Saturday, March 30, 2024

Peter Dunne: Trading partners

Ever since Britain joined the old European Economic Community in 1973 New Zealand has been on a quest to secure reliable, long-term markets for our sheep meat, beef and dairy exports.

First, we settled on Iran as a potential market from whom we could import cheap oil in return. The Shah of Iran even visited New Zealand 1974 to strengthen the burgeoning relationship. But that all fell over when the 1979 oil crisis struck, and the Islamic revolution toppled the Shah's regime.

Then we shifted our focus to the former Soviet Union, importing large numbers of the infamous Lada cars in return for dairy access into the USSR. But that deal crumbled the early 1980s when domestic economic problems caused the Soviets to default on payments, at the very time when the New Zealand economy was on the ropes.

The free trade agreement with China in 2008 was the most dramatic move yet, given the vast size of the potential Chinese market and the potential it offered to New Zealand exporters across the board. This potential was so alluring that warnings at the time of the risks of putting too many eggs in the Chinese basket were quickly and easily ignored. Not surprisingly, it was only a very short period of time before China became our major trading partner, dominating our economy in many areas.

The relationship was bolstered by a steady exchange of trade delegations and Ministerial visits emphasising the importance of the relationship, with only limited acknowledgement of the reality that New Zealand now needed China much more than it needed us.

This tension - that some had warned of at the time the free trade agreement was signed, but had been ignored - started to become more apparent as China begin to exert its political influence in the South Pacific, and as more and more questions about its domestic human rights record arose. But as the United States, Australia and others began to call out China for its potential expansionism and human rights abuses, New Zealand clung to its delicate balancing act, sharing the concerns others were expressing, but never quite joining traditional friends in saying so publicly out of blind fear of the potential economic consequences.

By the early 2020s, the United States and others, including Five Eyes partners the United States and Australia, were expressing frustration at New Zealand's reluctance to ever criticise China. But, with our economy now so dependent on the Chinese, New Zealand has retained its staunch silence on any public criticism of China. Successive Prime Ministers have pleaded in defence that their public silence does not mean they have not made forthright criticisms to China's leaders in private meetings, but then, they would say that, wouldn't they.

Things came to a head this week with revelations of sustained Chinese cyber espionage against Parliamentary and electoral agencies in Five Eyes countries, including New Zealand. This time New Zealand did issue a critical public statement, but unlike the United Kingdom and the United States it is not proposing any retaliatory action against China. Incredibly, the Prime Minister even went so far as to say he believed the government's statement, best described as "naughty China, please do not do this again" was sufficient for China to get the message!

It has to be acknowledged that the success of the free trade agreement makes it difficult for New Zealand to speak out against China for fear of economic retaliation to our detriment. But it is also true that competing geopolitical considerations in our region cause their own difficulties. For example, New Zealand’s flirtation under both the previous and present governments with joining the non-nuclear parts of the AUKUS agreement will become increasingly problematic since AUKUS is really an anti-China alliance. The AUKUS partners are unlikely to view favourably New Zealand’s involvement, while it remains so tied to China. For its part, China has already warned New Zealand about getting involved with AUKUS. The bottom line is that at some point New Zealand will have to make a choice, and that choice will have consequences.

Meanwhile, at the beginning of May the free trade agreement between the European Union and New Zealand will come into effect. At the same time, the government is keen to revive the long-stalled talks with India over a proposed free trade agreement. Both markets offer huge new potential opportunities for New Zealand. India, however, is not nearly as keen on a free trade deal as New Zealand is, so any progress there is likely to be very slow. But, given the size and emerging strength of the Indian economy, a free trade agreement remains extremely attractive from a New Zealand point of view, and the new government has signalled it is a clear priority.

Should that eventuate, the new opportunities created would alleviate some of the pressure created by the reliance on the current free trade arrangement with China, which would leave New Zealand less precariously balanced on the diplomatic tightrope than it is currently. But until and unless that happens, New Zealand governments of whatever hue will be forced to continue fudging and obfuscating with friends and allies alike for fear of upsetting the Chinese dragon that controls our economic destiny.

Peter Dunne, a retired Member of Parliament and Cabinet Minister, who represented Labour and United Future for over 30 years, blogs here: - Where this article was sourced.


CXH said...

Considering the public service is determined to destroy our primary industries, we will soon have nothing to sell to China. Then we can stand up and speak our mind freely.

Anonymous said...

Dunne gets his timeline wrong when he says that we imported the Ladas to get access to the Soviet market before it collapsed. The NZ Dairy Board actually accepted the offer of the cars when the Soviets couldn’t repay their debts for $200,000,000 of, mostly, kiwi butter.

Anonymous said...

Missing from this article is the Trade established between NZ & Eastern Arab Countries - Saudi, Bahrain UAE - to which an English owned Shipping Co built 2 container ships to sail from NZ via Australia transporting various food products, both frozen, chilled & dry -example NZ Apple & Pear Marketing Board with specially created cans of fruit juice [sold to street vendors in many of the Cities, in the Countries mentioned].

For many NZ Business's this Tarde area was a 'boon' and many made the most of promoting NZ made products, mainly food to the Arab buyers.

I recall that one Mike Moore, then a member the NZ Labour Party/ me thinks as Min of Foreign Affairs - was 'a supporter of this Trade arrangement'

It would be interesting to know if this trade route still exists - I am not sure the 2 ships still remain in service.