message that in the fairly near future we need to again pick up the trade and economic aspect of the relationship that at the moment is fairly static – to ensure it performs as successfully as the other aspects of this very important partnership.

Here I want to place on record my deep appreciation to EU Development Commissioner Andris Piebalgs, with whom I co-hosted the Pacific Renewable Energy Conference a few weeks ago.

Together we managed to attract commitments in excess of $635 million for projects that should take the Pacific from below 5 per cent to around 50 per cent renewable energy in the years immediately ahead.

This has been a very exciting and successful new strand to our relationship with the EU.

New Zealand’s exports to the Gulf Cooperation Council have grown on average by about 10 per cent a year over the last decade and growth in other aspects of the relationship has been as spectacular.

While many other relationships suffer from inadequate logistical connections, New Zealand enjoys 28 flights per week from Emirates as well as the benefits of the codeshare arrangement between Etihad and Air New Zealand.

Massive sovereign wealth funds provide huge investment partnership opportunities for New Zealand, especially in agriculture as Gulf countries seek food security arrangements for the future.

The completion of the GCC FTA remains a priority for the Government, and soon we will launch a New Zealand Inc GCC strategy.

We have just made the decision to boost our resources in the Abu Dhabi embassy opened two years ago, and are pleased to see NZTE also expand their footprint in the Gulf.

Back in 2010 the Government published a refreshed Latin America strategy.

As part of this strategy the Prime Minister has just completed a hugely successful visit to the region.

This month Trade Minister Tim Groser will attend a meeting of the Pacific Alliance, where we are now observers.

In my view the Pacific Alliance will be a real force to be reckoned with over the next few years.

While our geographies and seasons may limit the extent of our trade in goods, the services and investment aspects of the relationship with Latin America have huge potential.

I have deliberately left until last our role in our own neighbourhood, the Pacific.

It is no secret that the Government regards, and I personally regard, our role in this region as key to our international reputation and personality.

We now spend nearly 60 per cent of our total ODA budget in the region.

And we are trying to spend it in a more ambitious way.

The recent Pacific Renewable Energy Conference is a good example.

Preparing a prospectus reflecting Pacific renewable energy roadmaps, holding a conference and sourcing $635 million of funding is difficult enough. Turning $635 million of commitments into $635 million worth of projects will be even more demanding.

But shifting the region closer to 50 per cent renewable electricity supply is an important objective.

This is exactly the sort of facilitative role New Zealand should, with our links into the region, be able to play.

Another good example is the group of projects we are undertaking in the Western Province of the Solomon Islands, especially the expansion and sealing of the Munda Airport.

A couple of 100 pound bombs and a 1000 pound bomb under the existing runway are just the start of the complications encountered in projects of this sort.

But the new facility will bring huge benefits to the Solomons as they make the transition from the RAMSI Mission.

It will be a critical enabler for key sectors, especially tourism and fisheries.

This is an ambitious approach to the use of our development resources, but one that should make a significant and sustainable difference.

As you have heard, we have been making changes to our resource allocation around the world:

- The new mission in Western China

- The new mission in Myanmar

- The commitment to a full time mission in Addis Ababa

There are clearly pressures building for a greater presence in Africa.

In addition to growing markets there, Africa is the location of 60 per cent of the world’s uncultivated arable land and I hope to see increasing New Zealand private sector interest in that continent.

The Prime Minister’s successful Latin American visit made clear the pressures for an expanded footprint there.

And the continuing growth in trade with the Gulf – now a $1.6 billion market will keep the pressure on our increased resources there..

Finally, a word on our Security Council campaign.

I am pleased with progress to date.

But as the 2012 campaign and Australia’s and Luxembourg’s success demonstrated, the final year really matters.

And bigger countries with bigger resources always have an advantage over smaller countries with smaller resources.

We are working hard.

I am just back from visiting 13 countries – six in Africa and seven Europe – in thirteen days.

Fourteen countries in 14 days if you count a brief stopover in Australia.

I leave again at the end of this week for the Caribbean, where I will address the annual Foreign Ministers meeting and make bilateral calls.

New Zealand has an outstanding international reputation, built upon the good work of many people over many years.

We work hard to maintain and enhance it.

I hope and believe that, along with some hard yards in the meantime, this will leave us well placed when the UNSC ballot comes in October of next year.