US-NZ Council speech
First, thank you all for your attendance this afternoon and let me acknowIedge the efforts of Jordan Small for both the invitation and arranging today’s event.
Before turning to the US –NZ relationship, it is important to raise one matter which has concerned the Government this week and that is the fire in the convention centre.
The hosting of the APEC Leaders meeting in November 2021 has always been of importance for the country and Auckland City in particular. Without doubt the fire is a setback.
What we need to do now and what we will do is demonstrate that New Zealand is a first world country and we has the ability to respond.
In fact, how we respond will speak volumes about our country. Our challenge is to demonstrate we have the capability and can deliver on our prepared contingency options. How we respond will arguably showcase Auckland just as much as if this disasterous fire didn’t happen.
There is alot more information to gather and assessments to be made to develop our response. But the Government’s view is we are confident we can and will successfully host APEC.
It will require extra effort from all of us, including many of you here today. However, with applied effort it is achievable. And the government looks forward to working with you in that regard.
This Government knows where its strategic interest lies and that brings me to the critical importance of the United States to New Zealand, and to our corner of the world in general.
The relationship is, of course, made up of many interwoven strands. We enjoy close political ties born of our long history of friendship; our shared advocacy for democratic values and norms; and our track record of working closely together in regional and global affairs over the past several decades.
The commercial significance of the US for New Zealand businesses is huge, as you would expect for our fourth-largest trading partner. Two-way trade is worth more than $18 billion each year, and we want to take action to see that grow.
We continue to see high profile business investments and transactions taking place between New Zealand and American firms – for example, Air New Zealand’s recent Boeing Dreamliner purchase.
We are also seeing substantial growth in numbers of people travelling between the US and New Zealand. We received around 368,000 visitors from the US in the year to July, making the US our third largest international visitor market.
And from June this year, New Zealand business people have been able to access E1 and E2 visas for the first time – a joint achievement for the US and New Zealand under the KIWI Act.
The Government is investing too in a positive future for the relationship – for instance, in doubling our contribution to the Fulbright New Zealand programme, to make sure our best and brightest young people can get access to top US universities.
In short, the current state of the bilateral relationship is excellent. Moreover, the Prime Minister’s meeting with President Trump in New York on 23 September was a milestone. It was clear from that conversation that we enjoy support at the highest levels in Washington, D.C. for lifting the relationship to its fullest potential.
For all of these reasons and others, it has been important to prioritise a series of meetings with my American counterparts through visits to Washington, D.C. in December 2018 and then again in July this year.
The key to continued success with the US will be respect, and personal relationships. If my discussions in July were any indication, US leaders have started to look at New Zealand with a fresh appreciation for the benefits of working with us, and with a renewed sense of the opportunities for regional cooperation.
In an address to the Centre for Strategic and International Studies in Washington, D.C. in July, my speeched focused on some of the historic ties that bind us as long-standing regional democracies and strategic partners. Our political systems and values are underpinned by pluralism; by respect for human rights and religious freedoms; and by a commitment to maintaining the rule of law.
These are the values that form the bedrock of our status as two of only nine countries around the world that have held continuous democratic elections since 1854.
It is evident however that the underlying strength of some of these foundational democratic values is increasingly being challenged in the Pacific, as they are elsewhere. My contention is that, to ensure regional prosperity, we must work together to create the conditions that will allow those values to flourish.
This demands a step up in our respective levels of commitment to the region. New Zealand has taken that step, in the form of the Pacific Reset. We are committed through the Reset to building deeper, more mature political partnerships with Pacific Island countries, while supporting their independence and sustainable social and economic resilience.
My Georgetown University address in December 2018 set out to express a point of view on the importance of greater US engagement in the Pacific. Nearly a year on, we see real progress in collaborative effort among likeminded partners, including New Zealand and the US, to work together to enhance regional security and developmental assistance.
It was also an opportunity to point out that, as likeminded partners, we need to support each other economically by ensuring we reduce and remove barriers to trade, and by understanding each other’s economic imperatives.
New Zealand already makes strong contributions to defence, security and prosperity across the Indo-Pacific, and across the Blue Continent of the South Pacific. We are eager to maintain and build on our contribution. But we can only do this if we are economically prosperous.
And therein lies the rationale behind our decision to act decisively and to place a high priority on building a stronger bilateral economic relationship between the US and New Zealand, through a Free Trade Agreement.
In addition to the economic benefits of a stronger relationship for the US and New Zealand, an FTA with New Zealand would also send a signal about the seriousness of US engagement in the Indo-Pacific region.
