Speeches and Articles

What’s next for New Zealand, the United States and the Asia Pacific region

Stephen Jacobi
13 August 2013


Thank you very much for the opportunity to be with you this evening.

It’s good to be back in Christchurch and I congratulate Alex McKinnon and all of you at the Institute for the work you are doing to promote the importance of international affairs in your local community.

I was last with you way back in 2006 – a lot has changed since then but what has not changed is the fundamental importance of the United States for New Zealand’s national interests.

I have just spent three months in Washington DC on a sabbatical at Georgetown University looking at the way the American government consults with business and other stakeholders about trade negotiations.

While in Washington I was fortunate to work with my good friend and colleague Bill Maroni, the President of our counterpart organisation, the US NZ Council. to put together the fifth US NZ Partnership Forum.

The Partnership Forum brings together Americans and New Zealanders from government, business and the community to discuss the future of the relationship.

As you remember, the fourth Partnership Forum was held here in Christchurch on that dreadful day in February 2011, which has forever marked this city and the life of its people.

Those dreadful events have created a special bond with those American friends who were with us in Christchurch and this was evident once again at the Washington event in May.

The theme of this year’s Forum was “what’s next” – I’d like to use this as a starting point for discussing the future of the relationship between the two countries, the outcome of the Washington Forum and the outlook for the Trans Pacific Partnership negotiations in which both New Zealand and the United States are currently involved with ten other Asia Pacific partners.
 
What’s next for the relationship?

For the longest time there has been a sort of informal competition underway amongst of those interested in NZ/US affairs to work out how best to describe the steady improvement in the relationship.

First we had the relationship that was the best it's been in a decade, then the best in 25 years and more recently the best it’s ever been.

I think that at the Washington Partnership Forum it was apparent to everyone that not only had the fundamentals of the relationship been transformed, our ambition needs no longer to be limited by comparisons with what has gone before.

Today the relationship between the two countries is defined not by the past but by the potential for the future.

Certainly we see an astonishing amount of co-operation across the board – from political and security issues, expanding defence ties, a healthy level of trade and investment, growing co-operation in education, research, science and technology, people to people exchanges of all kinds.

With the Wellington and Washington declarations we have a greater sense of strategic direction and planning for the relationship at the highest level – in a different form, to be sure, from the alliance of old, but one which perhaps better suits the times we live in and New Zealand’s own sense of its place in the world.

We also have more active governance of the relationship given that Ministers and senior officials from the two sides are now meeting more regularly and frequently than ever before – the NZ/US Strategic Dialogue held on the day following the Partnership Forum is becoming a regular event in the relationship calendar.

Foreign Minister Murray McCully captured the positive state of the relationship when he told the Partnership Forum that “we have found a new normal”.

Deputy Secretary of State Thomas Burns characterized the significance of the relationship in this way:

“We both have a great deal to gain though expanded partnership – and our partnership benefits the entire Asia-Pacific region… I am confident that our shared values and interests, our common vision for a prosperous, stable, and secure Asia-Pacific, and the growing partnership we have built between our governments and our peoples, will help us make the most of the opportunities in the Pacific Century unfolding before us”.

From the New Zealand perspective then we are at a stage where we have transcended our past and entered into a “new normal”.

From the American perspective this new normal is part and parcel of a new and significant American re-engagement and re-balancing in the Asia Pacific region.

This happy state of affairs has some important implications for the future.

Unshackled from the weight of the past, we can and should expect the relationship to continue to grow and develop, not just in former ways but in ways which reflect the pressing concerns of the Pacific Century.

For example we can expect a growing emphasis on development and sustainability issues in the Pacific.

When we think of security we might talk just as frequently about disaster relief, supply chain security or transnational crime as much as military forces.

While we will want to continue expand the economic relationship between us this too is taking on an increasingly Asia Pacific dimension through the TPP negotiations which I will discuss further later on.

The new normal is likely to bring some increased demands from our American friends.

Some of these we will likely find it difficult to respond to because we are a much smaller partner and need to weigh carefully the costs and risks associated with our engagement.

