Supporting economic resilience in the Indo-Pacific - Speech to the Asia Forum
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Ladies and gentlemen, distinguished guests, kia ora koutou katoa
Thank you Farib. It is a great pleasure to be invited to speak at this event.
I want to acknowledge the on-going work of the Asia Forum. Over many years – decades, in fact – you have been able to bring together diverse perspectives from a range of professional disciplines and fields of research. In a changing world your advice to governments and business on how to adapt to new challenges helps shape New Zealand’s future trajectory and ultimately the well-being of all New Zealanders.
I have been asked to talk to the work being done to support economic resilience in the Indo-Pacific, for Aotearoa New Zealand and our partners in the region.
The Indo-Pacific is our home region. In normal times we can reach key Indo-Pacific destinations non-stop by air from New Zealand. We have strong people links across the region, visible in the make-up of our multicultural society. Above all, for the purposes of today’s discussion, it is the region that accounts for the bulk of our offshore commercial links – it accounts for around 70% of our trade.
Within that total I am delighted, as Minister of State for Trade and Export Growth, to have specific responsibility for our trading relationships with Southeast Asia and the Pacific.
Our place in the Indo-Pacific
A number of you will have attended the Prime Minister’s address to the New Zealand Institute of International Affairs in July, where she spoke to the topic of the Indo-Pacific.
Let me underline at the outset the Prime Minister’s point that New Zealand will always be anchored in the Pacific.
But the pandemic has shown the Pacific is increasingly impacted by events further afield. What happens in the Indo-Pacific – our wider home region – impacts materially on the well-being and prosperity of New Zealand and our closer Pacific neighbours.
The ‘Indo-Pacific’ places us within a larger ecosystem of nations and regions that includes East Asia, the Pacific, the Indian sub-continent and the Pacific Rim.
After the turmoil that afflicted Southeast Asia in the 60s, 70s and 80s we enjoyed a generation in which we could view the region essentially through an opportunity lens. We no longer have that luxury. The strategic environment has become challenging. Whether it is competition between the great powers, the crisis in Myanmar, tensions in the South China Sea, North Korean nuclear adventurism, risiung nationalism, protectionism, or climate change – we are clearly moving into a period where there are fewer certainities and greater risks.
We take an extended view of our interests. We understand that what happens across the region impacts on New Zealand. And we believe in doing what we can to secure and promote our interests.
That means, first and foremost, working with others. Concerted, collective action is the best way to build regional resilience, stability and prosperity – and by extension, to protect our own prosperity and way of life.
Regional Economic Integration
Take the economic agenda. The evolution of the regional economy over the past generation or two has been an extraordinary story, and in general a positive one. Economic integration driven by trade and investment has played a critical role in building prosperity across the region – lifting family incomes in the process.
Of the many bilateral and regional trade and investment initiatives, we are part of four that are worth highlighting – not only because of their scope and size, but because of the opportunity they provide, through a model of “open plurilateralism”, to reinforce the rules-based multilateral trading system, to bring in new economies, and to build towards a more prosperous future.
I start with the free trade agreement between ASEAN, Australia, and New Zealand (AANZFTA). Signed over ten years ago, AANZFTA delivered remarkably good access to a set of markets that had previously maintained high tariff walls. AANZFTA has become the foundation of a genuine economic partnership between ASEAN and New Zealand, and a boon for NZ exporters with an interest in a set of big and fast-growing markets.
Last month I sat down virtually with economic ministers from ASEAN and Australia for an annual meeting that we hold under the AANZFTA banner. At that meeting we instructed officials to intensify negotiations that have already started on the AANZFTA upgrade. I also joined ASEAN and a wider set of ministers for the East Asia Summit Economic Ministers’ Meeting, another way New Zealand is involved in the strategic economic discussions centred on ASEAN-led architecture.
Next, the Comprehensive and Progressive Trans-Pacific Partnership. CPTPP emerged from a small New Zealand initiative with Chile, Singapore and Brunei (P4). But we always had a regional vision for it. CPTPP, with all its New Zealand DNA, is the most ambitious trade agreement the region has negotiated – and we are keen to expand it.
The caveat is that anyone who wants to join has to turn up “well dressed” – they need to be able and willing to match the genuinely high standards – for rules as well as market access –set in the original TPP and CPTPP negotiations. There are no cheap seats.
