As trade tensions rise between the United States and China, Beijing warns that US tariffs will not fix the problem.
Pick a side. Does New Zealand now have to choose between being offside with its biggest trading partner or its most important defence ally? JOHN McCRONE reports.
Donald Trump and Xi Jinping. Is it the return of the Cold War face-off of the 1960s, or is it more accurately a re-run of the Great Power rivalries of the 1930s?
Internationally, the pundits are debating. One scenario sees it in terms of a battle of ideologies – the historically-inevitable clash of two opposing systems of thought.
The other just understands the United States and People’s Republic of China to be indulging in an unabashed arm-wrestle – two capitalist powers with authoritarian tendencies that both want to run the world.
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Either way, it seems the harsh new reality for New Zealand. The world order is shifting. Pick a side quick.
And which way to jump? Like it or not, the US is still our protector, our “Five Eyes alliance” military backstop. And like it or not, China has become our most important export customer by a good few billion dollars.
As Trump’s trade wars and China’s naval posturing heat up, both are going to be looking around to see who stands with them.
Up until now, New Zealand has done a good public relations job on being the plucky little independent voice in world affairs.
Why, we made it on to the United Nations Security Council in 2015. Helen Clark was in the running for UN Secretary-General for a while. We take it as no surprise a Kiwi career diplomat has just been parachuted in to help patch up the World Trade Organisation (WTO).
A choice of strongmen: Xi Jinping and Donald Trump.
In the era of globalisation and free trade that followed the collapse of the Soviet Bloc, New Zealand has flourished by speaking its mind, promoting its economic and social values.
But surely that independent stance is about to be called? Neither Trump nor Xi look the sort to have patience with irritating do-gooders from tiny countries of zero geopolitical significance. Pick a side and pull your head in, will be the story.
At least that seems the developing narrative. Yet surprisingly, New Zealand’s foreign policy community isn’t having any of it.
Trump’s trade wars: By ignoring a rules-based order, that attacks New Zealand’s interests.
Instead the mood seems almost bullish. In terms of its settings, New Zealand is standing on the right side of history, they say. And rather than backing off, the smarter play is to be doubling down on the principles we represent.
BULLIES DON’T WIN
Otago University professor of international relations Robert Patman says the pundits are not mistaken. Things are suddenly tense.
“New Zealand is facing one of the most challenging diplomatic situations since the end of the Cold War. As a country, we are seeing the things we cherish – such as a rules-based international system – under threat.”
And Patman says the particular worry is that it is some of our traditional allies who are the ones turning nationalistic and unpredictable.
“It’s not just the usual suspects – authoritarian regimes like Russia and China. We’re seeing it from countries we thought we shared our values with, such as the UK [over Brexit] and the US.”
However it is an error to view it as the past repeating, says Patman – drawing either the Cold War or Great Power parallels.
This harks back to a time when a single nation could hope to dominate a large chunk of the globe. When what it said would go.
“But recently, unilateral action by superpowers has had a very poor record. Indeed it has had an almost 100 per cent failure rate in the post-Cold War era,” Patman says.
Take the US. “We saw its disastrous intervention in Iraq which eventually led to the emergence of Isis and other insurgencies.” Now the poor old US can’t even seem to get its way in Venezuela.
“We’ve also seen Russia’s attempts to rough up a neighbour – annex Crimea and intervene in Eastern Ukraine. But it lost US$150 billon in the process and has become strategically isolated in Europe.”
Patman says even China is already regretting the way it has started flexing its muscle under Xi, creating island bases which straddle the region’s shipping lanes.
“They built some artificial islands in the South China Sea, but the price was colossal. They went from being a peaceful rising power to one that was suddenly feared by its neighbours – like Japan and South Korea, two of its biggest trading partners.”
Otago’s Prof Robert Patman: Superpowers actually have a poor record of getting their way.
Patman says the US and China might still be finding it hard to accept, yet history is showing the world has grown too complex and interlinked to be easily bullied. Multilateralism – power of all sizes – now naturally reigns.
He says take even New Zealand and its 1980s Anzus bust-up over visits by US nuclear ships. “We were at loggerheads for two decades. But it was America that blinked.” In 2006, Washington agreed to disagree and moved on.
So the world order is changing, says Patman. Just in the other direction. Superpowers keep being flummoxed by how hard it is to get everything their own way.
Dr Jason Young, director of Victoria University’s Contemporary China Research Centre, agrees.
Young says talk of a new Cold War only makes sense if there were some existential imperative for New Zealand to choose a side – if China were somehow the evil empire and we had to align with the army of the good.
Under Xi – who worryingly last year did away with Party limits on his term of leadership – China has sharply stepped up its international profile.