And, as ever, our Government will be faced with assessing just where New Zealand’s interests and those of the United States intersect and coincide – that is where the value added from the relationship is likely to be found.

The new normal will quite likely lead us from time to time to disagree with the United States but these disagreements are unlikely to shape the relationship as perhaps they once did in the past.

Certainly the new normal can lead us New Zealanders to be bolder in terms of the things we ourselves want from the United States.

For example a key theme emerging from the Partnership Forum related to the ease of labour mobility and business travel especially for those entrepreneurs establishing businesses in the United States.

Since the Forum it has been great to see the US NZ Council take up with Congress the issue of temporary business visas – not an easy issue given divergent American views on immigration.

The point is that just as the new normal expands the  scope of the agenda between us and gives rise to increased co-operation from both sides, it should also give comfort to articulating more precisely what we as New Zealanders want from this critical relationship.

Partnership Forum

The changed circumstances of the relationship were very much evident at this year’s Partnership Forum.

The Forum itself was noticeably different from preceding events.

The Forum title was renamed “The US NZ Pacific Partnership Forum” to emphasise the broad regional context in which the relationship now figures.

The Forum’s attendance was larger than ever before – 300 participants attended the two days of discussions.

The Forum was carried out in public and ‘on the record’ with journalists present, as opposed to the Chatham House events of the past.

There was finally a noticeably younger and more diverse audience, helped by the presence of 45 Future Partners in the 20-30 age group from both countries including 25 from New Zealand brought together by the Councils and Fulbright NZ.

These Future Partners participated fully in all discussions and set the standard for the active social networking through twitter and facebook around the event.

At its heart however the essential purpose of the Forum remained the same.

The Forum was an opportunity to stimulate new thinking in the relationship, to provide a platform on which to build momentum and direction and to engage with and motivate our US-based constituency for New Zealand.

The Forum included the usual round of keynote addresses, panels and break out sessions.

Prominent speakers included Deputy Secretary of State Burns, Under-Secretary of State for Economic Affairs Hormats, former Deputy Secretary of State and World Bank President Bob Zoellick, Congressmen Rick Larsen and Kevin Brady and no less than six former US Trade Representatives. 

On the New Zealand side both Minister McCully and Minister Groser attended, along with the Secretaries of Treasury, Foreign Affairs, Primary Industries, Customs and the Chief of Defence Force.

A large number of Chairs, CEOs and other senior business figures attended from New Zealand also.

The breakout sessions, which were designed to be more interactive in nature, reflected the breadth of issues which are key drivers of the relationship today:

• co-operation on food and agriculture
• the Christchurch rebuild as an exemplar of the city of the future
• business partnerships in the area of security technologies
• innovation in the film and new media technology sector
• innovation in life sciences, particularly in health care and medical technologies
• new approaches to promoting sustainability and developing new green technolgies

The website of the US NZ Council – www.usnzcouncil.org - contains a wealth of material arising from the Forum including video feeds of all the major addresses.

Trans Pacific Partnership

High on the agenda for discussion at the Partnership Forum was the outlook for concluding the Trans Pacific Partnership or TPP negotiations.

While the idea of a new framework of rules for trade and investment between New Zealand and the United States has been around for more than a decade, the influence of the Pacific century has effectively changed the nature of that idea.

Today TPP is about a lot more than just New Zealand and the United States but it is in this context that freer trade between us will be able to be achieved.

TPP has been under negotiation for five years or so and is now entering a critical final phase as TPP Leaders prepare to meet at the APEC Summit in Bali in October.

The partnership – a sort of economic fellowship of the ring - has been expanded to twelve economies – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Viet Nam.

Japan is the latest economy to join, just last month – Japan’s entry is in many respects a game changer.

Japan’s entry significantly expands the economic coverage of TPP – now up to 40 percent of global GDP.

TPP is being built both as a means of expanding trade and investment amongst the twelve and as a “pathway” for a future Free Trade Area of the Asia Pacific (FTAAP) linking all 21 economies in APEC.

In the United States Japan’s entry has increased the growing commercial interest in the TPP negotiation – at a time when the United States is also negotiating a new FTA with the European Union.