The Comprehensive and Progressive Trans‑Pacific Partnership Agreement, or CPTPP, has been an important benchmark in that regard. While not all of us endorsed every single aspect of the original TPP, it was still a matter of concern to us that the US chose to withdraw when they did. Aside from the loss of market access, the result has been a regrettable retrenchment of US economic presence, profile and influence from the region, at a time when it is most certainly needed and warranted.
We see it as being in America’s interest – and in our own – for the US to retain its place at the table when it comes to setting the rules that will guide the region’s economic development and trade patterns long into the future.
We have a choice. We either work together to ensure the regional rules of commerce protect the fundamental pillars our firms need to succeed – open markets, enforcement of contracts, access to independent judiciaries, and penalties for corruption and nepotism. Or we leave the rules to be written by others, placing our companies’ livelihoods in jeopardy.
A stronger economic relationship with New Zealand would also help to arrest another concerning trend. Despite our strong economic links, the US share of exports to New Zealand is declining relative to other partners with whom we have FTAs. This is consistent with the broader trend for US exports around the region as a whole. And it illustrates what the US stands to gain by turning that trajectory around.
The point is backed by the numbers. Though US exports to the world have grown by 5.3 percent on average per year since 1990, the share of US total exports to New Zealand dropped, from nearly 18 percent to 10 percent.
Meanwhile, imports from our regional partners with whom we have FTAs have grown significantly in relative terms over the same period. China’s exports to New Zealand, for instance, have grown on average by 17 percent per year. And China's share of total exports to New Zealand has grown from 1 percent to 20 percent during that time – becoming our largest source of imported goods.
The shift is even more drastic for the US share of imports across Asia. In 1990, 17.4 percent of all goods imported to Asia came from the US, whereas by 2018 that share had fallen to just 7.4 percent. Put another way, the US has lost half of its market share in Asia over a 28 year period.
Naturally, with the revamped CPTPP agreement now in force, we would welcome a US return to the fold, under the revised set of rules and conditions.
But as things stand, we also contend that there is a viable path forward to be found in a bilateral FTA process with the US. You will recall that President Trump declared the US as being open ‘to making 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.’
Of all countries, New Zealand has to be among the best credentialed to make good on our side of that deal. Indeed, we are uniquely ready to take the next step, given our proven track record in pursuing ambitious trade deals, and our advocacy for ‘free and fair’ global trade.
New Zealand’s interest in a bilateral trade deal with the US is not new. Some of you will be aware that New Zealand’s desire for ‘a reciprocal trade treaty’ was articulated by former Finance Minister Walter Nash to President Roosevelt and members of the US State Department and Treasury, as far back as 1939.
Which brings us to today, some eighty years later. And all of you will want to know where we see an FTA process going over the course of the next year, and beyond. In fact, MFAT’s senior trade official will be meeting with his US opposites in Washington, D.C. soon to talk through some of the options.
These are still very early days for an FTA discussion. Naturally, we would by no means expect an FTA negotiation to be a straightforward process. There will inevitably be disagreements and differences. But we refuse to accept that the right result cannot be attained, simply because it would be challenging in certain respects.
Many here might agree that there can only be benefits to business if we succeed in diversifying our export destination options. And in my view, there is still a lot of headroom for strong growth in New Zealand’s exports to the US market.
In an uncertain geostrategic environment, it will serve us well to ensure we are keeping open as many avenues as we can to trade with our partners abroad. This is why this Government continues to press ahead with negotiations with the EU, the Pacific Alliance, the Regional Comprehensive Economic Partnership Agreement (or RCEP), and others.
We do not deny that there would likely be some challenging choices for us to face if we want to get an FTA with the US over the line. Some of those thorny issues have already seen the light of day in TPP negotiations – on market access ambition, pharmaceuticals, copyright and the like.
But we need to think positively about all of this, focus our attention forward, and keep the end goal in sight. We have agreement in principle now from US leaders that this is the right direction for the relationship to be going. As I said in Washington, D.C. in July, the lack of a trade deal is an obvious gap in an otherwise exemplary bilateral relationship. And we have not made the progress on a trade agreement that we should have done.
We have been patient for eighty years. The time to act is now, while we have so much to play for in economic and strategic terms.
We have been clear about the direction that we see this relationship going. We are optimistic about finding common ground when it comes to matters of economic prosperity. And we can all be confident that an improved trade relationship between New Zealand and the US will be one of those areas. And I have been assured by Vice President Pence and other top US political figures that they share that vision.
So we are continuing to push in that direction. It is not an easy prospect, and we will undoubtedly need to call on the support of the New Zealand-US Council and other members of New Zealand’s business community as we work to make it happen. But with patience and persistence, it is an outcome within our grasp.