“We have a more assertive and confident China that is engaging with our region in ways we are not familiar with, and at times have issues with and struggle with.”
But Young says China isn’t promoting a world ideology, as was the case with Communism. There is not that drive to conquer. The preoccupation is instead with economic advance.
“They talk about the China model as pulling 500 or 600 million people out of poverty – how China can be a positive force for development.”
So from New Zealand’s point of view, there is no inevitable reckoning of values, Young says.
China may be adopting a more transactional approach to its international partners at the moment. And there are big human rights issues like its actions in Tibet and Xinjiang.
However it would take a pretty extreme scenario – like the US backing a Taiwanese declaration of independence – to step things up to a military level and force New Zealand into some kind of uncomfortable decision, Young believes.
Patman says the idea of two great rivals squaring off is appealingly simplistic. But another reason it is quite wrong is the world system has reached a point in its development where its biggest issues are truly global.
“Think of all the problems the US, New Zealand and China face together. Like climate change. Can any one country unilaterally resolve climate change? No it can’t. What about the global economy? Can any one country resolve the economic problems of the world? No it can’t.”
Patman says the same applies with terrorism, drugs, pandemics, and any other ill which transcends national borders.
The populist successes of the Donald Trumps and Nigel Farages might suggest a world wanting to return to a “might is right” era. “They want to take us back to the 1930s.”
Sea power: China has been building island bases off the Philippines to straddle shipping lanes.
But New Zealand will be doing the right thing if it doubles down on its own rules-based, internationalist, view of the future, he says. There is that third option.
THE ASIA WAVE
The message is that New Zealand is better placed for the current power games than most people would think.
Patman says 20 years ago, there would have been reason – as a small country far from anywhere – to be more pessimistic.
“We had a rift with the United States then. And we didn’t have a Free Trade Agreement (FTA) with China. Fast forward two decades, we now have a very good relationship with both superpowers.”
The Trump administration goes out of its way to say nice things about us, and China sees New Zealand as a valuable testing ground for its developing relations with Western liberal democracies.
So we start with the advantage of being in good standing with both sides, Patman says. And in terms of soft power – our international influence – we have also reached a high mark. UK consultancy Portland ranks us 18th most important on that score.
That was even before Prime Minister Jacinda Ardern captured the world’s attention with her empathic response to the Christchurch mosque shooting, coupled to her steely determination to ban automatic guns and limit internet hate speech.
New Zealand is not such a minor country anymore, Patman says. “The world was watching to see how we would react.” It has credibility as an independent voice in the global arena.
Australia is arguably more conflicted at the moment. Whereas 20 per cent of New Zealand’s exports go to China, it is 30 per cent for Australia. And on defence, Australia is just about the US’s closest ally. Which way would it jump, asks Patman?
So New Zealand can profit from maintaining the stance that while it wants to be friends and trading partners with everyone, it doesn’t need to compromise its values.
Patman says this independence makes even more sense when you consider what comes after China’s rise to prominence.
In the US, many commentators, like Robert Kaplan, fellow at the Center for a New American Security, see confrontation with China in terms of a straight rivalry.
It is a new Cold War, Kaplan declared earlier this year in the magazine Foreign Policy. “The differences between the United States and China are stark and fundamental. They can barely be managed by negotiations and can never really be assuaged.”
Kaplan says Xi has emerged as the strongman leader. China wants naval control of the South China Sea as a starting point just as the 19th Century United States used its control over the Caribbean as the launchpad of its own climb to world dominance.
And he warns that unlike Soviet Russia, with its creaking economic model, China will be riding the same rapid technological curve as the West, so can’t be priced out of the coming arms race.
Asia central: FutureMap’s Parag Khanna says China is emerging into a world already multipolar.
However there are others – like Dr Parag Khanna of FutureMap, a Singapore-based “big data” strategy specialist – who see globalisation as an unstoppable human project. Small state nations like New Zealand would be right to stay aligned with that.
In a new book, The Future is Asian, Khanna points out that world defence spending has actually plateaued at US$2 trillion a year since 1990. It is projected still to be that in 2025.
Yet over the same period, world infrastructure spending has rocketed. It was US$2t a year in 1990. But it has hit US$7t today and it is heading to US$9t by 2025.
Those numbers speak for themselves, Khanna says. The wealth of the planet is being spent on the cross-border connectivity – the roads, railways, ports, airlines, data links, and other infrastructure – that support global trade.
Khanna says the West still views geopolitics through a familiar colonial prism – expansionary powers seeking to own territories.
But what is really happening as the world approaches a population of 10b is that Asia – home to 5b of those people – is stitching itself together as a collective economic entity.
Khanna says the modern Asia story begins with the 1950s industrialisation of Japan. He says what many don’t realise is that a successful Japan then became the main investor behind the 1980s wave of Tiger economies – the rise of South Korea, Taiwan, Hong Kong, and Singapore.