From the New Zealand perspective there is in fact more to be gained in terms of economic impact from Japan in TPP than from the United States or any of the other partners.

This is because Japan until now has been the missing link in terms of the FTA coverage we have amongst the Asian economies and because our major agricultural exports to Japan face high tariff and other barriers.

Research undertaken by the East-West Center, in Honolulu, estimates that TPP with Japan could add around $5.1 billion to the New Zealand economy by 2025.

It’s no secret of course that TPP is both complex and controversial.

TPP is complex because negotiating a new framework of rules for trade and investment amongst twelve economies is far from straightforward – it means TPP simply cannot be negotiated in the full blaze of publicity, as many would advocate.

TPP is controversial because it has the potential to reach far deeper into domestic economic policy settings than other previous agreements.

TPP represents a significant change in the way governments are approaching the task of freeing up trade in region.

Whereas once this was done primarily between individual economies, there is now a move to bring together groups of economies through initiatives like TPP.

This is first and foremost because governments are looking for ways to use increased trade and investment as a means to promote sustainable economic growth.

Throughout the economic crisis, developed countries have in particular relied on developing countries to lead the charge for growth.

Today we seem to be at the end of this scenario where growth in developing economies is slowing while in developed economies growth either continues to stagnate or expand at a much slower rate than before the crisis.

Governments today are cash-strapped and have few domestic levers to pull to get their economies moving again – hence the need to look to trade and investment.

At the same time business itself is changing – today business is being done primarily between increasingly sophisticated supply and value chains, which see goods passing through several jurisdictions before reaching the final consumer.

This too requires a different approach from governments, one that puts emphasis on reducing barriers, adopting regional approaches to regulation and a more even regulatory framework between economies.

TPP is not an attempt to do away with rules for the benefit of multinational corporations, as some are quick to tell us.

TPP is about putting in place the sorts of rules what will provide for greater speed and less cost in doing business, more effective regulation and more opportunity for innovation.

Similarly TPP is not about granting more rights to foreign companies as opposed to local ones – it is about giving foreign investors essentially the same rights so they can play their full role in economic development and job creation.

That applies equally to foreign investors in New Zealand and to New Zealand investors in other economies.

From the standpoint of the NZ/US relationship, TPP provides a means to put our economic relationship on a new level and to subject to a set of rules, which are appropriate for the earlier part of the 21st century.

From a New Zealand perspective we have an opportunity to eliminate the few trade barriers that exist, particularly in terms of agricultural products, gain better access to federal government procurement, provide more security for our existing business and focus more commercial attention on the relationship as a whole.

The United States has its own objectives for the negotiation of course but there is reason to think that a satisfactory outcome can be achieved without fundamental changes having to be made to policies with respect to intellectual property rights or the future operations of Pharmac, to take just two of the most controversial elements.

For the time being TPP remains a work in progress.

While negotiators continue to work assiduously towards completion by the end of the year as mandated by President Obama and other TPP leaders, we should know by the time of the APEC meeting how realistic this goal is.

Substance needs to drive the timing but the demands of business and the economic considerations behind TPP that I just mentioned are also important factors.

Finally it should be noted that once the TPP negotiation is concluded the ratification will subject to Parliamentary procedure and full public scrutiny, like any other treaty.

Conclusion

A successful conclusion to TPP will enable the transformation of the economic relationship with the United States in much the same way as the relationship has a whole has been transformed.

The question is today not so much how far have we come in the last 5, 10 or 25 years but how far can we go in the decades ahead.

Our shared values and principles should help us move beyond the present policy agenda to look at how the two societies can become progressively more inter-connected. 

The aim should be to make it easier to visit, work, do business, learn, teach, research and innovate in each other’s countries and to use this as a springboard to tackle new challenges and opportunities in the Asia Pacific region.  

The new normal in the relationship should help us do nothing less than build a new doctrine for deeper economic and social integration in the Pacific century.

This is likely to require ongoing attention to innovation in the relationship, changes to policies in both countries and to enhanced co-operation between us and with others in the wider region, which we both call home.

The United States will remain fundamentally important for New Zealand’s interests.

One thing you can count on - "What’s next" in the relationship will not be like what has gone before.



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