Soft options: China's growing influence in New Zealand

by Bevan Rapson / 20 April, 2017
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Chinese Premier Li Keqiang and his wife, Cheng Hong, arrive in Auckland in March. Photo / Getty Images

As China moves to fill a regional vacuum, New Zealand unhesitatingly rolls out the welcome mat. 

Even “soft power” generates a buzz. That much was obvious during the recent visit to New Zealand of Chinese Premier Li Keqiang, whose presence here delivered a jolt of extra optimism – and not a little diplomatic hot air – among local officials, ministers and business lobbyists.

The public may have been more interested in Adele, or the political cacophony emanating from other countries, but the whir of government announcements about trade and other deals released by the Beehive during Li’s visit emphasised just how massively China looms in the national worldview.

The visit’s centrepiece was an announcement of talks to upgrade the free-trade agreement signed between the two countries nine years ago, since when two-way trade has tripled to $23 million, with a target of $30 billion by 2020.

Other deals highlighted included access to China for chilled New Zealand meat, faster border clearance for New Zealand exports, increased direct flights between the two countries and easier access for rapidly increasing numbers of Chinese tourists.

Sure, some of the announcements – a shared climate change action plan, links between schools, $25,000 for a one-day young leaders forum – hardly deserved a fanfare, but showed how keen our government was to give the right impression of fulsome co-operation with our largest trading partner.

Bill English and his ministers want to build on our record of enthusiastic engagement, a history acknowledged by the Premier in one of the ritual exchanges of mutual admiration during his visit: New Zealand was the first Western country to sign a bilateral free-trade deal with China, he noted, the first to join its Asian Infrastructure Investment Bank, and even the first to hold a Chinese Language Week.

Now, it’s also signing up for talks on China’s “One Belt, One Road” strategy, a massive plan for trade and infrastructure development linking China to the West by land and sea. Tertiary Education Minister Paul Goldsmith will attend a “Belt and Road” summit in China in May.

The trillion-dollar initiative is part of China’s long-term quest for “soft power” influence around the world. Now, with the Trans-Pacific Partnership swept off the table by President Trump, along with Barack Obama’s so-called pivot towards the Asia-Pacific, a vacuum has been created that China would happily fill.

Its sway in New Zealand, through investment and immigration but also “softer” cultural and educational relationships, is already at a level that a time traveller from 1990 would scarcely believe.   

But is it a given that a smart trading nation is bound to get on board with all of China’s plans?

Not in Australia, apparently, where loyalties to the United States play a much greater role than in New Zealand. The Financial Times reported that a Chinese push to align an Australian infrastructure fund with the Chinese “Belt and Road” strategy was rejected by Canberra over worries it might hurt relations with the US. And in a recent speech in Singapore, Australian foreign affairs minister Julie Bishop called on the US to become more engaged in the region, bluntly warning China over the need to embrace democracy.

Even allowing for New Zealand’s looser ties to the US, some China-watchers caution against us rushing to accept all our giant partner’s initiatives. China-based New Zealand economist Rodney Jones advocates a patient approach, telling TVNZ’s Q+A that China needs to be more open to services from other countries as well as goods. The TPP was the best encouragement for Chinese reform, he said. “The conversations are kind of happening on China’s terms right now.”

And let’s not forget the objections from a familiar quarter: New Zealand First leader Winston Peters lambasted the government’s “economic kowtow” to China, perhaps rehearsing some of the lines he’ll be running hard come the election campaign.

 “Be under no illusion, China’s OBOR [One Belt, One Road] may suit their economic and international plans, but the real question is, does it suit ours?” he asked. Linking the chilled meat deal to Chinese shareholdings in New Zealand meat firms, he said China’s approach put “China first, China second and China third”. And he went on to accept the free hit offered by an agreement aimed at getting more Chinese visitors off package tour buses to travel independently, pointing to the number of people killed in accidents where foreign visitors were found to be at fault. “Again, it’s the National Party being blinded by the dollars and not thinking of the overall consequences.”

National, however, seems confident that despite Peters’ best efforts the New Zealand electorate won’t develop a version of the nationalist fervour that helped elect Trump in the US and produced Brexit in the UK.

Ahead of Li’s visit, English announced the goal of having free-trade agreements covering 90 per cent of New Zealand’s goods exports by 2030 – up from just over half today – with $90 million over four years dedicated to helping achieve it.

Never mind that this is the latest in a string of policies aimed at the distant future, what Labour’s David Parker called “another meaningless promise on the never never” – the policy is perfectly in keeping with National and Labour’s three-decade bipartisan dedication to the grail of free trade.  

In Todd McClay, English has a trade minister who appears almost as committed to talking up a free-trade storm as his indefatigable predecessor Tim Groser, though neither have quite reached the heights of trade evangelism scaled by Labour’s 80s lamb burger salesman Mike Moore.

In a country with such a small domestic market, it’s hard to dispute the underlying free-trade logic, though research by Chartered Accountants Australia and New Zealand suggests the benefits escape even many in the business world. Over 70 per cent of 600 senior New Zealand business staff surveyed on the topic thought free-trade agreements had no impact, were neutral or they were unsure of the impact.

One interpretation of that surprising result is that free-trade talk often involves big exporters like Fonterra, and that people in small-to-medium businesses don’t see the potential for gains.

Critics of the country’s economic direction also ask whether the rush to cash in on China’s economic awakening in particular has left us worryingly dependent on remaining in one country’s good graces. In Peters’ analysis: “We went wrong several years ago relying on one company, Fonterra; one commodity, milk powder; and one market, China.” Now, he says, we’re back renegotiating from a point of weakness, with a trade imbalance at its worst since 2009.

Amid all the diplomatic pomp and niceties of Li’s visit, complete with the customary presentation of an All Blacks jersey, the Premier just once gave a glimpse of firmness, in answer to a question about Chinese steel dumping in New Zealand, which he denied. Half of China’s dairy imports were from New Zealand, he said: “But we haven’t said New Zealand is dumping dairy products in China.”

As an argument, it didn’t necessarily stack up, but as a crystal-clear reminder of the dairy industry’s reliance on the Chinese market, it served its purpose. English claimed it showed the robustness of the relationship, though it’s hard to picture New Zealand or its negotiators getting away with too much robustness in bilateral discussions.

That’s unlikely to change soon, whether Peters wins a place in the next government or not. No one really needs reminding that in the China-New Zealand relationship the balance of power – soft or otherwise – will only ever tilt in one direction.

 

This article first appeared in the May 2017 issue of North & South.
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