These have all in turn been the investors driving a modernising China through the 1990s. And of course it won’t stop there, says Khanna.
Already arriving is the fourth wave which is South East Asia – India, Vietnam, Malaysia, Indonesia, Thailand, Cambodia, the Philippines. The new factory floor of the world.
Khanna provides the supporting data. Japan’s annual gross domestic product (GDP) now totals US$5t. And so is that of the Four Tigers.
China – with its 1.5b population – has a GDP of US$11t. South East China – with a 2.5b population – has reached a GDP of US$6t and will be matching China for size within a decade.
So any moment of dominance is going to be a fast-passing one for China, Khanna says. Instead, international eyes should be focused on how – in a series of self-reinforcing waves – Asia is transforming itself into a modern, interconnected, system of economic flows.
All the world’s busiest airline routes now link pairs of Asian cities, he says. China’s controversial Belt and Road Initiative (BRI) is just official recognition the region is constructing its own co-prosperity sphere.
Khanna says US thinking about China is shaped by the fact that it has memories of being the uncontested great power after World War II – at a time when it had 50 per cent of global GDP.
China by contrast has a mere 15 per cent share of the world pie. And it has emerged at a time the world is already securely multipolar.
It has to exist alongside the US, Europe, Japan and India, not to mention the dozens of smaller regional powers it wants as friendly and trusting trading partners.
Soft power: PM Jacinda Ardern leads her Christchurch Call alongside Emmanuel Macron in Paris.
Looked at this way, the present kerfuffle between Trump and Xi starts to get put into perspective.
WINNING BIG ON TRADE
Khanna’s analysis is how New Zealand’s policy community appears to be reading the future too.
Victoria University professor of strategic studies Robert Ayson says talk of picking sides makes for a great parlour game. “The idea of a binary choice is remarkably addictive and compelling.”
But what New Zealand wants to align with are the world’s emerging trade and political institutions.
Since the 1970s, New Zealand has realised that being so small and far away means that a rules-based world order is what serves our national interest best. It is about economic outcomes as much as moral values.
We need international trade agreements as there is only Australia as an even reasonably close export market. And institutions like the UN and WTO underwrite the sovereignty of the world’s small states, allowing them at least the opportunity of a democratic say.
So there is no crossroads, Ayson says. New Zealand will side with China, the US, or anyone else, based on the circumstances.
“We will find different alignments depending on which institution we are thinking about – trade institutions, climate change institutions, security institutions, and so on. That’s the New Zealand way.”
Otago’s Patman points out the flipside of New Zealand being an independent is that it also creates more opportunities. Not being tied to a camp means it is easier to strike up with new partners.
If the UK, US and even Australia seem to be going backward, New Zealand can start to engage with other still progressively-minded leaders, such as France’s Macron, Germany’s Merkel and Canada’s Trudeau.
Patman says Trump – in attacking the WTO and launching a China trade war – is in fact attacking New Zealand directly. The WTO is an institution that matters greatly to us.
Join the club: Trade Minister David Parker (second left) celebrating last year’s CPTPP deal in Chile.
“We’ve won every single trade dispute though the WTO, including with Australia. That’s how we got apples into Australia after many years.”
Patman says there would have been widespread support for Trump if he had instead mounted a WTO case against China. There are ways China does game the system. But unilaterally junking agreements and imposing tariffs are not to anyone’s long-term benefit.
And Patman says that if you look at what New Zealand is actually achieving in its foreign policy, it looks on the right side of history when it comes to the new institutional structures.
After Trump pulled the plug on the Trans-Pacific Partnership (TPP) deal in 2017, the US expected the free trade pact would simply collapse. But last year, the other 11 countries went ahead with their own Comprehensive and Progressive Agreement for TPP (CPTPP).
As a result, Patman says New Zealand suddenly has these major new free trade markets – Japan, Canada, Vietnam, even Mexico – to start to explore over the next few years.
“We will gain massively from that,” he says. If the problem is we have become so beholden to China as an export customer, a wider trading world is the solution.
Diversity and independence go together. New Zealand’s strategy is to have 90 per cent of its goods trade covered by FTAs by 2030. After CPTPP, it got to 65 per cent. And an FTA with the European Union looks on the cards for later this year.
So New Zealand can’t afford to ignore Trump and Xi, says Patman. These are turbulent times with the two giants in open confrontation.
But New Zealand has little need to cower. As Khanna argues, the world is stitching itself together economically in ways that makes nations interdependent. And the real problems of the planet are ones that only collective action can answer.
Thus there are plenty of reasons why for New Zealand, the third option – the globally confident independent – is the choice we should continue to make.