How do we pay to keep the lights on?
There was a time Defence Minister Judith Collins breathed fire when New Zealand was attacked by UK and Australian politicians for “sucking up to China” and having “sold its soul” to preserve trade relations.
“Stop judging New Zealand by the fact that we are a little country at the bottom of the world who has to trade. That’s how we do it. That’s how we pay for everything we need,” she told The Guardian in October 2021.
“If any criticism comes to New Zealand, as it often gets about this close relationship with China and trade, my answer to everybody - whether they’re the US or UK - is: so where is our free trade agreement?” added the then opposition leader.
The fire breathing Crusher Collins underpinned that good question by blaming the US (under President Trump) for “foolishly” withdrawing from the Trans-Pacific Partnership in 2017 and not joining its replacement, the CPTTP, thus opening the door for China’s greater influence in the Pacific and Indo-Pacific.
When asked about potential political retaliation from China, she explained why the opposition did not join the UK and Australian attack on the Ardern government’s moderate line on China.
“We are not stupid, we know what’s going on… I have been around long enough in politics, and long enough in senior roles to know that things do happen”.
Collins’ understanding and bipartisan position is still valid and more relevant today as the geopolitical tension between the US and China ratchets up, and New Zealand’s coalition Government is giving clear signals that it’s leaning increasingly towards greater alignment with US security interests.
The Guardian interview also quoted Professor David Capie, director of the Centre for Strategic Studies at Victoria University, where he questioned whether the US was concerned about China’s growing influence. “[W]hat alternatives is it providing to the huge gravitational pull of the Chinese economy? Shared values are all well and good but they don’t keep the lights on.”
The US has offered a carrot lately when our Foreign Minister, Winston Peters, issued a joint statement with US Secretary of State Antony Blinken in Washington last month. The statement talked about the “great potential” for NZ to collaborate in US-led defence and economic efforts such as the Indo-Pacific Economic Framework initiated by President Biden in 2022.
The question needs to be asked, since New Zealand’s participation in this new US-led regional economic framework, what expansionary trade benefits has NZ accrued in the US market and how does this help reduce our dependence on trade with China that in the year to September 2023 accounted for 27% of New Zealand’s exports?
The US/NZ joint statement mentioned the “unwavering commitment to the values that we prize”, but as the good professor noted, that’s all well and good but values don’t keep the lights on.
Writing in The Post, business commentator Phil O’Reilly noted the Government’s goal to double the value of New Zealand’s exports over 10 years. He correctly noted that a government’s target is not a business target as governments do not export anything. Businesses do.
“What governments can do is to help create an enabling and supportive business environment to encourage appropriate risk taking and innovation,” he said. In advocating for greater coordinated consultation with private business groups he said there was a need to review “our trade strategy”.
The Post’s politics, business, and economics editor, Luke Malpass, echoed that, writing that while the Government sets the rules, it is business leaders who help create the wealth and conditions that drive economic development.
They decide the hows, the wheres, and why capital is deployed. They make the big bets and live with the consequences. “They are also the people who run, build, finance, insure and feed both New Zealanders and customers around the world,” he said making the important point that these are the people who should be on the other end of the Prime Minister’s and his ministers’ phones, to understand policy impacts.
In the past few months, we have heard about the increasing geopolitical tensions in the Indo-Pacific, especially involving China, our biggest trading partner, and the US, our third trading partner.
Given the economics of political realism expressed bluntly by Judith Collins, what do our business leaders, especially those entrenched in the China trade, think about this and our ability to keep the lights on?