Third, we are committed to implementing the giant Regional Comprehensive Economic Partnership. RCEP was signed last year by ASEAN countries, Australia, New Zealand, China, Japan and Korea. It is consistent with a regional vision and evolving value flows. RCEP provides a consistent set of rules and less red tape for our exporters, while also providing opportunities for NZ businesses to get their products into regional value chains. In terms of our own legal process I am pleased to say RCEP is in the final stages of ratification by parliament. We are hopeful the agreement will enter into force – making it useable by New Zealand exporters – in a matter of months from now.
Meanwhile, on the theme of resilience, we are also thinking actively about how trade architecture should respond to change. Resilience obviously requires an ability to adapt to a changing environment and being future-fit. We think actively about architecture for the new economy.
Our new Digital Economy Partnership Agreement, or DEPA, with Singapore and Chile is a case in point. DEPA establishes new rules and best practices for supporting trade in the digital era. And in line with our open regionalism principles, DEPA is open for others who can meet the standards to join. We were delighted to be able to start accession negotiations with the Republic of Korea.
The first big piece of regional economic architecture was APEC. The overarching vision for APEC is a region of open economies, progressively moving toward fuller integration, with that process facilitated by a transparent, rules based system. At this time of crisis – both pandemic and economic – forums such as APEC that bring governments together to shape concerted action are more important than ever.
As APEC host and chair for 2021, New Zealand has been at the forefront of helping APEC address this crisis. In that capacity we have been leading the negotiations on an action agenda for the next twenty years based on the vision APEC leaders agreed in Putrajaya, Malaysia in 2020.
In June I represented New Zealand at the APEC Ministers Responsible for Trade (MRT) meeting which was hosted by my colleague, Damien O’Connor.
We were successful in securing APEC agreement on the need to rejuvenate and enhance the WTO, to push for a conclusion on the long-standing issue of fisheries subsidies, strengthen APEC’s commitment to phase out inefficient fossil fuel subsidies and transition to renewable and cleaner energy sources.
After several challenging years for APEC as an institution we are confident we will leave it in good shape, with its status as a pillar of regional architecture secure.
I also want to underline today the importance of the Government’s Trade for All agenda. Trade for All is about making the trade agenda work for every group in society, not just the big end of town. It underpins everything we do on trade and is essential if New Zealand trade policy is to be sustainable in the longer term.
As a practical matter, Trade for All means having a trade policy that is more consultative and more inclusive. A trade policy that recognises the role, voice and views of Māori as treaty partners. And, ultimately, it means sharing the benefits of trade more widely, allowing all New Zealanders the opportunity to benefit. We are committed to working for approaches that will enable SMEs, Māori and women-led businesses to access the opportunities provided by trade.
COVID-19 and the Trade Recovery Strategy
I can not go any further without mentioning COVID. COVID-19 has had a devastating impact. It has threatened to roll back decades of progress towards better livelihoods and greater prosperity. And the disruption it brought to international trade and global supply chains has proven particularly problematic for open and internationally-connected economies like New Zealand.
Very early we realised that New Zealand’s response needed to tackle these disruptions head on. So while at home we were focused on the safety of New Zealanders, abroad we turned our minds to laying the foundations for an accelerated, trade-driven, economic recovery.
The Government’s Trade-led Recovery Strategy is supporting businesses to recover from the shocks caused by the pandemic – and to seize new opportunities. This is through a concerted all-of-government effort to: retool support services for exporters; reinvigorate international trade architecture (e.g. the WTO); and refresh New Zealand’s key trade relationships.
COVID-19 has also reinforced just how quickly market and supply chain realities can change, and how important it is that in these turbulent times we build resilience into New Zealand’s trading profile. Spreading our risk means spreading our offerings across a wider range of markets, and it’s the Government’s job to keep creating options for businesses to do that. These realities are at the heart of the government’s diversification strategy.
The economies of the Indo-Pacific are key to all of these objectives, including our developed markets in North Asia, our growing relationships in ASEAN, and the potential represented by the Indian subcontinent.
Our North Asian trading partners have an enduring importance to New Zealand’s well-being. Yet the region’s political disputes have, on occasion, spilled over into trade.
We have seen this particularly with regards to China, including the trade measures it has taken against Australia. China is important to us. It is our largest trading partner and we will continue to invest in the political and economic relationship – the FTA upgrade signed earlier this year is one example. But at the same time, we will continue to be clear with the business sector that it needs to consider the benefits of diversification: diversification supports resilience.
Elsewhere in North Asia, CPTPP provides us new access into Japan, one of our oldest partners and closest friends in the region. We also have a close and strong relationship with South Korea, with which 98% of our trade will be duty-free by 2030 under our bilateral FTA.
The countries of South East Asia, which together make up the combined ASEAN market, are an important part of our diversification strategy. There are 650 million people and a $3 trillion economy across the ten countries of South East Asia. Taken as a collective the ASEAN economies are our 4th largest trading partner, representing 10% of our exports. By and large these are young populations, open to new ideas, innovations and technologies.
There is already a spectrum of New Zealand companies exporting to ASEAN, be it a larger scale operation exporting milk powder for reprocessing and re-export in Malaysia, or an SME like New Zealand Fresh, selling grass-fed Kiwi meat and fresh seafood direct to the family table in Singapore.
The strategic importance of ASEAN is obvious, and the potential to grow our trading relationship is great. We have tended to under-estimate the potential of our bilateral ties, but that is starting to change. It is a complex region, but decades of links between New Zealand and the peoples of South East Asia have bound us together.
We need to build upon those people-to-people links, including the valuable contributions made by diaspora communities, to find new paths and provide the impetus for us to work together in a more formalised way.
India is another story of where there is ample, untapped opportunity. New Zealand is lucky to be home to thriving and diverse Indian communities. Our historical ties stretch back to the first Indian migrations to New Zealand in the 1890s.
Late last year I was fortunate enough to speak at the launch of a report on the Economic Contribution of New Zealand Indians, commissioned by the Waitakere Indian Association. For the first time it quantified the economic activity of the Indian community. It found New Zealanders of Indian heritage contribute $10 billion to our economy each year, or 3.3% of total GDP. Indian IT professionals alone were estimated to have contributed more than $350 million in 2020.
Why then does our trade relationship remain undercooked?
There are around 140 New Zealand companies active in India and two-way trade in 2020 was worth NZ$ 2.54 billion. If you ask me, this is not reflective of the relationship New Zealand should have with a country as important as India, regionally and internationally.
There is no doubt India offers enormous potential for New Zealand as a strategic partner, as a trading partner, and as a source of talent and capital.
We do not have an FTA with India – although we have tried. Likewise India chose not to join with the 15 other economies that make up RCEP. These are decisions that the Indian government has made and we respect them.
But we should not be limited to the national level. The Government is enthusiastic about exploring options for economic cooperation at the state level, remembering that India is a federal union made up of many states and union territories, each with considerable autonomy and a distinctive cultural and economic identity.
More broadly, New Zealand is committed to a greater investment across all aspects of our relationship with India. This includes broaden and deepening our political, security, and cultural connections.
New Zealand remains active elsewhere in South Asia. In August, we opened a new High Commission in Colombo. Like New Zealand, Sri Lanka is a small island nation with a heavy reliance on trade. It offers opportunities for New Zealand as NZTE’s fastest growing market across South Asia, Africa and the Middle East, (with exports reaching $436 million as at December 2020).
As I hope I have illustrated, New Zealand benefits from vibrant and robust relationships with our partners in the Indo-Pacific. By working together, I hope that we can ensure our region remains peaceful, secure, friendly and prosperous – and does so in an innovative way which recognises the rapidly changing global environment – whether due to the pandemic, globalisation, climate change, or strategic competition.
I began this address by referring to the challenging strategic environment we now see in South East Asia. In closing, I’d like to note that our response to those challenges is encapsulated in remarks made by the Prime Minister when she spoke at the NZIIA annual conference in July.
She said that what underpins our relationships in the Indo-Pacific is a set of principles that have served New Zealand well in the past – and which the region will need to adhere to if it is to address common challenges with success. These are: respect for rules and international law, openness, inclusivity, upholding and respecting sovereignty, and transparency.
These principles are not ground breaking concepts. But they resonate with New Zealanders across the board.
The Prime Minister was clear that our success as a small, open trading nation will depend on working, in our own way, with the widest possible set of partners. We need to invest in our relationships. We need to cooperate, partner and to trade with others for our collective prosperity, while also recognising that we may need to adjust our approaches over time. Such is the nature of cooperation. Such is the nature of New Zealand’s approach.
Thank you for the time afforded me today to share my thoughts. I am interested to hear your views on the Indo-Pacific and value your insights.
No reira, tena koutou, tena koutou, tena koutou katoa.